Areport released last week by the Grattan Institute on services like

Uber and Airbnb finds that such peer-to-peer services can provide
large benefits to the economy, but that governments need to ensure
that both consumers and providers are protected. Hoping the services
will just go away is not an option governments can afford to take.

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Its amazing how quickly peer-to-peer services have become part of our
lives. The phrase Its Uber, but for ... has become so ubiquitous it has
almost reached a dad-joke level of humour. Were now not so much
worrying about whether or not to use Uber, but instead obsessing over
our Uber rating.

But with this new economy comes challenges will it improve

productivity at the expense of safety and wages? How should
governments react, given the biggest resistance from established
players such as the taxi companies and owners?

The Grattan Institutes latest report, Peer-to-peer pressure: policy for

the sharing economy examines the policy issues involved. The report
notes that there certainly are clear economic benefits from the sharing
economy.

The report estimates Uber can cut more than $500m from Australian
taxi bills close to 10% of the $5.5bn spent each year by Australians
catching a taxi.

The reports author Jim Minifie argues that other sharing platforms are
boosting employment and incomes for those on the fringe of the
labour market, and putting thousands of underused homes and other
assets to work.

This last point is one that certainly has import in light of continued
concerns about productivity. A persons spare room or granny flat that
is unused is essentially an economic asset going to waste renting it
out via Airbnb puts that asset to work.
But a major concern for those for who compete with these new sharing
operators especially the 68,000 taxi drivers around the nation is
that the playing field is not level. Taxi regulations and licence fees force
taxi fares to be higher than Ubers, and certainly the evidence in the
Grattan Institute report backs this up.

A short trip from Canberra Civic to Parliament House costs more in a

taxi, even when including a 1.5x Uber surge charge:

UberX and taxi fares in Canberra

Civic to Parliament House - 6 minutes, 3.3km

Flagfall
Distance charge
Time Charge
Card charge
Card charge
UberX - 1.5x surge
5
10
$15
Taxi
UberX
Taxi - weekend and night
UberX - 1.5x surge
Source: Grattan Inst Fig 2.1 Get the data

Amid all the issues regarding unfair competition, the reality is that
many taxi drivers provide good service in a dangerous occupation the
report suggest driving a taxi is possibly 15 times as dangerous as the
average job (in 2013-14 in Victoria for example, there were 51 assaults
in taxis).

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But there has also long been a very real sense of customer
dissatisfaction with the service. When a survey in Western Australia
finds that only 41% of women feel safe catching a taxi alone at night
you know the industry has an image problem justified or not.
Uber however gives customers some power. Customers can estimate
fares and car arrival times, view the approach of a driver, monitor
actual versus advised routes, streamline payments, and review each
trips route, time, driver, and fare.

But the ability to rate someone on an app is the very lightest form of
consumer protection, and the report argues that while some taxi
regulation should be reduced, mostly these relate to licensing and
pricing. Instead it argues that not only should the safety regulations
remain in place, Uber drivers should also be required to meet certain
standards such as passing a criminal history and driving history
check, a need to have zero blood-alcohol concentration, and for their
cars to undergo an initial roadworthy inspection and appropriate
follow-up inspections.

The introduction of Uber certainly does lead to a drop in taxi driver

income and the value of taxi licences.

The report notes that even in states where Uber is not legal the value of
taxi licences has fallen:

But the report argues that while the new entrant will reduce taxi
drivers and licence owners income, they should not for the most part
be compensated instead only those suffering economic hardship
should be assisted.

Similarly the Grattan Institute recommends only light regulation of

accommodation services like Airbnb.

The service, which has grown exponentially in recent years, allows

people to rent out rooms in their own house or other properties for
short-term periods:

The Grattan Institute report finds that a majority of Aribnb activity is

not in peoples primary residence thus investment properties that
would have been used for long-term renters are now being used as de
facto serviced apartments.

Two concerns which arise from this are that it may increase rents in
these areas due to a shortage and that short-term stayers are more
likely to cause disruption to neighbours.

The report suggests the impact of Aribnb on rents would at worst be

very localised inner city and more touristy suburbs and that mostly
it would be minimal given Airbnb residents only account for about 2%
of Sydneys current rental capacity.
However concerns about the disruption to neighbours appears to be
well founded especially within apartment complexes. Within the
Melbourne CBD and inner-city, short-term residents are more than
three times more likely to be subject to complaints about behaviour
than long-term ones:

Unfortunately in many states such as New South Wales the legal

remedies to neighbourhood disruptions are more geared for
complaints against long-term residents.

One better example perhaps is that of Queensland where party house

legislation enables local governments to require some or all party
house owners to obtain permits, which can include conditions such as
occupancy limits and noise controls.

Certainly it is clear that both state and local governments need to adapt
to the Airbnb growth by ensuring the ability to quickly identify the
property that is the subject of a complaint and to contact the operator,
and to impose escalating penalties, up to bans, on landlords if they
breach conditions repeatedly.

But while the peer-to-peer economy may bring with it improved

competition, lower prices and better services for consumers, there is
some concern that it will reduce wages.

This was an issue noted by the shadow assistant treasurer, Andrew

Leigh, last year when he released the ALPs sharing economy policy.

But the Grattan Institutes report would suggest these concerns can be
overstated. The report notes that for the most part peer-to-peer
services are in areas that already mostly involve independent
contractors such as household repair and construction (hipages),
household services and errands (Airtasker), writing, website design, IT
services and data entry (Freelancer, Envato).

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The report notes that few large platform workforces in manufacturing,

retail and wholesale trade, healthcare, or financial services. The report
does however see the possibility for such apps to be abused and
recommends sham contracting provisions in the Fair Work Act, to
deter misclassification of legitimate employees as independent
contractors.

The sharing economy is here to stay. For governments to ignore it and

hope services like Uber will just go away would be like media
organisations pretending that social media is just a passing fad.

There are clear economic benefits from this new economy, but also
issues for consumers and providers of these new services the Grattan
Institutes report provides some good recommendations for
governments to follow.