How often have you had temporary requirements that need a lot more resources than you currently have? How often can you really afford to meet these needs by hiring someone full time or buying a product? As Rachel Botsman says, "What you need is a hole, not a drill."

The world is transitioning to an economy based on use, promoting access over ownership of resources. Collaborative consumption is the shared use of products or a service based on immediate requirements, which is why the concept is also called the "on-demand economy." 

People are transacting money between strangers over online platforms, and are efficiently satisfying human needs by reducing cost and risk of ownership. Through the sharing economy, people are also creating value as informed suppliers rather than employees or workers, and they are unlocking the true value of resources that are under utilized.

With how fast this concept is growing, the collaborative economy is going to be a crucial part of growth and employment in the future.

The collaborative consumption of labor 

Collaborative consumption of labor involves crowd work where bigger projects are broken down into smaller tasks. These include micro-entrepreneurs, on-demand workers, gig workers, freelancers, independent contractors, and prosumers (people who generate wealth using idle resources).

The main driver for people to engage in collaborative consumption is the search for fairer prices for services.

The evolution of peer-to-peer economy  

With the advancement of technology and widespread use of the internet, consumer needs are rapidly changing. The evolution of collaborative economy has led to the rise of peer-to-peer platforms where customers request on-demand, limited time access to a product or service. The three most common amongst these are property sharing, property-based sharing, and service sharing.

Technological platforms facilitate the transaction and coordination costs, and they work using online reputation tools, establishing consumer protection through transparency. These platforms have extensive information about their users and the market conditions, and they exercise control over the workers with algorithms, dictating the likelihood of an individual being chosen to provide service.

The goal of these platforms is not to sell a service, but to create more interactions, as they make profit from their clients and not the resources.

Some of the most popular examples of these platforms are Task Rabbit, Uber, Airbnb, and Freelancer.

Who are most likely to take part in the peer-to-peer economy 

Since online platforms drive collaborative consumption, the people who participate in this are more often from urban areas, younger, literate, and have a medium to high income.

Individuals who want to engage in collaborative consumption should also be sociable and look forward to seeking relationships online.

The work performed in a sharing economy is legally considered self-employed work, as these are performed by independent contractors who are autonomous. However, since most platforms establish control over the workers, they are considered the employer. Platforms manage the productivity of the workers through algorithms and activity logs.

Why is the peer-to-peer economy special? 

• It gives an incredible opportunity for workers to convert their time and skills into money.

• Ratings are crowd sourced information, making them more trustworthy.

• It empowers consumers through pricing and choice of access and helps them save and earn money.

• It encourages on-demand employment, equal access, conscious consumption of resources and collaboration.

• It encourages people to be more opportunistic and independent minded.

The other side of the coin

• If there is no demand, there is no work.

• It makes it difficult for workers to develop a strong career when they are performing a multitude of on-demand tasks.

• Individuals do not have the option to negotiate the conditions of service with the platform.

• The workers are not covered for worker's rights such as non-discrimination, as they are working outside the labor law and social security.

• There are no paid breaks, lunch, holidays, or sick leave.

• The rating system pressures workers to perform their best at all times.

Setbacks that need to be settled 

Privacy concerns

Since the on-demand economy requires both the workers and consumers to share their data without any legal framework to protect it, privacy becomes a concern.

Lack of clarity on employment protection laws

Since temp workers are not technically employees, there is a lot of confusion around minimum wage laws, the rules that govern employment agencies, and what insures worker safety and security. Generally, agencies and platforms become the employer on record and are liable in case something goes wrong.

Insurance and taxes

Society on the whole loses if taxes arent paid. There isn't enough clarity on whether the workers are private or employed, creating conflicts regarding insurance coverage. There needs to be an extension of applicable regulations to platform work, as well as a new category of work between employment and self-employment.

The future of work 

The current state of the economy is marked by significant volatility, requiring businesses to adopt a collaborative approach to thrive. As the sharing economy continues to streamline capitalism, organizations that can effectively harness this dynamic will find success.