[Local News] Ideas for better sharing economy policies

While there has been a growing interest on sharing economy around the world for the last couple years, we are now seeing a deeper level of practical experience and research results coming out today.

Following a series of various sharing related events in Korea and overseas held recently, From Nov 19 to Nov 20, the Korea Development Institute and the Ministry of Strategy and Finance of Korea co-oragnized a conference under the theme of “Dissemination of the sharing economy: issues and solutions.”

Current status and major issues around sharing of accommodations, cars, finance, skills, etc. were on the agenda of this forum which was participated by experts from international organizations including OECD and EC, the city of San Francisco which is the hub of global sharing economy, and global sharing enterprises. The panelists shared their policy approaches and practical experience and discussed how to promote sharing economy in the Korean society in a more stable way and policy measures needed to achieve that goal.


Image source: KDI

I. Prospect of sharing economy

Sun-joo Hwang, a fellow at KDI, presented his analysis of the economic benefits of sharing economy and suggested a “Regulation-in-proportion” model, which means applying different level of regulations to sharing economy service providers based on the size of their business. His idea is to allow businesses to follow regulations based the trade volume they have set by themselves. Hwang acknowledged that there were still some risks such as the possibility of service providers under-reporting their trade volumes to avoid regulations or large administration costs. But he argued that such risks can be minimized by delegating some of the responsibilities such as reporting and tax collection to platforms of sharing services. In addition, for social risks, he said that such risks could be prevented by requiring platforms to have liability insurance polices and other supporting policies of their own.


Image source: KDI
Kyeong-seon Choi, Editorialist for Maeil Business Newspaper raised an interesting point that the reason behind the vibrant sharing economy of San Francisco is inconvenient living conditions of the city including high prices, congested roads, parking shortages, limited accommodations for visitors. Against this point, Mark Chandler, the Director of the San Francisco Mayor’s Office of International Trade and Commerce, said that he thought San Francisco’s innovative culture and citizens gave birth to the prosperous sharing economy in the region. In addition, he emphasized that sharing economy startups emerge not out of someone’s plan but has emerged naturally and organically out of social and technological changes and progress.
David Gierten expected that Internet identity and social reputation and trust, which are also important in sharing economy, were associated with social network and therefore the trusting relationships between users and providers enabled by sharing economy would continue to be improved.


Image source: KDI

II. Car-sharing: Issues and solutions

In the presentation and discussion sessions on car-sharing issues in particular, Mark Chase, a co-founder of Zipcar and a consultant on sharing economy who also teaches at the Tufts University, explained differences between car-rental and car-sharing. Unlike traditional car rental services, in car-sharing services, vehicle locations are distributed throughout the service area, giving users more choices in pick-up locations and no paper works are required; everything can be done online. There are three kinds of car-sharing services in terms of the way of sharing cars: the two-way system of traditional car-rental services; one-way system which offers one-way trips from point to point; and P2P system which allows users to pick up and drop off a vehicle at any spot in a car-sharing parking space within the company’s coverage area.
He pointed out that P2P system, which allows more freedom in terms of vehicle choices and pickup/return locations, didn’t need dedicated spaces for parking and stopping while there were challenges in terms of quality management as it needed to have secured a certain level of user feedback to assess and improve service quality. In addition, he said that one of the critical issues that needed to be tackled as a priority is insurance and stressed the role of the local government, i.e. support and cooperation from the government was key in this matter.

In the past, no one could tell whether Zipcar was legal or illegal since there was no law regarding car-sharing services. But thanks to the support of the government, it overcame the first hurdle when car-sharing was defined by the law as “a short-term car-rental service offered 24 hours where users pick up and return vehicles by themselves (self-service) based on a web platform.” He also stressed the importance of collecting related data in order to prove that car-sharing is a low-cost alternative to car ownership and to spread the effect into other policies. For this, he said the government should invest aggressively in collecting and processing such information.
He introduced several cases in the North America as good examples including a policy that mandates a newly constructed building to include a space for car-sharing depending on the size of the construction (e.g. 1 car-sharing parking slot per 50 regular parking slots); and a case that supports electric vehicles as car-sharing vehicles for low-income population.


Image source: KDI

III. Accommodation sharing: issues and solutions
In the discussion session following the presentations on accommodation sharing services, Cait Lamberton from the University of Pittsburgh shared an interesting perspective on the competitive composition between the traditional hotel services and accommodation sharing services. She disagreed with the view that Airbnb, a global accommodation sharing platform, was in a competitive relationship with the traditional hotel services and said that the experiences from the two were completely different and therefore it was a nonsense to compare the two. She said accommodation services and traditional hotel services didn’t necessarily compete each other and mentioned IKEA, which sells assembly furniture unlike the traditional furniture industry as an example. She pointed out IKEA offered “experience” of visiting warehouse stores to see furniture, purchasing furniture kits and assembling them by themselves, which is different from traditional way where consumers order a complete product and get it delivered. In other words, she said, IKEA offers a completely different service from that of other furniture providers. Moreover, selling snacks such as meatball and hot dogs for visitors to enjoy after shopping seemed to have nothing to do with furniture, but actually played a role as part of the brand experience. In this sense, she said that accommodation sharing also needed to seek ways to develop further in the future by adding the element of “unique experience” to services, so as to differentiate itself from the traditional industry.


Image source: KDI

IV. Status of workers in sharing economy
The last session of the conference was a presentation and discussion session on the status of workers in sharing economy. Brishen Rogers, Associate Professor of Law at Temple University Beasley School of Law, moderated the panel session. He highlighted that in today’s structure of production enabled by P2P platforms, temporary employment was majority and the form of employment had changed, compared to those in the years since the industrial revolution.
According to Prof. Rogers, the traditional structure of consumption is B2C (business-to-consumer) model while the new model is P2P (peer-to-peer) exchange which directly connects excess production capacity to the need. In other words, sharing economy platforms such as Uber and TaskRabbit are playing the role of an labor agency connecting workforce and businesses thanks to the advanced network technology.
But here, instead of enjoying labor flexibility, workers end up being in a situation as a temp contract worker who cannot trust their income stability. He said that Uber drivers were not assured of enough income for their livelihood and even they were pressured to carry out emotional labor, which stresses the need for social security.
He proposed three alternative solutions to establish social security for sharing economy workers.
The first solution is to create a fair and desirable working condition through a consensus among sharing economy stakeholders. He said data analysis and internal regulations should help them keep stable working condition.
The second solution is “Flexicurity,” which means providing both flexibility and stability of employment by accepting flexibility in the sharing economy job market. This is to say that providing a generous welfare system to flexible job market will lead to a more vibrant job market as a whole. Generous welfare system means the government offers unemployment benefits to workers who cannot earn stable income so that they don’t end up in the working poor while it also offers work placement so that people can find job opportunities in other occupations.
The last solution is helping workers in the sharing economy industry work together as a co-op. With investment through crowdfunding, sharing economy workers such as Uber drivers should be able to run a platform of their own and decide their own working condition by themselves. He said that basic income security system would make up for the expected income instability at the beginning.
Image source: KDI

This conference was a great opportunity to overview the current state of sharing economy in Korea and the ideals we are seeking through an intensive panel discussion on various issues including sharing economy workers issues and solutions, not to mention issues around various sharing economy areas such as accommodation-sharing and car-sharing. As Hwa-ryeong Lee from KDI pointed out, sharing economy, which is considered as an alternative in this era of low-growth, may not completely replace the existing structure of industry and business but will play a supplementary role.
It is expected that we will need to see more experiments surrounding sharing economy to see how sharing economy with the structure of a low-cost, low-consumption based on experience can be part of our daily life!