Don't 'Hastily Overregulate' Sharing Economy, FTC Chief Ramirez Says
FTC Chairwoman Edith Ramirez had some advice on the sharing economy, the subject of a paper released Wednesday by the Brookings Institution, where she and others spoke. It's "important for policymakers to look at this issue very carefully and not hastily overregulate" because this innovation should be encouraged, she said. Through this "disruptive competition," Ramirez said, consumers are getting products and services that are "vastly different" from traditional methods, but these business models are also taxing existing regulations around the world.
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The FTC is lending its expertise to local regulators so they can take a "targeted approach" to consumer and health safety issues without hindering the benefits of a sharing economy, Ramirez said. The agency fears an "incumbent" in certain markets may have the ability to influence local policymakers and entrench their position to create barriers to emerging on-demand companies, she said. Ramirez said the commission studied the sharing economy in a workshop (see 1506090046).
Sen. Mark Warner, D-Va., said this new on-demand economy is an "incredible opportunity" for policymakers "to think broader." For example, he said, an independent worker may have four sources of revenue but eventually that revenue dries up for a period of time, so "income insurance" may be a viable alternative to unemployment insurance. But he said legislation isn't needed now because this is still an emerging issue. "This is extraordinarily complicated," he said. "If we legislate too quickly, we're going to screw it up." Rather, he said, there needs to be some "safe space" to create some pilot projects to see what the market can show. He also cautioned that creating a classification could spur some companies to offload their employees to save costs.
In an emerging sharing, on-demand or "online gig" economy, rapidly growing app-driven companies like Uber and online services like Airbnb are creating a new set of employees who can decide when to work, for whom to work and how long they want to work, said the paper from Brookings' Hamilton Project. Such employees are providing services in a range of industries such as car sharing, rental housing, shopping and house cleaning, and they may be working for more than just one employer, it said. It said the workers also need benefits and workplace protections similar to traditional employees and independent contractors. It featured a proposal from Princeton University professor Alan Krueger and Cornell University professor Seth Harris, both of whom served in the Obama administration, to create a new "independent worker" designation that would get certain benefits.
Under the proposal, such workers would have the freedom to organize and be given collective bargaining rights and civil rights protections. Their "intermediaries" or employers would be required to withhold taxes and make Federal Insurance Contributions Act contributions, and have the ability to pool workers to provide cost-effective benefits such as insurance or retirement savings. But the proposal wouldn't give such workers overtime, a minimum wage or unemployment insurance.
Gene Sperling, a consultant to startups including Airbnb and former national economic adviser to presidents Bill Clinton and Barack Obama, wasn't ready to endorse the proposal. "It's just moving very fast ... and I don't feel like we know enough how things are going to legislate in this area," he said. He said some companies like Instacart, which provides an app to order groceries online, are moving toward becoming more of traditional employers because they want end-to-end control over customer experience, quality and training.