Pandemic debunks Silicon Valley’s collaborative economy myth

By Marc Arcas.

San Francisco, US, May 20 (efe-epa).- Staff layoffs due to the COVID-19 pandemic are affecting the companies of the so-called collaborative economy, which until recently were Silicon Valley’s big bet for the future but are now seeing their incomes plummet.

This is the case at both Airbnb and Uber where 25 percent of the workforce have lost their jobs.

The success of most of these companies is closely linked to the transport and tourism sectors – two of the hardest hit by restrictions on mobility – with the exception of food deliveries, which is experiencing a crucial moment because of COVID-19.

“So now I’m doing about 70 percent food deliveries and 30 percent passengers. Normally it would be the other way around,” said Jeffrey Thomas, who has been driving for Uber for eight years in the San Francisco area.

This has not only meant a change in the type of activity he carries out, but also a drop in income of up to $1,500 per month, since the margins of food delivery are much lower than those of transporting people.

Like Thomas, hundreds of thousands of drivers around the world have seen their number of passengers plummet in recent months, losing a significant portion of their income, and some have even stopped driving because it was no longer worth it or because they could not continue to pay their car installments.

However, no Uber driver has been fired during this crisis, precisely because the collaborative economy model on which it is based gives them a self-employed status and not that of a company employee.

Therefore the layoffs at Uber, like those of its American rival Lyft, and those of the property rental platform Airbnb, have all been engineers, administrative staff and office workers.

Airbnb’s case is even more brutal than Uber’s due to the expectations that the company had for 2020 – it should have been its great year, with an IPO that will no longer occur – and due to the extremely delicate situation of many people who had built businesses with the platform.

During the past years, when tourism and consumer spending on leisure reached unparalleled levels, many investors opted to take out mortgages with the purchase of houses, not with the aim of living in them, but rather renting them for temporary stays through Airbnb.

“I have an already paid for property that does not worry me. I’ll just stop making money from it for a few months and that’s it. The ones that worry me are two others that I bought in 2015 and that were always full until now,” said Kim, a professional artist based in Daly City, California.

Out of the three houses that Kim rents out on Airbnb, the only one that is already paid for is in Daly City, but monthly mortgages for two in San Francisco need to be paid, until now from the income obtained from temporary rentals.

In better times, the collaborative economy was seen as an easy opportunity to secure a source of income while maintaining a high degree of autonomy, having freedom over how many hours worked per day and having to answer only to oneself, which encouraged many people to quit their jobs to drive for Uber and Lyft or rent properties on Airbnb.

“Now, the prospect is much more precarious, without health insurance and without work for prolonged periods of time. At least for a time, (the pandemic) will be a stumbling block for people to leave stable jobs and turn to a collaborative economy,” said professor of finance at the University of Chicago’s Booth School of Business, Raghuram G. Rajan. EFE-EPA


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