Will the Sharing Economy Unleash Latent Racism?

Earlier this month, Benjamin Edelman and Michael Luca released a paper arguing that Airbnb customers racially discriminate between potential hosts. Airbnb is essentially a marketplace where individuals can rent out a room in an apartment or house for a very short period of time, much like a hotel does. The researchers determined that, when controlling for apartment quality, non-black hosts on Airbnb charged 12 percent more than black hosts. They theorize that this is because customers have a racist preference against black hosts, driving the market-clearing price for renting from a black host down.

Although the methods in this study seem a bit exotic, the conclusion coheres with a whole body of less exotic research that shows racism to be prevalent in economic transactions. For instance, a 2003 study found that resumes with white-sounding names on them are 50% more likely to receive a call back from an employer than identical resumes with black-sounding names on them. It is hard to attribute any given economic decision to racism, but the overall trend tells the story. Whether conscious or unconscious, racial bias infects the way individual econmic actors behave.

Given the prevalance of racism in our existing economic institutions, it might seem like the purported rise of the sharing economy is not particularly problematic on this front. If you have racism infecting both, then it seems like a wash. But this kind of quick analysis ignores problems inherent to the unique way the sharing economy is organized.

In that status quo, firms are the dominant institution for organizing economic production. People do not just go out and contract with individuals for each and everything they want. Instead, they are employed by firms and they buy things from firms. Because successful firms have long tenures and many employees, it is easier to subject them to anti-discrimination laws. You can more easily prove that they are being discriminatory because you can present evidence of long-running patterns. They also have the organizational capacity to adopt and enforce anti-discriminatory policies internally.

All of this goes away in a sharing economy world where everyone is essentially an individual contractor selling directly to a consumer. The present slate of anti-discrimination employment laws do not reach Airbnb consumers or any consumer for that matter. They only really bind employers hiring employees into traditional firms. But more than that, it's not obvious to me how you could practically restructure the law to reach people who directly purchase things through the sharing economy. What are you supposed to do: track their purchases and see how often they buy from sellers of a given race? This approach, and anything else I can cook up, strikes me as totally unworkable.

Right now, the so-called sharing economy is pretty small and it may stay that way. But if things like Uber, Task Rabbit, and Airbnb are the forerunners of a much larger trend, we could see the econony evolve in a way that moots our existing anti-discrimination employment law and makes replacing it extremely difficult if not impossible. Such a world could end up being worse for people of color and other targets of discrimination than the one we have now.