Discrimination and the sharing economy

The signs which adorned bed and breakfasts in the 1960 and 1970s declaring “No coloureds!” are rightly viewed as a historic relic confined to our past. Various race relation acts - and latterly the Human Rights Act and the Equalities Act - have made it illegal to discriminate on the grounds of race, gender, sexuality and disability in the provision of goods and services.

The original online marketplaces were frequently idealised as an arena where discrimination was not just illegal, but impossible. Evidence suggested that the anonymity of online transactions and the arm’s-length dealings between buyers and sellers significantly reduced discrimination. However, the sharing economy removes much of the anonymity associated with the original online marketplaces such as Amazon and eBay. This raises the question of whether the sharing economy might enable discrimination rather than reduce it.

Online websites and sharing economy companies

Evidence suggests that the original online marketplaces enabled significantly less discrimination than the traditional brick and mortar marketplaces that had preceded them. Ayres and Siegelman found, in 1995, African American car buyers paid more at dealerships than white car buyers - a smaller study from the UK observed similar findings in 1999. In contrast, Scott Morton et al. (2003) found no such racial difference in online purchases. Many of the early internet marketplaces provided no mechanism for discrimination. Marketplaces such as Amazon and eBay committed sellers to selling their products and services at a set price to any buyer. In this sense, the shift from brick and mortar to the original online sites was a great enabler of less discrimination. Some were hopeful that these advantages of reduced discrimination would be passed to the sharing economy companies that have emerged in recent years.

However, there are two key differences between the original online marketplaces and the new sharing economy companies. First, the sharing economy companies require buyer and seller to meet in real life. For example, taxi services such as Uber require driver and customer to share a journey while rent lodging services such as Airbnb require host and guest to share lodgings. Second, the added intimacy of sharing economy services has required sharing economy companies to increase trust between buyers and sellers. They have done this through facilities such as profiles, where buyers and sellers are required to create a detailed profile; pre-approval, where sellers are not required to sell to any buyer and can pre-approve; and user ratings, where sellers and buyers can rate each other after the transaction has taken place.

The sharing economy is still in its infancy, however some researchers have examined whether discrimination occurs in two of the most high-profile sharing economy companies: Airbnb and Uber.

Discrimination and Airbnb

Airbnb was founded in 2008. It allows individuals list, find, and rent lodging. It now has over 1,500,000 listings in 34,000 cities and 190 countries. Airbnb has several mechanisms which might enable discrimination by hosts and guests. Airbnb requires hosts and guests to create a profile. This profile includes recent reviews, a profile picture, a name and frequently an associated Facebook account. Potential guests may view the host's profile before booking their accommodation. When they decide to book the lodgings, the guest will send a request to the host. The host can then review the guest’s profile before confirming the booking. A Harvard University study from January of this year found extensive racial discrimination by Airbnb hosts. The study found that requests from guests with distinctively African-American names were approximately 16% less likely to be accepted than identical guests with distinctively White names. The difference persisted regardless of whether the host is African-American or White, male or female. The difference also persisted whether the host shares the property with the guest or not, and whether the property is cheap or expensive.

Research suggests that discrimination on Airbnb is not symmetrical - that is, it is not perpetrated exclusively by hosts. A 2014 paper examined the practises of Airbnb hosts and guests in New York City. They found that non-black hosts could charge around 12% more than black hosts for the equivalent rental - even when controlling for location, rental characteristics and quality. Black hosts also received a greater penalty for having a poor location score relative to non-black hosts.

Discrimination and Uber

Uber is a smartphone application which allows customers to submit a trip request which is then routed to Uber drivers who use their own cars. Currently, Uber is available in over 66 countries and 449 cities worldwide. Uber drivers and customers rate each other after the journey is completed. In addition, Uber customers will normally see a profile picture of their driver before the journey and both driver and customer will see each other's first names.

In a paper for the University of Chicago Law Review, Brishen Rogers argues that uber drivers have the potential to discriminate against customers in several ways. First, Uber drivers may give lower review scores to customers from minority groups. When a request is made, drivers see this score and may reject the booking. Second, Uber drivers may refuse bookings from customers with ethnic minority sounding names. Unfortunately, no quantitative analysis of these claims has been undertaken. A number of anecdotal accounts suggest that Uber customers discriminate against non-white drivers by cancelling their bookings and giving worse reviews.

However, while Uber may permit some discrimination almost all critics accept that it enables less discrimination than the traditional hailing system. A number of studies have shown that Uber drivers are much more likely to pick customers up from neighbourhoods with higher levels of ethnic minorities than traditional taxis. Moreover, studies have shown that traditional hackney carriages are 27% more likely to pick-up a white customer hailing from the street than non-white customers. Finally, studies have shown that non-white drivers receive significantly lower tips than white drivers. Uber avoids this problem by not allowing tipping - in part, because it believes it would enable racial discrimination.

Conclusion

The sharing economy was once idealised as a ‘silver bullet’ for reducing discrimination. Recent accusations of discrimination have thrown this claim into question. Research suggests that Airbnb does enable discrimination both by hosts and guests. However, such research does not consider the counterfactual. The sharing economy often makes it easier to spot discrimination because each transaction is recorded online. It is unclear whether Airbnb enables more discrimination than traditional lodging alternatives such as ‘B&Bs’. The counterfactual with Uber - a smartphone taxi application - is clearer. A significant amount of evidence suggests that traditional hackney carriages were more likely to enable discrimination. Uber is almost certainly not discrimination free, but it has removed many of the mechanisms which allowed drivers and customers to discriminate. The question of whether the sharing economy increases or decreases discrimination is still very much unanswered.   

James Dobson is a researcher at Bright Blue