The Future of the Sharing Economy and Its Impact on Jobs and Income
Traveling to Copenhagen recently, I booked an Airbnb, ordered my lunch via Deliveroo, hopped into an Uber, bought a few items on Amazon, and replied to a few questions on Quora, all within an hour. In total, I utilized five services from the Sharing Economy. This experience revealed the interconnectedness of the digital economy and the evolution of job creation and labor markets.
The Declining Salaries and Rise of Freelancing
The average gross salary for young adults aged 18-34 in developed countries has decreased from 36,000 to 33,000 since 1992. Moreover, 98% of new jobs created in the past seven years are either freelance or part-time. This trend is indicative of a shift towards gig work, where workers are increasingly outsourced to freelancers or cheaper labor in emerging markets.
For instance, as digital music gained popularity, traditional music stores began to decline. Similarly, the rise of streaming services like Netflix led to a reduction in the number of sales attendants at movie rental stores. The ratio of revenues per employee in high-growth companies is also changing, with companies like Instagram creating massive valuations with a small number of employees.
The Four Horsemen: Amazon, Apple, Facebook, and Google
The emergence of powerful tech giants like Amazon, Apple, Facebook, and Google is reshaping the job market and economic landscape. Their investments in artificial intelligence, virtual reality, self-driving cars, and seamless user experiences are unprecedented. Amazon, for example, is trialing a new store called Amazon Go, where customers can simply walk in, pick up their items, and leave, with their purchases automatically charged to their accounts. This is spawning questions about the future of traditional retail jobs, such as cashiers.
The Role of Artificial Intelligence
Artificial intelligence has advanced rapidly over the past decade. It can now recognize faces even when they are upside-down or in a blurry image. Additionally, JP Morgan has outsourced hundreds of legal decisions to artificial intelligence, reducing the need for human lawyers.
The Sharing Economy in Full Swing
The business model of the Sharing Economy revolves around the utilization of excess resources. If you have excess items like empty rooms, seats, or parking spots, and others want access to them, a platform can facilitate the transaction. Businesses like Airbnb and Uber are prime examples of this model, offering services that bring together those with excess and those in need.
The Winner-Takes-All Phenomenon
In today’s economy, the 'winner-takes-all' phenomenon means that if you create $1 in value, your portion of that value keeps shrinking. In the 1960s, a global CEO might earn five times the average employee's salary. Today, that ratio is 200 to 1. The lion's share of the value created goes to the top executives, board members, and shareholders, while the rest of the workforce gets minimal compensation.
During economic downturns, CEOs and top management often receive bonuses, while the majority of employees are let go. This highlights the unequal distribution of wealth and the increasing pressure on the workforce.
Preparing for the Future
The rise of the Sharing Economy and the advancements in artificial intelligence are likely to lead to deflation, which in turn could result in economic depression. To mitigate this, some experts suggest implementing Universal Basic Income (UBI) to provide financial support to all citizens.
Given these changes, it is crucial to adapt and reinvent oneself to thrive in the gig economy. The Sharing Economy offers opportunities to supplement income and access resources that were previously out of reach. By identifying and leveraging excess resources in your life, you can benefit from this new economic landscape.