Growth of Sharing Economy Creates Interesting Challenge as UK Government Struggles to Measure Economic Benefits

Dollars & QuestionsWhile the emerging sharing economy clearly produces economic benefits driven by intrinsic efficiencies the sector is confounding the UK government a bit – as they are struggling to quantify the overall benefit to society.

This was discussed, to a degree, in a recent report published by the Sharing Economy UK.

The document states that “the sharing economy leads to win-win efficiency gains not included in the definition of Gross Domestic Product [GDP]”.

According to the authors, it is simply not possible to determine the size of the sector using traditional statistical tools.  Accurate numbers  are deemed “essential” to aid policymakers to support, and understand, how the economy is evolving as technology makes it simpler to share and benefit from the overall increase in productivity and utilization.

The SEU report explains;

“The debate [on the sharing economy] is also skewed by the fact that almost all evidence on the impact of the sharing economy is based on the US experience, with its entirely different labour market and business context. There is an urgent need to understand the sharing economy better, given the potential of the new platforms to enable millions of people in the UK to earn more income from their assets and skills; to give consumers access to more choice and lower prices; and to contribute to productivity and growth. The fact that sharing economy activity might even reduce measured GDP underlines the shortcomings of existing definitions and statistics.”

And how does the report define the sharing economy?

“The sharing economy consists of platforms that bring people together, matching supply and demand. A strong motivation for early participants in the sharing economy was the potential benefit (social and environmental) of consuming less and collaborating more. This emphasis on collaborative consumption and human relationships remains a strong driver.”

Sharing Economy segmentsWithin this broad sector is “Money” or better described as investment crowdfunding including peer to peer lending. Overall, the report sites PwC and their estimates on the UK sharing economy.  The global consultancy believes £500 million in turnover took place for the sharing economy in 2014. This number  may grow to £5 billion by 2025.

But the sharing economy may lead to a reduction in “measured” GDP because there could be reduced personal investment of individually – owned assets such as cars or second homes. The possible decline in GDP, as measured today, may obfuscate the productivity increase in the overall economy.

So what should the UK government do? The SEUK provides a helpful list of solutions, itemized below:

  • Additional questions on surveys of individuals (such as the Labour Force Survey) to capture the extent to which people are engaged as providers on sharing economy platforms, including consideration of the definitions and terms used in questions to ensure they reflect the way people think about their provision of services via sharing platforms;
  • An updated Time Use Survey could provide data on people’s engagement in sharing economy activities. A time use survey is a statistical survey that aims to identify, classify and quantify the main types of activities that people engage in during a specific time period. They may require respondents to keep a time use diary for a few days, or as much as a full year. Time use surveys provide activity sequence information (who does what, when?) and time budgets (how much of each activity?).They can capture activities not measured in any other statistics. The last one for the UK was carried out in 2005. There is useful information in the Household Accounts, due to be published in February 2016, but time use data is far richer;
  • The possibility of using ‘Big Data’ techniques to gather information, for example by scraping websites, could be a useful first step to building a statistical picture of the sharing economy
  • Surveys such as the LFS or other household surveys could include additional questions on sources of income from sharing activities, or administrative data (for example from HMRC) might be explored for additional evidence;sharing economy UK
  • Consideration should be given to trialling something similar to the US 2005 Contingent Worker Survey (which observers there are calling on the Bureau of Labour Statistics to repeat for up to date information), for evidence on a range of policy-relevant issue, including the importance of sharing activity in household incomes.[ i] To inform a useful policy debate, a survey of this kind should cover working conditions, flexibility and the alternatives, as well as income. It could also ask specifically about participation as providers of access to assets such as cars or driveways, rather than just asking about income derived. This would provide valuable information on the efficiency of asset use;
  • Assessing the prices paid for services for which there are conventional comparators, to explore whether the inflation measures currently used are missing an important element – although the conceptual problems posed for price indices by the variety of services, their peer-to-peer character, and the dispersion of prices, are extremely difficult;
  • It is important to carry out feasibility study looking at updating the classifications of employment/sectors to take account of new kinds of occupation and business. The categories used now were defined for an economy in which manufacturing was far more important and do not allow people to identify accurately the kind of activities they engage in. It is estimated that about a third of businesses in the economy currently do not identify themselves accurately in the standard classification;
  • Finally, the statisticians should look to collaborate with sharing economy platform businesses to discuss the sector definition and data gathering, including the implications of the platform business models for economic definitions and statistics.

The report is available for download here.

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