The Rise of the Distributariat

By Steven Hill, Project Syndicate, July 16, 2021

The shift to remote work during the pandemic has brought both disturbing developments, like the increased use of surveillance technology, and promising ones, like the de-linking of employment from geographic location. But without new rules of the road, workers overall will be worse off than they were before COVID-19.

For over a year now, most countries have been undergoing an enormous labor-market experiment triggered by the coronavirus pandemic. Before COVID-19, only about 3.6% of US workers regularly worked from home. But at its peak, the pandemic forced anywhere between 34% and 62% of US workers to do their jobs from their kitchens, living rooms, and home offices. Across OECD member states, an estimated 40% of workers have been operating from home.

Now that vaccines are being rolled out in advanced economies, we should consider what the “new normal” might look like. According to an April 2020 survey in the United States, 74% of companies are planning to “shift some employees to remote work permanently.” Similarly, a May 2020 analysis by researchers at the Federal Reserve Bank of Atlanta found that companies expect the share of working days spent at home to increase threefold, with many employees operating remotely 1-3 days per week.

Behind these broad scenarios are evolving trends that will reshape how people work. Many of these trends reflect the dramatic rise in e-commerce and e-services, and some are quite alarming. But a few could lead to some positive outcomes for workers, provided that the right rules and guardrails are established.

HOMEWORKERS

First, there will be many more “distributed workers.” Before the pandemic, companies like Uber, Upwork, Amazon, Clickworker, PeoplePerHour, Foodora, and other early “distributed companies” pioneered the use of online platforms to hire millions of freelance contractors and temp workers.

These virtual “labor halls” employ a relatively small staff of regular employees who use digital technologies to oversee vast armies of remote individual operators – all of whom are accessing work through an app or website and not reporting to any particular workplace. For the most part, these distributed workers earn piece-rate wages and lack the job security, social-welfare benefits, labor rights, and union protections of regularly employed workers.

Following the onset of the pandemic, millions more regular workers found themselves working remotely in a “distributed” mode. Many of these workers still have the job security and labor protections that they had in the office – but for how long? Distributed workforces are much more difficult for labor advocates to organize, especially since it’s harder to maintain the kinds of close relationships with fellow workers that facilitate solidarity.

As employer-employee relationships become more virtual, managers will be tempted to hire more workers as freelancers, or to engage in misclassification practices such as “bogus self-employment,” wherein regularly employed workers are illegally treated as independent contractors. With more workers distributed across homes and WeWork-style coworking spaces, enforcing existing labor laws will be more difficult.

Moreover, the potential for significant labor-cost reductions is a powerful incentive to shift toward more distributed workforces. According to the consulting firm Global Workplace Analytics, employers that allow employees to work remotely from home, even part-time, tend to save about $11,000 per year per employee. And because distributed employers often do not pay their share of health care and other social supports for freelancers and contractors, they can shave another 25% or more from their labor costs by employing more of their distributed workforce on a “freelance” basis.

In some occupations and industries, this “labor deleveraging” could happen fairly quickly. In others, it will be phased in more gradually. Many of those who started working remotely because of the pandemic will be kept on remote status indefinitely. Then, more freelance and gig workers will be added to the mix over time, creating a pretext for the remaining regular employees to be replaced by lower-cost freelancers. Indeed, some of those former employees will be offered positions as platform-based gig workers. As this trend reaches a greater scale, we can expect to see a further loss of labor influence and bargaining power for entire sectors and occupations.

BIG BOSS IS WATCHING

Another major trend is increased employer surveillance of at-home workers. With remote work surging, many employers have begun requiring their employees to install “bossware” on their laptops and smartphones, in order to maintain productivity and cut down on so-called cyber-slacking – even in their own homes. One recent study found that 78% of employers currently use employee-monitoring software. Software companies like Hubstaff – whose product tracks a worker’s mouse movements, keyboard strokes, browsing history, email, file transfers, and applications used – have enjoyed runaway sales. Software from TSheets allows employers to track workers’ location, and Time Doctor records an employee’s screen and uses her own webcam to take a picture of her every ten minutes.

Similarly, widely used cloud-office applications like Slack and Microsoft Teams collect data on when an employee is “active.” If you fail to open the app first thing in the morning, your boss might assume you’re late for work. Microsoft 365, the world’s most popular software suite, enables managers to mine user data to identify employees who aren’t participating enough in group chats, sending enough emails, or collaborating in shared documents.

Learning of such practices, most workers would agree with Basecamp co-founder David Heinemeier Hansson’s observation that, “Being under constant surveillance in the workplace is psychological abuse. Having to worry about looking busy for the stats is the last thing we need to inflict on anyone right now.” Indeed, a majority of workers report feeling stress and anxiety about this spying, with two-fifths saying that they constantly wonder if they are being watched.

But the creepiness doesn’t end there. The surveillance company Pragli helps companies recreate various features of the office within a virtual reality to which remote workers must subject themselves. Employees are instructed to keep their home webcams and microphones on at all times, so that spontaneous face-to-face chat is always only a click away. Just select another worker’s avatar and you can instantly start a video conversation, mimicking “swinging by their desk” in a real-world office.

Other “virtual office” features include an online “water cooler” for workplace chitchat, and online company happy hours, game nights, and “ice breakers.” To avoid employee backlash, Pragli encourages companies to frame this Big Brother surveillance regime in New Age hipster lingo, saying its video chat system will “create that sense of togetherness.”

Alarmingly, nearly three-quarters of employers are using stored recordings of email, calls, messages, or videos to inform their decisions on performance reviews, and 37% have used recordings to fire and/or discipline employees. Nearly half (46%) of employers are spying to monitor the potential formation of workers’ labor unions.

Despite the enormous privacy concerns, this surveillance activity is perfectly legal in the US. So, not surprisingly, surveillance companies like Awareness Technologies, Hubstaff, and Teramind report a tripling of demand for their products since the start of the pandemic. One website showing “Employee Monitoring Software in the USA” lists more than 100 companies with products for sale. And dozens of companies offer similar services in Germany, the United Kingdom, and Japan. Apparently, the privacy protections enshrined in the European Union’s General Data Protection Regulation have not prevented Hubstaff from tripling its European sales.

AUTOMATION AND ALIENATION

A third trend involves automation. To manage a more distributed and remote workforce, many employers have been deconstructing jobs into component tasks, thus fashioning a new division of labor based on which tasks can be performed by remote workers.

This reconfiguration of work has two overarching effects. First, it requires that workers have a more flexible skill set, so that they can quickly adapt to shifting workstreams. Hence, Cisco and Allianz Global Investors have adopted internal strategies that break down work into tasks and projects that can be matched with people from anywhere in the organization.

Second, this “task segmentation” allows more work ultimately to be performed by algorithms and robots, which can easily be trained to perform repetitive, predictable tasks. Since the start of the pandemic, many utility companies have expanded their use of automation software to accommodate distributed workers and to monitor power-grid systems remotely.

Historically, researchers have found that automation is adopted faster during economic downturns, and the COVID-19 recession was no exception. At the height of the crisis in advanced economies, the bots appeared to be making major advances. The net effect of this technological adoption over time will be to render more humans obsolete. Yes, some experts predict that new jobs will be created to service the robots and artificial-intelligence (AI) systems. But whether those jobs will be as numerous, pay as much, or be of the same quality as previous jobs remain open questions.

Many people initially enjoyed working from home. But after the honeymoon, managers’ increasing demands and use of surveillance technologies became additional sources of stress. Compared to officegoers, home-based workers feel extra pressure to respond to emails, texts, and phone calls during all hours of the day, even when “off-duty” (though this trend was apparent long before the pandemic).

When you work from home, your professional and personal lives increasingly overlap. While this can provide flexibility (such as for running an errand in the middle of the day), it also can have enormous consequences not just for a worker’s happiness but for that of his or her family. “It’s important for people’s sense of autonomy and dignity, and their mental health, that the home remains a private space,” notes Silkie Carlo, the director of the UK-based group Big Brother Watch.

Workplace safety and ergonomics have also suffered dramatically. It took decades to enact health and safety codes that protect workers and the occupational environment. Now, remote employees are working from their kitchen tables or couches with their laptops on their knees, hunched over and staring at computers for long hours.

To address this, some businesses have assisted their employees in designing the correct home setup, and some better-paid freelancers have been able to purchase their own new equipment. But millions of other people have been left to fend for themselves. For workers who don’t have a supportive employer or the income to purchase proper equipment, ergonomic health will likely become an ongoing challenge.

Many workers also must cope with the additional pressure of constantly upgrading their skills. As workforces become more distributed and remote, employers are offloading more of this responsibility to the workers themselves.

Many countries have not invested in the training to handle this change. The exception is in occupations involving programming, data science, and AI, where online education and training had been playing an increasingly central role. Now, the COVID-19 crisis has breathed new life into online education, and companies like Udacity are developing dozens of courses with corporate collaborators such as Google, Amazon, and Mercedes.

MORE OPPORTUNITIES FOR SOME?

Despite these risks and challenges, some occupations and marginalized geographic regions could benefit as post-pandemic workforces become more distributed. Smaller cities and towns with decent university STEM (science, technology, engineering, mathematics) programs are well-positioned to produce pools of younger workers who can be employed by companies hiring remotely. A worker in Alabama, Greece, or Croatia will no longer need to relocate to San Francisco, New York, Berlin, or London.

Companies could open regional hubs or provide access to coworking spaces wherever their workers are concentrated, instead of having most of their workforce commuting daily into a central office. This has some potential to redistribute opportunity to new locations and demographics of workers. It also could curtail the problem of brain drain, which has grown more acute in recent decades.

But not all remote work is created equal. Millions of those at the low-skill end of the labor market – including a disproportionate percentage of women – will continue to get the short end of the stick. While highly educated, higher-earning employees tend already to have the right setup to work from home, where they can continue to get paid and advance their careers, many other workers lack suitable space or affordable high-speed internet connections.

By some estimates, only 65% of Americans have an internet connection capable of supporting workable video calls. According to a survey taken a few months into the pandemic, half of at-home workers were operating out of either shared rooms or their bedrooms. “Taken together,” economist Nicholas Bloom of Stanford University observes, “this is generating a time bomb for inequality.”

Without the right regulations and labor standards, the transition to more remote and platform-based work will result in a race to the bottom among regions and countries. Already, online labor platforms like Upwork, Amazon, and PeoplePerHour have allowed workers from the developing world to undercut wages for workers from the developed world. A recent report from the International Labour Organization (ILO) finds that digital platform workers in developing countries earn 60% less than those in developed countries, on average, and that the number of labor platforms worldwide has exploded, from 142 in 2010 to almost 800 in 2020.

As this trend continues, it will allow even more companies to outsource without having to move any factories or facilities. Rather than spreading opportunity, it will result in a classic case of labor-cost triage, with the benefits accruing mostly to employers.

FOOTLOOSE WAGES

A final concern is that these pandemic trends will undermine the tax base. As more workers come to be employed by online platforms, tax authorities will need to have access to accurate and timely employment data that allows them to track wage payments across multiple platforms and countries.

Lacking that, it will be increasingly difficult to collect income taxes and social-security contributions from distributed workers and the distributed businesses that hire them. The inevitable result will be erosion of the revenues needed to fund education, health care, housing, climate investments, and national security.

This silent trend obviously demands urgent attention from governments and labor leaders. And yet the ILO’s latest World Employment and Social Outlook failed to outline the scope of the threat, much less offer a strategy to mitigate it.

The long-term effects of these trends are difficult to forecast. But a forward-looking society would take steps now to ensure that distributed workers can benefit from job reskilling, labor and occupational safety protectionsportable safety-net benefits, strong co-determination rights, affordable access to high-speed internet (a must for the virtual office), and other crucial forms of support. Reasonable standards must be established to deliver broadly shared prosperity. Otherwise, today’s inequalities will grow even worse.

Steven Hill, a former policy director at the Center for Humane Technology, is the author of seven books, including Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers and The Startup Illusion: How the Internet Economy Threatens Our Welfare (in German).

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