News EU Horizon 2020

Labor Participation in the Platform Economy

Guest Post by Christian Hoffmann: The disruption of established business models can frequently be identified by the vocal resistance of entrenched interests.

In the case of sharing services such as Uber or Airbnb, many cities have witnessed protests, even outrage, by taxi unions as well as the hospitality industry.

In most cases, protestors denounce both the working conditions, including wage levels, and quality of crowdsourced services.Not all elements of the emergent platform economy are as publicly controversial as the cited examples of Uber and Airbnb, though.

Today, we can observe a wide variety of digital platforms facilitating the outsourcing of services to a crowd of freelance workers. Services range from transportation, food delivery, or household services, to design and programming, or even the sorting and tagging of photographs. Platforms such as TaskRabbit or Amazon Mechanical Turk allow for the crowdsourcing of tasks too detailed and cumbersome to commission in the pre-digital age.

Labor in the digital on-demand service industry is characterized by a dissolution of traditional institutional and organizational settings: Crowdworkers are commonly self-employed, most working part-time. They tend to be uncovered by labor agreements; in fact, it has proven exceedingly difficult to even organize the interests of digital laborers.

Recent studies suggest that about one third of crowdworkers rely on digital platforms as their primary source of income, while the rest is complementing their income or just earning some pocket money on the side. In many respects, working conditions on digital platforms are very flexible – both in regards to time and location.

Given these fundamental, technology-induced changes in working conditions and the institutional setting of labor, a lively debate emerges on the benefits provided and challenges posed by digital on-demand service platforms. While some consider crowdwork a threat to worker income, safety and well-being, others focus more on the participatory opportunities provided by the digital work environment. In fact, weighing the benefits against the harms of the platform economy may prove difficult, as both do not necessarily occur consistently throughout the workforce or all at the same time. Digital on-demand service platforms may also favor some segments of the population at the cost of others. All the more reason, therefore, to carefully consider apparent advantages and challenges provided by the platform economy.

Glass half-full: Advantages of the platform economy

Income: An obvious advantage of the platform economy and one of its key success factors is the access to additional or new sources of income for thousands of workers. In the sharing economy, particularly, digital platforms allow users to monetize slack resources, such as time, space, and transportation.

Barriers to access are generally very low (a key point of contention for many), allowing easy entry and exit of the digital workforce. As noted above, a majority of laborers is quite free in deciding whether, when or where to engage in crowdwork. Also, digital on-demand service platforms facilitate the commodification of tasks previously too small or cumbersome to outsource.

In other words: Additional work and income is created by the fact that, online, human beings can be commissioned to work on and be compensated for jobs that would previously have been impossible or far too complicated to entrust to freelancers. Surveys show that many crowdworkers are quite happy with the income opportunities provided by the platform economy, particularly those who don’t depend on digital labor as a primary source of income.

Deterritorialization: Not all, but many jobs facilitated by digital on-demand service platforms are free of spatial restraints. This obviously does not hold for physical tasks, such as hosting, cleaning, delivery or transportation. But platforms such as TaskRabbit or Amazon Mechanical Turk are largely focused on the manipulation of digital artefacts, such as sorting, tagging, designing, programming, writing etc.

In these cases, freelancers from around the word can apply for a task. The purely digital segments of the platform economy, thereby, may well constitute the most globalized market ever witnessed by mankind: aside from potential language barriers entirely devoid of physical boundaries.

This does not only constitute an advantage to millions of workers denied access to developed economies due to political restrictions, but also to those in the West who live far away from economic centers or are otherwise unable to commute to/access a physical workplace.

Flexibility: A benefit touted not only by platform providers themselves is the flexibility associated with crowdwork due to the modularity and volume of work facilitated and distributed online. The platform economy tends to break down jobs into millions of individual, clearly identifiable and trackable tasks that can then be allocated to those willing to complete it in the time and place specified.

Due to the modularity of crowdwork, laborers can start and end their work practically at any time they wish. Due the volume of work, they can mostly rely on the fact that new work will be available again whenever they choose to reengage. Again, this holds especially true for those not relying on crowdwork as their primary source of income. In these instances, crowdwork may even be associated with adegree of worker emancipation, as individuals are no longer bound to a specific employer – instead they face a ubiquitous, instantaneous choice of thousands of international clients.

Anonymity: At first glance, it may strike some as surprising to cite anonymity as a key advantage of digital labor. It is, of course, true that not all crowdwork is anonymous – users tend to maintain nonymous profiles on platforms such as Uber or Airbnb. In the case of physical services, personal interaction can hardly be avoided entirely. Yet, again, a sizeable segment of the platform economy focuses on virtual services, with workers manipulating digital artefacts.

In these instances, clients and freelancers do not personally interact, it is also not necessary (or in some cases even possible) to maintain a comprehensive nonymous user profile. Some platforms, such as Amazon Mechanical Turk, deliberately avoid the personal identification of freelancers, since they market their services as a form of “human computation”. The advantage of these truly anonymous forms of crowdwork is the avoidance of traditional forms of discrimination, for example due to ethnicity, disability or gender.

Anonymous crowdwork, in other words, may level the playing field for those discriminated against in the traditional offline economy. In fact, some studies indicate that the participation of women and ethnic minorities is especially high in the on-demand service economy.

Glass half-empty: Challenges of the platform economy

Income: There is an inherent irony in the fact that income is both a chance and challenge of the platform economy. Yet the fact is undeniable that average wages available on digital on-demand service platforms tend to be low. A key selling proposition of these platforms to their users is precisely that the services available are simply cheaper than those offered by alternative, established providers.

This is mostly due to the fact that part-time freelancers require less pay. Also, incidental wage costs are avoided by relying on freelance work. In addition, slack resources can frequently be considered sunk costs and can therefore be marketed for profit at discounted rates. The resultant low average wages constitute a challenge for those relying on crowdwork as a primary source of income – in some instances a third of all crowdworkers, with numbers varying by time and platform.

These workers struggle to make a living online and frequently face precarious working conditions. This challenge may be exacerbated if traditional jobs are substituted or lost due to the competition provided by digital platforms – which brings us back to the resistance of traditional businesses and their employees cited at the outset.

Isolation: Freelancers offering their services on crowdworking platforms may benefit from flexible working conditions and the opportunity provided by deterritorialization. On the flipside, they are not given a realistic perspective of ever entering full-time employment. Digital on-demand service platforms constitute spot markets.

Platform providers are eager to stress that they are not employers of those marketing their work online. Workers, therefore, are not – nor will they ever be – members of an organization or a team. Instead, they are part of a more or less anonymous online crowd. This institutional foundation of crowdwork insulates workers, as can be witnessed by the failing attempts to organize worker interests. While some may cherish the opportunity to remain anonymous or work from home.

Others may well miss regular interactions with coworkers and clients and may even face the threat of spiraling into ever more overwhelming social isolation. Camaraderie, solidarity, friendship and social capital are not phenomena facilitated by the platform economy.

Deregulation: Another ambiguous feature of the platform economy is the flexibility offered by freelance work and spot markets. Easy entry and exit as well as global access do certainly come as a benefit to many crowdworkers. Yet, as discussed above, the institutional setting of crowdwork encumbers the organization of worker interests and all but precludes employment relationships.

Thereby, numerous workers are forced into what some may call pseudo-freelance work (“pseudo”, since the term implies a level of independence or entrepreneurship while there really is no alternative or choice associated with the form of crowdwork). Western, developed economies, tend to be particularly characterized by dense labor regulations mainly aimed at worker protection and (social) security. Many of the institutions of worker protection embedded in full-time employment relationships remain inaccessible to crowdworkers, though. The emergence of the platform economy once again illustrates that protective regulation tends to create insider-outsider-conflicts.

Policy makers will struggle with balancing the maintenance of established protections or benefits against the opportunities provided by deregulation, flexibility and access. In the case of cross-national work, many may be tempted to implement protective policies – diminishing a key opportunity associated with the platform economy.

Disempowerment: Platform providers tend to tout the participatory opportunities provided by crowdwork – up to and including discrimination avoidance. According to this narrative, the platform economy will empower users to reap new economic benefits, provide additional work or streams of income, and create unprecedented flexibility in the workplace.

The role played by the platform providers themselves remains noticeably vague in this argument. As recent research begins to point out: the platform economy replaces dyadic employer-employee-relationships with triadic client-freelancer-platform-relationships. In these triadic relationships, platforms emerge as tremendously powerful new players since, as the saying goes, “code is law”.

In other words: the settings and processes facilitated by dominant platforms largely determine the quality and quantity of work available to freelancers and services available to clients. Of course, digital on-demand service platforms are for-profit enterprises. Therefore, platform providers will compete to offer ever more convenient and efficient services to clients.

Workers on the other hand, while not irrelevant, may end up holding the short end of the stick in this dynamic, as individual elements of a crowd tend to be easily replaceable. And on a global scale, the crowd is quite sizeable. Again, particularly those relying on crowdwork as a primary source of income may find themselves entirely dependent upon platforms systematically disfavoring worker interests in their settings and policies.

Conclusion

As the American satirist H. L. Mencken once so pointedly put it: “For every complex problem there is an answer that is clear, simple, and wrong.” This certainly holds true for the evolving platform economy, the analysis of its consequences and the derivation of policy recommendations.

The reality of digital on-demand service platforms is riddled with ambiguity – not least due to its recent establishment and dynamic development. When considering the benefits and challenges associated with now forms of digital labor, each element tends to come as a mixed bag, revealing both encouraging and troubling aspects. In fact,one and the same feature of crowdwork tends to provide benefits to some and threatens harm to others.

While research still struggles to make sense of the platform economy, policy makers are well-advised to carefully balance the available insights and avoid rash interventions that may encumber evolutionary improvements. In any case, it is increasingly obvious that one party bears the brunt of responsibility for a beneficial development of digital labor: the platform providers. By setting standards, establishing policies and default processes, through programming the working and service environment, providers take on tremendous responsibility both for their clients and the thousands and thousands of freelance workers complementing their income or making a living in the digital space. The platform economy bears its title for a reason, after all.

About the Author

Christian Hoffmann, PhD, is a Professor of Communication Management at the Institute for Communication and Media Science at the University of Leipzig. Christian is also a lecturer at the University of St Gallen, Singapore Management University, Johannes Gutenberg University Mainz, and Zurich University of Economics. Christian’s research interests lie in the fields of strategic communication, management, financial communication, and political communication. He has a particular focus on the challenges and opportunities of new media.