Governments are getting better at regulating the 'sharing economy'
- For years, city and state governments around the country have been fighting over "sharing economy" issues.
- Now those fights are making more sense.
- Companies and lawmakers have learned to speak the same language, and they're finding compromises.
This is a column about government working better.
For years, city and state governments around the country have been fighting over "sharing economy" issues. What's changing is those fights are making more sense.
These are no longer so often fights between companies that think they're entitled to be unregulated and governments that want to ban businesses they find new and suspicious.
Companies and lawmakers have learned to speak the same language, have climbed down from extreme positions, and are doing better at finding compromises that harness the benefits of business innovation while limiting unintended costs imposed on communities.
They're not getting it right all the time, and there's a lot of work left to be done, especially around labor regulation for people who work in these industries. But they're getting it right more often, and even when they get it wrong - as New York may have recently done with new rules on Uber and Lyft - they're showing more flexibility, emphasizing that rules are subject to change as we see how they work.
The scooter freak out did not lead to scooter bans
A few months ago, there was a spate of articles about how everyone hates electric scooters, which had become ubiquitous in cities like San Francisco. They're blocking the sidewalk. They're getting thrown in San Francisco Bay. People are riding them on the sidewalk. They are an offensive symbol of tech bro culture. Etcetera.
There were calls from ornery residents: Get these off the streets. This sentiment was sometimes expressed in human excrement.
But scooters, while perhaps annoying, are useful. They address a very real "last mile" problem: Will people use transit if the place they're going is a 12-minute walk from the subway? What if it's a four-minute scooter ride from the subway instead?
Instead of banning, several cities have taken a smarter approach: Require operators to get licenses, impose rules about how to use a scooter safely and nicely, and limit the number of scooters in operation so there aren't piles of unused scooters littering the sidewalks.
San Francisco did order all the scooters off the streets temporarily, but a limited number are coming back this month for a yearlong pilot.
Santa Monica has imposed an especially sensible, flexible scooter cap: If a company's scooters are getting a lot of use, it can put more on the street. If they aren't getting used very much, they have to take them off.
Cities and companies understand regulation should be a work in progress
Instead of bans, jurisdictions have been channeling their skepticism and concerns about sharing businesses in more useful directions: Pilot projects, temporary caps, and regulations of fixed duration.
Seattle, the US city with the largest dockless bike share presence, has treated its programs as an explicit pilot. A big pilot: Three companies have 10,000 bikes operating in Seattle, about the same number as New York's dock-based Citi Bike program.
For a year, Seattle collected data and surveyed users and residents. Now, the three pilot companies are continuing to operate as the city decides what kind of permanent regime it wants - having learned a number of valuable lessons about bike parking along the way.
In New York, the city council has just passed new regulations on app-based ride share services, to much fanfare and also much objection.
The rules pause the issuance of new registrations for cars that may be dispatched by apps - there are currently about 80,000 of them, or more than five times the number of yellow cabs in the city. But that's only for a year, as the city tries its hand at regulations to guarantee drivers a minimum wage and discourage Uber cars from cruising midtown Manhattan without passengers.
Mayor Bill de Blasio sought a cap on rideshare cars four years ago and got smacked down by a city council responding to angry drivers. The new rules have been greeted in some corners as de Blasio's revenge. But the number of rideshare cars operating now is drastically higher than in 2014, and this isn't a fight about whether Uber will cease to be a major part of the transportation landscape in New York - it's a question on the margin about numbers and fares and driver earnings.
It's also a question about traffic speeds. Lawmakers cite the growth in rideshare cars as a reason traffic speeds in Manhattan have fallen in recent years. A congestion charge for all cars would probably be a better way to address this than a regulation specific to ride-sharing, but that's not on the table, because a congestion charge would require state legislative approval.
Ian Adams, who studies sharing economy rules for the libertarian R Street Institute think tank, is skeptical that rideshare-only congestion regulations would be effective at speeding up traffic. But he did praise the city for keeping the license cap to only one year, to then be reevaluated after study.
"I think that expresses some level of skepticism they have internally about this approach," he said, regarding the city council. "It may harm their own constituents and I think they're aware of that as well, and they're reluctant to do something that will irretrievably destroy the system. That said, I think there's a reason we haven't seen other large cities go this way."
There are still big questions to resolve
Some disputes about the sharing economy are harder to compromise on than questions about how much or how many of something should be available in a city.
Happy compromises have been harder to find on short-term home rental services like Airbnb than on ride-sharing services like Uber. This reflects bigger, substantive policy concerns about home sharing than other kinds of sharing.
Homeowners have valid quality-of-life concerns about the apartment buildings they live in turning into hotels - concerns that will not always be addressed by landlords and building managers if the government does not step in. And the diversion of housing units to the short-term rental market can undermine rent-control policies in cities like New York and San Francisco.
Labor rules in the sharing economy also require a lot of work.
Uber calls its drivers "driver-partners" even though what they do looks a lot like being an employee without the legal protections that come from a payroll-employee relationship. California's Supreme Court agrees, and has ordered companies like Uber and Lyft to start treating drivers as employees, eligible for overtime and minimum wage and other benefits of employment.
The companies complain, with varying degrees of plausibility, that requiring them to treat their workers as employees will have negative consequences for consumers and even the workers themselves.
The companies may have a point about overtime rules: These exist to protect employees from being required to work extra-long hours without extra-high pay. But since ride-sharing drivers set their own hours, do they need that protection? Will requiring time-and-a-half for overtime increase drivers' earnings, or will it just lead companies to order them to stop driving after eight hours - reducing their earnings and forcing them to choose a work schedule they didn't want?
I don't think the answer is obvious. It would be interesting to see how an experiment with time-and-a-half rules for ridesharing works out in some jurisdiction.
On the other hand, it's hard to see a good argument for why sharing-economy workers should be exempt from the minimum wage like they are today.
Yes, a minimum-wage requirement might make some jobs uneconomical, and some people might be told not to work at all because the company isn't willing to pay the wage required. But that's also true of the minimum wage in the regular payroll economy, and we view that as an acceptable trade-off for the way the minimum wage boosts low-wage workers' income overall.
In the long run, resolving these issues may require something the economists Seth Harris and Alan Krueger have proposed: A third kind of employment classification, less than payroll employment but more than independent contracting, that is customized to the kinds of flexible work arrangements that characterize the sharing economy.
But it would be good to see the results of more local experiments before designing a national form of those rules. After all, states and localities seem to be getting better at conducting these sorts of experiments.