Jun 22, 2015 ยท 5 minutes

On Sunday, Airbnb released a report that argued the company's platform is helping “countless middle-class families... pay the bills and make ends meet.” At first I was reluctant to take issue with it because I agree with the overall premise - as far as it goes. The problem is, the report is more notable for what it leaves out than for what it celebrates.

The report is titled “How Airbnb Combats Middle-Class Income Stagnation,” a strange title for a report that expects to be taken as serious economics since it sounds more like the headline on a blog post. It was authored by Gene Sperling, who served in economic posts in the Clinton and Obama Administrations and now heads an advisory firm where Airbnb is a client.

So this is a document about Airbnb's impact on the middle class paid for by Airbnb. I don't necessarily have a problem with that as long as Airbnb is up front about it (which it was) and it contains good information (which is partially does). Even its agenda is telegraphed pretty clearly: Airbnb wants to show potentially nettlesome regulators that it's helping communities. As Sperling argues in the report's conclusion:

“While it is important to develop common-sense regulations to ensure that our economy achieves the benefits of innovations in the sharing economy while minimizing potential downsides, those who claim that income stagnation is among the nation’s leading economic challenge cannot ignore the positive difference the Airbnb platform can make on helping families overcome income stagnation.”

That last phrase - “income stagnation” - gets at the flaw in this report. According to Census Bureau figures Sperling cites, US real median household income declined 7 percent to $52,770 in 2013 from $56,451 in 2001. “If real household income growth had surpassed inflation rates by even just 0.5 percent annually since 2001,” Sperling writes, “the median U.S. household would have $7,163 more in annual income than it does today.”

In other words, incomes haven't simply stagnated this century, they've declined. And they've declined during a period when real US gross domestic product has grown 29 percent. So, the middle class is getting smaller slice of a growing pie. Someone is collecting the money that has disappeared from middle-class budgets, and you can guess who it is.

Income stagnation is only part of the problem. The bigger and more important problem is income inequality.

Sperling's report mentions stagnation 16 times. Income inequality isn't mentioned at all, except in a footnote citing a LA Times headline that quotes a politician using the phrase “income stagnation.” The report bends over backward not to mention income inequality, even though that phrase is used far more frequently in books than income stagnation, according to Google Ngram. All of this might seem like nitpicking, but I'm focusing on it because it's emblematic of something that has been bothering me for a while about the demand-economy companies that have been raising billions in private rounds. While wages and incomes have been falling, income from investments has been rising steadily – even after the financial crisis, thanks to generous monetary policies that make borrowing to invest historically cheap. So you'd think that if Airbnb sincerely wanted to help the middle class, it would make it easier for them to buy shares in the company.

Airbnb isn't the only demand-economy star that has been helping middle-class families supplement their income. Uber and Lyft have done the same with ride sharing, and Etsy's marketplace has helped people find buyers for their handmade crafts. None of these companies would be anywhere near their success today if it weren't for the drivers, renters and sellers using their technology platforms.

In the past, some tech companies shared their success with those people by letting them buy a piece of ownership in an IPO. Google pushed for this in its Dutch-auction IPO and more recently, Etsy has been alone in reserving some IPO shares for its sellers. Even others like eBay that didn't take this step went public early enough in their growth trajectory that its merchants could buy shares in the company on the public market and share in its best growth years.

Airbnb and Uber aren't doing this. They're staying private as long as they can. And they have good reasons to do so - avoiding activist investors, quarterly earnings targets, and costly and complex accounting regulations. But shunning IPOs has another outcome that is potentially hurting middle-class investors: As long as these companies remain private, only the wealthiest investors are allowed to invest in them - and benefit from their surging valuations.

Airbnb is in talks to raise money from private investors at a valuation of $24 billion, while Uber is in talks for a round valued at $50 billion. (Google's market cap was $23 billion when it went public – a valuation that seemed insane at the time - and eBay's was less than $1 billion.) Only accredited (basically, very rich) investors can participate in these private rounds. If and when these companies go public, most of their growth and capital appreciation will be behind them.

If and when they go public, individual investors may have to wait until the stock begins trading before they can buy shares. But as we've been seeing this year, even the less-desirable tech IPOs are mysteriously seeing their stocks begin trading at 50 percent to 100 percent above the offering price of the IPO. By the time middle-class families are finally allowed ownership of these companies, it could too late to share in the success they helped build.

So while Airbnb may be presenting valid evidence that middle-class families are seeing some benefit from its service, it's a cynically disingenuous argument as long as it refuses to share with them the capital appreciation that is the real source of income growth in this country. Airbnb, Uber and others may be alleviating the income stagnation among the middle class, but by sharing their success only with the wealthiest investors they are also adding to income inequality.