Spark

Has the Gig Economy lost its mojo?

Uber for this, Uber for that.
(The Associated Press)
Listen11:17

For a while, it looked like the On-Demand Economy had nowhere to go but up. From driving services like Uber and Lyft, to short-term accommodation via Airbnb, there has been an explosion of technology companies that connect providers of goods and services, with consumers. Consumers get what they want when they want it, and providers pick up 'gigs,' often with flexible, part time hours.

Lately, though, there have been rumblings of trouble. For instance, the tech press point out that food delivery service, SpoonRocket closed up shop recently. Grocery delivery company Instacart cut pay rates to some workers. In the on-demand valet parking world, some startups are moving away from on-demand. Prices for some on-demand services are rising, while wages drop or remain in flux.

Arun Sundararajan is a Business Professor at New York University who has researched the On-demand or Sharing Economy. He argues that short-term upheavals do not challenge the overall viability of the big picture economic model, which is part of a much longer term economic shift. 

"We're at that phase of early experimentation. Many of these platforms have this curious mix between being marketplaces but also being firm-like," Sundararajan explains. "Uber sets prices; they have a brand. Airbnb is sort of like a franchising operation...You provide the space, and you provide the labour, you provide the hospitality, but there's the Airbnb brand and the Airbnb review system...that's layered on top of it." Sundararajan predicts it will take years before we settle on a few dominant models.

I'm not too worried about the fact that some of the startups that got funded are going out of business. It's possible that some of the companies that were funded in the sharing economy were just not good ideas.- Arum Sundararajan

While he doesn't see the corporation going away, Sundararajan does imagine an increasing role for the sharing economy. "If we look forward ten years, a healthy double digit percentage of many large economies will be sharing economy activity" he says. He sees a particularly strong role for countries like China, where the emerging middle class "...think about getting a car on demand rather than owning a car, or staying in Airbnb-style accommodation rather than going to a hotel. So the entire model of consumption that they embrace as they become middle class consumers may end up being sharing economy aligned."

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