The 2016 presidential election will determine the fate of the sharing economy. Donald Trump has yet to voice his opinion, but other candidates have made their positions clear. Hillary Clinton promises a regulatory shake down and GOP candidate Ted Cruz promises to leave it alone.
Hillary thinks the sharing economy is “raising hard questions about workplace protections and what a good job will look like in the future.” In her economic policy address, she said she will “crack down” on independent contractors.
That would be a big mistake. The independent contractor designation is the backbone of the sharing economy. It allows the flexibility and freedom for people to be their own boss and set their own schedules. Drivers are able to flip back and forth between different apps to find passengers. Homeowners make ends meet by renting out spare rooms and parking spots. Skilled and unskilled workers find all sorts of gigs to supplement their income. If someone wants to work, the independent contractor designation lets name do it whenever and however they want.
There is nothing to “crack down” on. “Cracking down” on independent contractors will only punish Americans who need the new jobs the most. Someone struggling to pay rent every month is a lot more likely to rent out a room in their house than someone who is financially well off. They should not have to ask Hillary’s permission before doing so.
If elected, Hillary wants independent contractors to have a boss. Her threat to “crack down” on the sharing economy is a political favor to labor unions supporting her candidacy. The AFL-CIO, International Brotherhood of Electrical Workers (IBEW) and International Association of Machinists (IAM) are already working to unionize the companies’ drivers. Hillary received an endorsement from the IAM, while the AFL-CIO and IBEW are waiting to endorse the Democratic candidate. Any doubt that she is going to leave the sharing economy alone should be thrown out the window.
On the other hand, GOP candidate Ted Cruz promises a much different approach.
In a letter to the FTC, Cruz demonstrates he has the best interest of Americans in mind. He warns the agency to tread carefully when considering regulation on the sharing economy and advises the commission to “embrace permissionless innovation and use its statutory authority to examine anti-competitive efforts to restrict competition within the sharing economy.” He believes Americans do not need a politician’s permission to innovate and work in the sharing economy.
Cruz is spot on. “Anti-competitive efforts” will punish average Americans. Before the rise of the sharing economy, it was difficult for someone with a car or an open bedroom to locate someone who needs a ride or a place to stay. Only the wealthy were able to have personal drivers and seconds homes. Services like Uber and Airbnb allow for everyone to participate in the market. The services act as middlemen who facilitate trade between parties. As more middlemen enter the market they will be forced to compete over who can offer a better service for a lower price.
Dealing with onerous regulations and strict labor policies is a death sentence for the entrepreneur working out of his or her garage. It drains resources away from product development and redistributes them towards compliance and litigation. This gives big businesses an advantage in the market because they have the resources to navigate the complex web of regulations. Cruz notes this in his letter when he explains how oftentimes the most difficult barrier to entry for new businesses are the regulations imposed by politicians. Fewer businesses in the market means fewer choices for workers and consumers.
Hillary’s “crack down” will strip away worker freedom as a favor to the labor monopolies supporting her campaign. She claims she wants to “protect” the public, but in reality she is protecting special interests at the expense of the little guy. As Sen. Rand Paul tweeted “America shouldn't take advice on the sharing economy from someone who has been driven around in a limo for 30 years.”
The upcoming election has major implications for the sharing economy. Likewise, the sharing economy will have major implications on the election. The drivers, homeowners, and taskers who value their economic liberties are a new coalition of voters. Their numbers are growing and their votes will have a resounding impact, especially in crucial swing states.