The distributed workforce: what will jobs of the future look like?

By Steven Hill, Hans Böckler Stiftung, July 2018

What will the future of work look like? Will the robots take over our jobs? Will increasing numbers of workers toil in gig jobs, or in solo self-employment, scrambling for a living? Or will more workers enjoy the flexibility of part-time employment, protected by a portable safety net without sacrificing income and security? Whether in Germany, the US or across Europe, that is what many people are wondering.

 

“FIRED BY ALGORITHM”

In recent years there has been a surge in Europe and the US in online labor platforms, including Amazon’s Mechanical Turk, Uber, Airbnb, Germany’s Foodora, Clickworker, WorkHub and dozens more. These companies facilitate the hiring of freelance contractors, temps and solo self-employed workers who access work through an app or a website, receiving short-term job offers (called “gigs”) on their smart phones. As contractors, these workers normally do not receive health care or social supports from the businesses who hire them, and there is little to no job security or union representation. Workers can be let go at any time without notice by simply cutting off their access to the online platform. “Fired by algorithm,” as it is called.

These platform businesses are what is known as “distributed companies,” and they hire “distributed workforces” that in some cases are scattered all over the world. It used to be that to find cheap labor you had to move your company or plant to another country; now you can outsource by going online and hiring workers wherever they live. In the US, the growth in distributed workers has doubled over the past decade, expanding nearly 10 times faster than the rest of the workforce. Germany and other countries also have seen dramatic growth. Businesses especially like hiring self-employed contractors and freelancers because they save 25-30% on their labor costs by not having to pay for safety net features like health care, retirement, unemployment compensation, paid vacations and more.

The prototype for this new type of startup company is Upwork, which is based in Silicon Valley. It is kind of an eBay for jobs, with a mere 250 regular employees who use the latest digital technology to oversee an estimated 10 million freelancers and contractors all over the world. A vast range of occupations can be found on Upwork, including architects, engineers, lawyers, tax accountants, website and app designers, translators, illustrators, software developers, computer programmers and graphic designers. Developed world workers from Germany, Europe, US and elsewhere bid for jobs in an online labor auction alongside workers from Romania, India, Thailand, China, Brazil and the Philippines. That results in a global race to the bottom of lowered wages. My own statistical analysis shows that half to two-thirds of developing world workers ask for a wage of €8 per hour or less, but less than a fifth of German or US workers do. Tens of thousands of German workers are seeking employment on the Upwork platform, and that figure grew by 300% to 59,000 during one seven month period. Upwork is the largest player in the digital temp industry.

Back to the future of the labor markets

Besides Upwork, other Silicon Valley startups such as TaskRabbit, Gigster, Handy, Guru and Freelancer.com have created digital labor platforms and mobile apps that allow vulnerable workers to bid against each other for work, often driving down wages to that of the lowest bidder. How do these digital platforms work in practice?

Meet Leena Chitnis, a Fulbright scholar who completed a graduate business degree. To keep herself afloat while she looked for a permanent job, Chitnis set up a bunch of micro-gigs on Fiverr. Fiverr is an online labor platform that connects buyers to sellers of numerous micro-tasks and services. After fulfilling a total of 27 gigs, in which she was constantly running like a hamster on a wheel, Leena found that she had made a grand total of $176. “I’ve seen panhandlers get more money outside of the convenience store,” she said.

 

“IN MANY CASES THE JOY OF FLEXIBILITY IS SHORT LIVED AND OVER-ROMANTICIZED.”

Advocates of these new ways of working like to promote the flexible schedule that workers can enjoy, which could allow them to spend time with family, friends and outside hobbies. But in many cases the joy of flexibility is short lived and over-romanticized. After a while many grow weary of this new kind of grind.  Roman, a digital media videographer from Berlin, eked out a living as a self-employed freelancer doing gigs for nearly 10 years.

“It was really hard to do,” he says. “It’s OK to try when you are in your 20s. But then you hit your 30s and you want more security, more income.” Now Roman is 35 and thankful that he was able to find a stable videographer job at an engineering university near Dortmund. He says the virtues of “flexibility” are way overrated. He has many friends who are still struggling freelancers, making €100 here, €100 there, and getting older and worn out.

To earn adequate wages, workers in the distributed laborforce must hustle to string together a series of short-term gigs, some lasting two weeks, two days or even two hours. Many workers have several different employers in a single day. Moreover, they work in isolation from each other and therefore are difficult to regulate or unionize. As freelancers and contractors, these workers often are not protected by many labor laws, including those guaranteeing a minimum wage. Sometimes they don’t get paid at all for work completed; a study by the Freelancers Union in the US found that 71% of freelancers struggle to collect payment for work completed, and the average unpaid freelancer loses almost $6000 annually (13% of their total income) because some employers refuse to pay them.

Silicon Valley likes to call these workers the “CEOs of their own freelancing business,” but that’s just techno happy talk. Many of the freelancers, contractors and bogus self-employed workers are barely better off than low-paid day laborers, auctioning their services in naked competition against each other. In reality, many of them spend more time – unpaid – constantly looking for work than actually finding it. They also don’t have any job security or much coverage from the social welfare system.

Wages for these freelancers can vary a lot by occupation – those in the tech industry are high and can result in a decent lifestyle, but other occupations barely earn minimum wage. A study from Stanford University found that the median profit for Uber drivers in the US is no more than €8 per hour once you subtract their considerable costs for driving their own vehicle; about half of the drivers earned less than minimum wage. That helps explain why, according to Uber’s own internal study, as well as studies by others, most of its drivers leave after working only a year on the platform.

 

“DIGITAL LABOR PLATFORMS ARE TRANSFORMING THE NATURE OF WORK.”

Distributed companies at times resemble stateless corporations in which labor laws are mostly ignored. It is no coincidence that these online, on-demand businesses gained major traction during the deepest economic downturn in nearly a century, when unemployment was in double digits and the condition of the most vulnerable workers put downward pressure on all workers. While the labor platforms can increase opportunities for flexible employment, and allow more job opportunities for workers in developing economies and other categories of “labor market outsiders,” they also erode the customary relationship between employers and employees that is needed to enforce labor laws and deliver social protection and benefits.

These digital labor platforms are transforming the nature of work, as the piecework of the gig economy returns the job market to how it was structured in the late 19th century. More workers now live lives of employment precarity on a “virtual shop floor.” This is a back-to-the-future reinvention of what we mean by “work,” and what constitutes an employment relationship. It is a direct threat to collective-interest representation, works councils and co-determination.

Unregulated, the proliferation of the “distributed company” business model could lead to a two-tier society where a small upper-tier is composed of highly skilled, highly paid workers with sufficient employment and social welfare benefits; meanwhile a much larger lower-tier will be filled with precarious middle- and low-income workers with few if any benefits or job security. However, as automation and algorithmic-driven “smart software” continues to be integrated into business practices, even highly-skilled and -paid knowledge workers may be threatened with redundancy.

Regulations for a distributed world

The rapid growth of these distributed companies and their workforces is more advanced in the US than anywhere else. But these companies, and the on-demand labor platform technologies they are pioneering, also have gained a foothold in Germany and in Europe. This form of employment poses an existential dilemma for our societies. In this emerging digital economy, what policies and regulations will allow society to harness the new ways of working in a way that maintains a broadly shared prosperity?

Distributed workers must be able to benefit from job reskilling, labor and safety protections, affordable access to high-speed internet (a must for their “virtual office”) and other supports. Mini­mum standards for wages, health and safety, working hours and social security must be established to make this form of work less exploitative. Rights and obligations should be expanded to freelancers and the self-employed. This includes representation by works councils and labor unions, collective bargaining and co-determination.

Extending these rights will not be easy. Recently German workers at the platform startups Foodora and Deliveroo organized themselves into works councils. These digital platforms offer bicycle delivery of food from restaurants. These jobs are physically demanding and even dangerous, so the bicyclists at both companies in Germany began mounting protests and public pressure campaigns for better working conditions. Eventually that culminated in the formation of works councils. But that unleashed a series of retaliations and threats by the companies against the leaders of these organizing efforts.

In addition, a German court decided that Foodora’s mother company, Delivery Hero, was required to allow workers to elect 50 percent of the members at the company’s supervisory board. Out of the 3 boards seats now reserved for the employee side, one is even actually held by a bicyclist-worker. It’s a step forward, but it remains a struggle to wrest labor-friendly policies out of this multinational company. Going forward, a key issue with these platform companies will be whether their workers are hired as regular employees or freelancers, since it is the number of regular employees that determines the level of co-determination.

Another necessary step is to include all distributed workers in a new kind of portable and universal safety net, ensuring co-financing of their social security contributions by all the many businesses that hire them. This could operate something like a system of »Künstlersozialkasse for all«, building upon the existing support in Germany for artists, musicians, journalists and certain types of home workers, to foster a system that encompasses other oc­cupations that currently fall through the cracks of the welfare system.

 

“WORKER DATA COULD BE USED TO ALLOW SUCH WORKERS TO CONTACT EACH OTHER AND ORGANIZE COLLECTIVELY.”

The condition of the distributed workforce also could be improved by accessing the right kinds of data from these distributed companies. Whether tracking the misclassification of workers as bogus self-employed, or abuses of labor laws and working conditions, or the misuse of companies’ online surveillance of their labor forces, data access is key to ensuring that distributed workers have rights. Rather than dooming distributed workers to operate in isolation, worker data could be used to allow such workers to contact each other and organize collectively.

Also, as more workers come to be employed by online platforms, tax officials at the national level need to have the employment data that allows them to track these distributed work­ers so that taxes and social security contributions can be collected from both workers and those who hire them. Distributed com­panies do everything they can to avoid taxation as well as regulation. Governments must adjust their data collection accordingly, otherwise the cat-and-mouse game between the regulators and the unregulated will undermine financing for the welfare state.

Role of labor unions and advocates

In the US, one would expect that labor unions might lead such efforts, but unfortunately that has not often been the case. In an era of ongoing attacks against labor by the Trump administration, and a decades-long decline in unionization rates (to less than seven percent of private sector workers), unions lack the resources or the expertise to tackle this challenge. Efforts in the US to enact a portable safety net have been seriously discussed but labor unions have not fully embraced the idea, even though it has been endorsed by former President Barack Obama and a number of leading Democratic Party politicians. When it comes to the digital economy and regulating distributed companies, labor unions in the US are struggling for ideas, vision and inspiration.

 

“SOCIAL MEDIA HAS PROVEN TO BE A GOOD MEDIUM FOR SHARING INFORMATION AND BRINGING COMMON INTERESTS TOGETHER.”

In that vacuum, various groupings of workers have begun using Facebook groups as an online organizing vehicle that can give them a collective voice. Freelancers in various occupations are forging their own digital “water-cooler communities” by connecting online with their fellow workers, most of whom they have never met face-to-face. Social media has proven to be a good medium for sharing information and bringing common interests together. For example, delivery employees at Instacart organized a “no-delivery day” through their Facebook group to strike for higher pay. A number of Facebook groups have sprung up to support ridesharing drivers, including the “Uber and Lyft Drivers Breakroom” with over 27,000 members in which drivers can discuss industry practices and organizing strategies.

Cities like New York and Seattle have tried empowering labor-allied nonprofit agencies to advocate for ridesharing drivers. One of these, the Independent Drivers Guild, has organized a petition calling on New York City to pass a law establishing a minimum wage and a cap on the number of ridesharing drivers. While the IDG is not a union, Uber has agreed to recognize it as a driver representative. But Uber also has provided funding to the IDG, spurring the New York Taxi Workers Alliance to call IDG a “company-financed pseudo union.”

US labor unions are supporting a bill introduced by US Senator (and former presidential candidate) Bernie Sanders, a Democrat-leaning independent politician, that would make it easier for workers, especially distributed workers, to prove they are employees with the right to unionize and negotiate with management. But as long as the Republicans control the Congress and the president’s office, that proposal has zero chance of passing.

The distributed workforce is growing in the global economy, and labor advocates need to adjust their strategies for this 21st century digital world before it returns us to the conditions of the 19th century.

German language version