Imagine that I am sitting at home one night, and I would love to go meet some friends for a drink. Unfortunately, it’s hard to get cabs to come to my neighborhood, it’s not quite safe to walk alone at night, and driving to the outing would defeat the purpose, since I couldn’t drink once I got there. So instead, I sit at home and watch reruns.
Lowering the transaction costs makes it easier for me to find someone who is willing to drive me over to the bar. This hasn’t displaced someone else’s job; it’s an entirely new piece of economic activity that simply wouldn’t have happened if the transaction costs had remained high. We get additional employment, additional consumption and additional happy hours with our friends, drinking margaritas and arguing about "Game of Thrones."
Kevin Drum does not.
All this has Kevin Drum concerned: “It now seems as though the 'sharing economy' is any job that's somehow related to a scheduling app and provides workers only with odd bits and pieces of work at the employer's whim. In other words, sort of like manual laborers in the Victorian era, but with smartphones and better pay.”
McArdle hears his concern but is not convinced. Lots of people would love to have two or three or four jobs.
Of course, some workers would rather be [fully employed]. But what about people who use these jobs to “moonlight” around other obligations, like day jobs, school or child care? Worker supply, as well as consumer demand, seems likely to fall....
The real concern, I think, is that these jobs will become substitutes for better jobs: more stable, better paid. This is obviously going to concern left-wing commentators, many of whom have already expressed worry that the “gig economy” is bad for American workers.
That may be.However, just because workers would suffer doesn't mean workers would suffer.
But proving that someone got hurt is not the same as proving a net decline in the position of workers.
But so what? It's not like they can get a good job anymore anyway.
But that rests on the hidden, and so far unproven, assumption that the gig economy is in fact displacing workers by driving down the value of the work they do, rather than creating new economic activity that simply wouldn’t exist if it weren’t for these apps -- and possibly in the process providing work for workers displaced from other industries, for reasons that have nothing to do with Uber or Instacart....
I think there are real concerns about what has happened to the wages of American workers. But so far, I don’t see much evidence that Uber or Airbnb is the cause. Most of it seems to come from automation of low- to medium-skilled work in the manufacturing and clerical sectors, or the outsourcing of those jobs abroad. Trying to fix those problems by destroying Uber’s business model is like trying to cure your headache by taking a hammer to the bottle of aspirin.
Just as McArdle thought that Africans would be lucky to "slave" for $21 a month in a sweatshop, her fellow Americans would be lucky to get whatever work they could scrape up in their spare time, if there is any work.
Kevin is, of course, right that these apps somewhat mimic the casual labor market of the 19th century. But there’s a difference beyond the labor conditions: The apps radically drive down the transaction costs to providing these sorts of services. A Victorian laborer might have had to tromp from house to house looking for work, or stand outside for hours waiting for someone to come by looking for workers. No longer.
Just think about how much easier your life of poverty would be if you could wait to be contacted via app instead of waiting in the parking lot of Home Depot in the hopes of getting a painting or construction job.
Besides, those full-time jobs with benefits were problematic to begin with. Your company is bound to screw you over anyway.
But doing those things internally, rather than buying services in the market, is expensive. It makes the employer less flexible, and raises its fixed costs. It has to recover those costs somehow, which can happen in one of three ways:
- Charge customers more, which will reduce demand and result in fewer hours of labor being consumed
- Lower the wage paid to the workers
- Exert a lot more control over worker schedules and conditions to maximize the ratio of work to overhead. Workers will probably not be allowed to show up whenever they feel like and work as long as they want. They will, for example, probably have their hours capped to prevent them from qualifying for health insurance.
If employers have to pay you steady wages and benefits you'd never get a job.
How much better it would be to just accept your impoverished and precarious situation. And let's face it, how much better it would be for Megan McArdle if you were powerless, and forced to ferry her from her $300,000 gentrified Victorian rowhouse to her favorite bars and back again for the lowest fees the market could provide.