By Jacob Silverman, Work.
The rise of the “gig economy” has given expression to the thirst for mobility in the labour market, spawning platforms that crucially host and provide access to agile talent. But how are these suitable for adoption across different industries? What are the challenges and the solutions? We explore these in this conclusion to “150 Jobs in One Career, Meet the Face of the Gig Economy (Part 1)” .
Adopting Disrupter Models to Conventional Industries
Consider the so-far unrealised promise of platforms for lawyers, consultants, programmers and other highly skilled professions. Many such platforms do exist, such as the UK’s MBA & Company, a provider of on-demand consultants, and TopCoder or Tongal, which allow companies to post software and creative challenges, respectively, with payment for “winning” ideas and solutions. Even the venerable law firm is facing disruption. UpCounsel, the on-demand legal company based in the US, has thousands of lawyers, while Axiom, which bills itself as a provider of “tech-enabled legal services”, has raised tens of millions of dollars in venture-capital funding and has lawyers on call in North America, Europe and Asia. But largely the success of the firms most identified with the gig economy has not been widely replicated.
There are reasons for that. Many of the industry’s forerunners were premised on monetising things that many people have access to — cars, homes, smartphones, basic computer skills or the ability to do manual labour. As Will Attwood-Charles, a PhD candidate and researcher at Boston College, points out, with “a lot of the platforms that have been successful, it’s sort of the low-hanging fruit”.
Compared to drivers and people with spare rooms, solicitors, doctors and consultants make for a scarcer, and more picked over, labour force. Professionals often require extensive education and training and credentials from a board or trade organisation. In terms of liability, they may be better off sticking with a larger employer who can provide insurance and legal services, rather than going it alone. And professionals who find themselves in demand may — for the time being — be able to secure higher pay, along with health and retirement benefits, by forming an exclusive relationship with one employer.
Hurdles for Businesses
The dilemma for business is perhaps more complex. Companies have long subcontracted work, used temporary employees, made deals with outside suppliers and so on. “Most large organisations use a variety of strategies for sourcing labour,” says Mark Beatson, chief economist at the CIPD. Turning to work platforms to find someone to review a contract or consult on a project may simply be a digital-age twist on long-standing practices. But shifting towards these labour sources requires new procurement and subcontracting procedures. It means scaling up and down in a more frenetic way than many companies are used to. It might mean hiring new staff whose purview is to manage platform workers — invoicing, communication, assigning tasks, apportioning projects and smaller jobs across various sites, apps and cloud-based services.
Efficiencies may be gained, but it still represents a hectic, multi-channel workflow that employers would need to adapt to. And there are new concerns about liability, reputation and how such platforms collect tax, if at all. “What I haven’t seen is much evidence of how larger firms are using [platforms] themselves,” says Beatson. “They come with a degree of commercial risk to the business.” Quality issues might also become more of an impediment, he adds, questioning whether organisations are “ready to rely on advice provided in that sort of way, when perhaps it will be difficult to trace who has done the work”.
Attwood-Charles adds: “In economics, this is the old transaction cost problem.” Economists studying how companies do business have asked: “Why don’t we just put everything up on a market? Why isn’t every interaction a single-time contract?” The answer, Attwood-Charles explains, “is because of the cost of search. Going to the market every time is costly.”
Some organisations also find hiring workers on a full-time basis yields rewards that can’t be replicated through outsourcing or platform work. When workers become employees, it’s harder for them to flee to a competitor and they’re likely to be more invested in the company’s mission. MyClean, a cleaning service based in New York, started with independent contractors and later made them employees. According to the CEO, the result was better customer reviews, as well as more control over staff.
That doesn’t mean that all this couldn’t change. And who’s to say businesses won’t try to overcome the hurdles by setting up their own platforms? Why can’t existing organisations develop employment platforms? If gig economy companies simply provide digital infrastructure — software — for facilitating connections between employers and workers, couldn’t others do the same? Why should venture capitalists in San Francisco earn 20% of a fee earned by someone in Bangalore writing code for a web design firm in Brazil?
Scholars, small business owners and political leaders have begun asking these questions and working towards some novel solutions. A group of taxi companies in Vancouver have banded together to set up their own hailing app. Similar initiatives have been launched by municipal regulators and taxi commissions. Trebor Scholz, a professor who studies digital labour at The New School in New York City, sees a potential resurgence of worker cooperatives. In a recent paper, he pointed to efforts like Stocksy, a stock photo website owned by photographers, Resonate, a streaming music service owned by users, and Robin Hood Minor Asset Management, a British co-op hedge fund.
This kind of arrangement has deep roots — unlike lawyers, the vast majority of practising barristers in England and Wales are self-employed, for instance — but that doesn’t mean it isn’t ripe for innovation. Trade associations, guilds, licensing organisations or simply a group of like-minded video-game designers might create a platform that provides profit-sharing or shared services. They might even build their own platforms using programmers and designers they find on sites like Upwork or Guru. An electronics company might create a digital platform to manage outside vendors and solicit bids from new suppliers.
There are already notable examples, such as Euro Freelancers, which operates a freelance marketplace for independent EU affairs funding consultants and investors. Euro Freelancers also demonstrates some of the differences between lower-paying platforms and more professional gig work. The group screens potential consultants and plays a role in matchmaking employers, workers and projects. (That said, even firms like Handy, which provides workers to help around the house, only allows about 3% of applicants through its screening process.)
FairCrowdWork.org, a website developed by the German union IG Metall, represents another possibility of what platform labour might bring. It provides ratings and reviews of crowd-working sites and assesses their terms of service agreements — the closest thing to an employment contract in these relationships. The site also offers legal and payment advice.
Efforts like FairCrowdWork may benefit employers as well. Reputation works both ways — companies that distinguish themselves with prompt payments and higher wages are more popular with workers. A study from the Institute for the Study of Labor (IZA) examined the use of Turkopticon, a reporting tool popular with users of Mechanical Turk, and found that “good-reputation employers attract work of the same quality, but at twice the rate as bad-reputation employers”. On some existing gig economy platforms, workers often don’t know anything about the company they’re contributing work to. But information sharing and employer rating help distinguish good from bad. As the IZA report suggests: “This should enable companies with better reputations to operate at a faster pace, a larger scale, or to be more selective in hiring.”
How prevalent the gig economy will become remains to be seen. Beatson sounds a note of caution: “Just because you can see the opportunity for a change in business model or change in technology… doesn’t necessarily mean it will happen. And the timescale will be quite variable.” But the potential is there and past experience has shown that disruption can come quickly and unexpectedly. Whether it is harnessed will depend on the willingness of companies and workers to adapt to changing labour conditions and new technologies. It will also require the cooperation of policymakers who often see the gig economy as an obstruction, rather than a potentially important new way of doing business.
Maybe, as John Boudreau, research director at USC’s Marshall School of Business and Center for Effective Organizations, believes, it’s time to move the debate beyond whether a worker is an employee or a contractor. “We should be talking about ‘good work’ not about ‘good jobs’,” he writes in the Harvard Business Review. “Replacing the idea of ‘good jobs’ with the idea of ‘good work’ doesn’t diminish the value and importance of regular full-time employment, but it places it in a context that acknowledges emerging work options — and it holds those new options to a higher standard.”
First published in the Spring 2016 issue of CIPD’s Work. magazine.