Challenges of a shared economy

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  • By: Joseph Roberts

    In as much as the shared economy provides huge opportunities, it as well has various challenges that inhibit its success. The internet makes easier for the acquisition of services and goods at a lower cost. This is a huge shift from earlier technologies. However, the adoption of these mechanisms brings about a range of issues that may pose a huge challenge to the operations of companies in the shared economy. Massive regulations and redesigning of these aspects that guide the shared economies should be put in place. However, without the necessary tools that would guide these approaches, the companies in the shared economy will still face the huge challenges. These include; taxation, property rights, labour regulations, consumer protection and safety concerns as well as rules on discrimination.

    Labour regulations

    All over the globe, countries have different forms of laws and regulations as regards the labour industry. What may be illegal to one country in terms of the labour engagements may be okay in another nation. Given that the shared economy is connected to the different nations in the world, the aspect of labour regulations crops up. Labour requirements vary as regards the protection of the employees as well as the representation in the various labour unions. However, given that the nations in the world have varying approaches relating to the issue of labour regulations, companies in the shared economy may find it hard to flawlessly navigate such occurrences. Companies such as Uber and Lyft are faced with a raft of legal suits as regards the manner in which they adhere to the labour regulations in the different states of the USA. For instance, the employees from the United States who work for Uber have a right to be recognised as employees, either on a full-time basis or on a part-time basis. That means they should be able to negotiate a better pay as well as having an improved working environment. However, that greatly contrasts with the labour regulations in other countries that may not recognise part-time workers as having the rights to such considerations and demands. In essence, the varying undertakings of the labour regulations means that while some employees in one country may negotiate collectively for their rights, others in another country may be inhibited by the labour guidelines. Overall, the shifting regulations as regards labour pose a challenge to the operations of the companies involved in the operations of a shared economy.

    Property rights

    In terms of renting the services or assets within the scope of a shared economy, different property rights are exerted by the owners. These rights that are imposed by the owners should always be observed. The challenging thing in such a setting is that the property rights may keep on changing depending on the wishes of the owners. Also, concerns that may constitute the need for property rights in one area may not be reflective of the same in another area. However, there is a challenge on the part of the companies involved as the users may not always adhere to these property rights. In the end, such a situation may instigate an array of complaints as well as suing claims. For instance, Airbnb may be faced with a raft of legal challenges as regards the stipulations and rights imposed by the property owners. In the case of Airbnb, there are cases where the leases for apartments do prohibit any form of renting out rooms. In the same vein, these property rights do disallow any form of subleasing. Moreover, some property rights forbid the usage of residential houses for any form of commercial purposes. Using Airbnb as an example, violations of these property rights will do harm to the operations of the company. However, some of the prospective clients may go against such rights, leading to legal suits on the part of the company. In most cases, the violation of these property rights will be noticed after the client has left, thereby exposing the company to the legal challenges.

    Rules on discrimination

    Most governments across the world have put up measures that curtail any form of discrimination. In essence, these measures are crafted to prohibit nay form of bias and inequity based on religion, sex, race or even disability. Moreover, all the business entities are supposed to uphold and live by the set of standards as regards the rules on discrimination. Failure by companies to abide by these rules lead to substantial penalties that have the potentiality to derail the undertakings of a company. However, with the usage of a shared economy, it is hard to authenticate if these rules have been exerted with finality. As with the case of the taxi-hailing services, such as Uber, it is hard to follow such rules. Some local laws in different parts of the world do vary as regards the availability of Uber taxis that can be assessed by those who are physically challenged or the disabled. In other towns, laws dictate that a particular percentage of the Uber taxis should have a fleet that can be able to accommodate the physically challenged. Also, within the hospitality industry and using Airbnb as an example, it is hard to verify if one ethnic grouping has been discriminated as regards the accessibility to rented apartments. All in all, given that keeping up with the records of these discriminatory occurrences may be hard, there is a challenge that these companies can be sued for negligence and not enforcing the laws as required. Overall, implementing these rules on discrimination poses a huge challenge for the companies operating in the shared economy model.


    Different countries have varying scopes in terms of the taxation procedures and requirements. In this context, companies that operate within the setting of a shared economy do have huge burdens in terms of the taxes. The taxing policies may shift depending on the formulation of new laws as well as the enforcement of the exiting regulations. Point in case, Airbnb taxes in New York augmented gigantically after the local legislators approved a bill that put forward enormous fines for anyone entertaining the activities of Airbnb within the city. Such a situation offers an intricate model as regards the manner in which the companies within a shared economy should adhere to taxation. Besides, within the hospitality industry, some countries have a special hotel tax, on top of the local and state levies. Also, traditional employers within the hotel industry are compelled to collect the payroll taxes from their workforces’ pay. In this case, companies that target the hospitality industry within the scope of a shared economy are as well required to do so. This is because it makes no sense for a portion of an industry to pay taxes while another is exempted. However, the challenge lies in the fact that compelling such companies to pay taxes may not be as straightforward. Because they use the internet as opposed to the services provided by the government, these entities may demand some tax privileges. For instance, Airbnb has been engaged in a legal tussle with the State of New York as regards the lack of tax payments.

    Consumer protection and safety issues

    Another challenge relates to the control of what the consumer should be exposed to in terms of safety. Given that there are few regulatory processes to be followed when acquiring an asset or service in a shared economy, there is bound to be an issue with the safety measures. In essence, most people who put their assets and services for rental by other people may not have put the necessary plans and mechanisms to make sure that safety is guaranteed. Upon successful rental of these services or assets, the client may be exposed to various dangers, leading to the negative stories about the venture. In essence, such an occurrence attracts negative coverage as well as legal concerns. Despite the insatiable need for people to find rentals in the city of New York, most of them do not know the risk they are being exposed to. Most of these rentals do not meet the threshold for the required standards and are therefore illegal. Case in point being rentals that relate to the Airbnb venture, most of them do violate both the state and federal laws in terms of housing requirements, health obligations and other safety measures. Moreover, most of the rentals on the Airbnb platform lack the required insurance cover for indemnity purposes. These challenging occurrences may therefore put in jeopardy the guaranteeing of food hygiene for the short-term tenants. Also, it means that the short-term tenants are exposed to a myriad of dangers, for instance fire accidents.


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