The New Sharing Economy

You no longer need a high income or a mountain of debt to live the life of luxury – as long as you’re willing to share.

Lifestyle Economics Skill Point: Demonstratives

If you’ve ever seen the Sex and the City movie, you probably remember a moment in a coffee shop when Carrie, the main character, known for spending exorbitant amounts of money on shoes, fashion, and designer labels, learns that on the website Bag, Borrow, or Steal, you can rent a designer bag for a couple of weeks. There are many reasons to do this; perhaps you want to attend a wedding with a matching purse, impress your former classmates at a high school reunion, or simply be a fashionista for a week.

We’ve been booking hotel rooms and renting cars for decades, but the new sharing economy takes things a few steps further. You can now rent someone’s entire house for a night on Airbnb, or book a car for your daily commute through city car-sharing services like Zipcar. It doesn’t end there. There are companies and website to help you share food and meals, clothes, books and textbooks, sports equipment, unused parking spots, party supplies, camping gear, and even solar panels. All through the magic of technology.

What brought about this new sharing economy, and is it good or bad? Capitalist companies might hate it – with more people sharing, there are fewer people buying – but with the sharing economy, the potential to make money is still there. Just ask some individuals recently profiled by Forbes, Sabrina Hernandez, a student at San Francisco State University, who makes an average of $1200 per month using the site DogVacay. She takes care of dogs in her apartment when their owners need a pet sitter, and rakes in more money than many part-time servers and bartenders. Dylan Rogers makes around $1,000 a month by renting out his BMW. Rogers says he can “Get the luxury of a vehicle,” in his crowded and expensive city of Chicago, without worrying about paying for it.

The best part about the new sharing economy is that it doesn’t have to be a big commitment. Do you have a bunch of tools in your garage that you rarely use? Put them on something like Neighborgoods and let your neighbors borrow them. And how about that extra bike you keep around, or the back-up surfboards? Sites like Spinlister let you lend out your “rides,” including bicycles, snowboards, and surfboards, by the day or by the hour. Now, when people show up on the coast of California using Airbnb, then can quickly rent a bike or a surfboard to enjoy their time without spending $25 an hour for a rental. Then, using a site like EatWith, the Airbnb for food, they can enjoy locally prepared foods from home chefs. So what’s the cost for day and night on the coast with locals? You can likely enjoy a weekend for two for under $100 a day, including one home-cooked meal, and bike or board rentals.

There are dedicated websites with safe and convenient ways to share all of the following items online, without resorting to Craigslist:

  • Clothes and fashion items
  • Cars
  • Food/Meals
  • Bed/ Accommodations
  • Books & Textbooks
  • Tools
  • Bikes
  • Sports Equipment, Snow Clothes
  • Instruments
  • Camping Gear
  • Solar Panels

Trends like these are spreading around the globe, and travelers can enjoy many of these services in countries all around the world, not just in the United States and Canada.

When it comes to the sharing economy, less really is more.

Reading Comprehension

Writing

INTERMEDIATE: Based on the list of items above, are there things you would not feel comfortable sharing? Why or why not? Explain your feelings about this new sharing economy in 200 words.

ADVANCED: If you were going to participate in the sharing economy, how would you do it? Explain in detail how you would buy, sell, rent, or lend items, time, or services in the sharing economy.

Will Inequality Grow in the Future?

Eric Schmidt of Google predicts that financial inequality will be a major challenge for democracies around the world.

Topics:  Economics  Our Future  Skill Point: Future Tense

San Francisco is a favorite city for many people all around the world. A Mecca for tourists and foodies, but these days most definitely known for its booming tech market. According to Google’s CEO Eric Schmidt, this very this is creating a startling financial inequality that is sure to become the “number one issue of democracies,” in the coming years.

It’s no surprise that Google is concerned with growing inequalities. Activists in San Francisco and Silicon Valley are regularly targeting big-name bosses and investors like Marissa Mayer (Yahoo!) and Ron Conway (angel investor) as parts of the problem. They’ve criticized the tax breaks given to the technology sector, and protested the private shuttles big companies like Facebook and Google provide to their employees.

The global wage gap continues to widen, according to the World Watch Institute. High incomes are inflating the costs of living, including rent, throughout tech-heavy areas. Meanwhile, the average worker’s wages are falling behind, and smaller companies are fighting to keep up with labor productivity growth. There are close to 200 million unemployed, according to the International Labor Organization.

According to the U.S. Bureau of Labor and Statistics, the income gap is more prevalent in some democratic countries than in others. In 2011, Norway had the highest hourly wage in the world, at $64.15, with the Philippines at the low end at $2.01.  The U.S. and Japan are in the middle, while Latin America, Eastern Europe, and the rest of Asia fall into the lower half of the hourly compensation numbers.

In a recent TED Talk, Schmidt promoted his new book, The New Digital Age, but not without a warning to the world regarding the changing future of democracies. We’ve known about the growing income gap, and even though Occupy Wall Street has fallen from the media’s eye, nothing seems to have changed.

Schmidt and Conway both believe we all, but especially the giants in the tech industry, have a responsibility to the future of democracies to try and reduce this income gap. Conway asks big tech businesses to donate their unused office space to startups that can’t afford raising rents, to adopt a school and provide guidance and materials to the teachers and administration, and to donate 1 million community service hours, among other charitable recommendations.

Schmidt provided three solutions:

1) Support Startups

The future is changing, and startups are shaping the landscape with new ideas and strategies. The main problem with the widening financial inequality is the high unemployment rate and the comparatively larger wage commanded by more tech-savvy workers. In order to keep new jobs coming, Schmidt proposes we support new startups as they spring up, and welcome their ideas. The next Twitter could be right around the corner.

2) Improve Education & Connectivity

One of the reasons there is such a gap in income is the small percentage of those able to do these high-paying jobs. With more education in the fields of science, technology, engineering, and mathematics (STEM industries), there will be more and more individuals qualified for these positions. Both Schmidt and US President Barack Obama are pushing for more education in these fields in order to fill out the tech industry’s growing job market. (Schmidt even states that all jobs unrelated to “creativity and caring” will soon be replaced by robots.)

3) Build a Safety Net

There is a limit to how many people the science, technology, engineering, and mathematics (STEM) industries can employ. Schmidt suggests building a (public) safety net for those who lose their jobs with the changing market, so they have access to necessary amenities like homes and healthcare.

This subject is one we’re sure to see more about.

Reading Comprehension

Writing

INTERMEDIATE: Choose one of the solutions Google’s Eric Schmidt presents to combat the growing inequality gap. In 200 words, give reasons why you agree or disagree with his solution, and how you might implement or change it.

ADVANCED: Why do you believe the global wage gap continues to widen? Do you think a certain person, country, or demographic is responsible? Are there any reasonable solutions? In a rational and sensible way, answer these questions and defend your argument.

Leisure vs. Work

How “Busy” Changed From a Sign of Poverty to a Badge of Honor

Topics:  Lifestyle  Economics  Skill Point: Present Continuousleisure-vs-busy

Many people these days are too busy to enjoy a real weekend, take a day off, or spend extra time with their families. We’re all working, commuting, and answering emails. Whether the tasks fall into our work hours or not, we always have meetings to attend, phone calls to receive, and the elusive “Inbox Zero” to attain. Today, busy is considered a good thing. It shows that you’re so successful that you don’t have a moment to spare on leisure. Business professionals, stay-at-home moms, and every person in between seems to wear “I’m too busy” like a Badge of Honor, but this wasn’t always the case.

A noted American economist, Thorstein Veblen, argued that just over 100 years ago, leisure was a badge of honor. In The Theory of the Leisure Class, Veblen outlined how people with money could pay those without money to do the dirty, dull, and repetitive work, such as lifting or cleaning, while the rich spent time in more challenging and creative pursuits, such as philanthropy or writing.

Leisure as a badge of honor might surprise today’s workers, but societies and cultures around the world followed this belief, though none quite so fervently as those in the West. It is only in the last decade or so that we’ve seen this shift, where leisure is available to the poor, but not to the rich. By 2005, college educated people had 8 fewer hours of leisure time per week than those with only high-school educations. According to The Economist, “the share of college-educated American men regularly working more than 50 hours a week rose from 24% in 1979 to 28% in 2006, but fell for high-school dropouts.” So why are successful Americans working so much when they have the means to afford leisure time?

They Want To

There are many different explanations for the current situation, but one argument is simply that people want to work. Now that there are fewer uninteresting jobs, the creative pursuits that might have fallen under the category of “leisure” previously, such as writing, philanthropy, or fashion, are now actual careers. We have replaced taxing jobs from the Industrial Revolution with challenging and interesting jobs in multiple industries. According to research by Arlie Russell Hochschild (UC-Berkeley), work has become more stimulating and more enjoyable than life at home. In her 1997 publication, Hochschild introduced the concept of the Time Bind: when work becomes home and home becomes work. Many people in her study go to work to relax, while others in more modern research are simply working so much because everyone else is doing it; they’re just keeping up with the Joneses.

Substitution Effect

Another theory is the economic theory called the substitution effect. To put it simply, the substitution effect refers to how higher wages make leisure more expensive. Not because the leisure activity is pricey, but because of the high wages lost when taking time off of work. When your income increases, each minute of work has a higher return, meaning an entire day off to go to the park with your family could cost you hundreds or thousands of dollars in missed wages. There are some people in the world who wouldn’t bother picking up a five-dollar bill they found on their way to an important meeting, and others who make so much money that it is not worth their time to pick up a $100 bill from the floor.

Winner-Takes-All Marketplace

Another explanation is the atmosphere of the current market. Modern economies have a “winner-takes-all” nature, where the most innovative company takes over the market and reaps a much larger share.  Beating your competitors (think Apple) can make or break a business, and the returns for success can be incredible. Many economists believe that this competitive winner-takes-all atmosphere “amplifies” the substitution effect.

There’s no single explanation, and no clear end in sight to this lack of leisure for the working professional. There are, however, clear differences from country to country. As the sayings go, some places encourage the “work to live,” mentality while other countries, such as The United States and Japan, are full of people who “live to work.” It is possible that a generation of entrepreneurs and fans of ideas like Timothy Ferriss’ 4-Hour Workweek will have the power to change our ideas of leisure and busy, but until then, we’ll all just have to get back to work.

Reading Questions

Writing Prompt

INTERMEDIATE: How many hours a week do you spend at work and how many hours do you spend on leisure? What do you do with your leisure time? What would make you spend more time on leisure? (More holidays where nobody works, more paid time off, higher income, etc.)

ADVANCED: Do you agree with any of the explanations in this article? Explain why you think business professionals have no leisure time in your country. Also give your opinion on why you do or do not have enough leisure time.