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CHAPTER IV - The Impact of New Technologies on Commerce and Low-Wage Work

The Impact of New Technologies on Commerce and Low-Wage Work

As the Internet and digital technologies transform labor markets on a global scale, they are changing the very nature of work and scrambling old, familiar categories for thinking about—and regulating—work. Leila Janah, Founder and Chief Executive Officer of Samasource, a nonprofit that brings small, computer-based tasks to low-income people in developing countries, gave an overview of how technologies are changing the structure of labor markets and inventing new genres of work. She focused on four major categories of commerce and work: casual work, online work marketplaces, marketplaces for goods and services, and collaborative consumption.

The proliferation of new sorts of work matter because there is an immense need for new jobs for people around the world. According to research by Accenture, some 700 million new jobs will need to be created by 2020 (in a global workforce of three billion people) to employ all of the young people entering the workforce by then. Over 400 million of these new jobs must be in Asia, said Janah.

According to Jim Clifton’s 2011 book, The Coming Jobs War, “More than anything else, what people want around the world is a good job.” Will the new technologies help meet this need? The flexibility of digital platforms in bringing work to people, wherever they may live, suggests some positive possibilities. Janah reports that her nonprofit, Samasource, “has moved over 14,000 people out of poverty in nine countries,” thanks to more than $5 million in contracts with companies like eBay and and grants from the Google, Cisco, Rockefeller and Ford Foundations.

A lot of the work that Samasource helps broker involves piecemeal “image-tagging” so that images—“the dark matter on the Internet”—can be more easily identified and retrieved on digital platforms. Samasource once sent a set of shipping containers with computers to a poor village in northern Uganda, and soon about seventy people were doing image-tagging and other small task-work jobs for large U.S. companies. The foundation world calls this kind of work “impact sourcing.”

Often, this sort of work is mediated through online marketplaces. One of the more prominent such brokers for casual, piecemeal work is Amazon’s Mechanical Turk. This site invites people to perform certain small-scale, granular tasks on for a few cents apiece, sometimes in the guise of a game. The tasks might involve matching a photo to appropriate keywords, or sending email solicitations to a targeted group of potential customers.

According to The Economist, the world’s biggest employer is the U.S. Department of Defense, with 3.2 million employees. But the second-largest “employer” is the online labor marketplace oDesk, which has over three million registered contractors. Elance, another large online marketplace, had 2.5 million registered users in 2012, who earned $730 million through Elance. Half of them report freelancing as their main source of income. American users have the highest amount of earnings on the site, followed by users in India and Pakistan. The site hosts more than 500,000 active businesses, said Janah. Another marketplace, TaskRabbit, lets people hire other people to do every day errands and tasks for them. The company has about 12,000 registered “rabbits” that provide local services in nine cities. The most popular service is assembling IKEA furniture.

The hosts of such online work marketplaces tend to be quite bullish about the future of their enterprises. Gary Swart, the Chief Executive Officer of oDesk, a broker of online work projects, calls his initiative “the Work 3.0 Movement.” While he concedes that traditional jobs are declining and going abroad, said Janah, Swart argues that we should adapt to the new reality that people will increasingly work as independent contractors as part of a large, contingent labor force. This is seen as a positive development because geography is no longer a constraint to hiring labor.

To date, oDesk has had an impressive impact. It serves 2.8 million workers globally, and paid out over $400 million in 2012. It has posted 3.6 million jobs since it was founded in 2005, and brokered 35 million hours of work. While the site may be seen as a way to outsource work to poor countries, Americans are the third-largest pool of workers using oDesk. Workers on oDesk also tend to increase their work hours rapidly—by almost 60 percent in their first year, and by around 190 percent over three years. People also tend to increase their incomes much faster via oDesk jobs than they do as part of a traditional workforce. Because oDesk can tap workers in countries such a Kenya, which often have high literacy rates, some workers there are doing “content writing” for blogs and other online venues at a competitive advantage over U.S.-based workers.

Another booming category of work is associated with “collaborative consumption,” websites that let people share, or rent out, their cars, apartments and other property to strangers on a piecemeal basis. Rachel Botsman and Roo Rogers survey this varied form of e-commerce in their 2010 book, What’s Mine is Yours: The Rise of Collaborative Consumption. Perhaps the most famous collaborative consumption website is Airbnb, an e-commerce website that has booked over ten million nights in people’s home in 192 countries. Since its launch in 2008, more than four million people have used it. In San Francisco, the average Airbnb host rents out his or her home for 58 nights a year, and makes $9,600.

Digital Sweatshops or Economic Emancipation?

The big question about casual digital work and online labor marketplaces is how we should assess their social impact. Are they lifting people out of poverty or are they simply exploiting people? Janah used to believe that digital outsourcing was problematic, but after visiting with the people who do the work, she has a more complicated reaction: “For a poor person in Uganda, tagging images is their greatest joy. I kid you not.” Janah told the story of a Muslim woman in Calcutta who had finished high school and spoke great English, and got a job with Samasource tagging images for Getty Images. Now she is the proud, primary breadwinner for her family.

Janah added that such workers probably need “some kind of representation,” whether labor unions or other forms, to help them protect their interests. But even though workers are doing piecemeal labor, she said, these jobs offer a lot of marginalized, low-income people opportunities to learn skills and become part of the mainstream economy.

A lot of people who have succeeded through small businesses on eBay, for example, are ex-convicts, disabled people, single mothers and elderly people who have been able to start businesses and earn money in ways that would otherwise have been impossible. On such online platforms, too, there is greater transparency than in most sweatshops; people can learn what the going market rates are for their labor, services and goods, and in some instances, use this knowledge to look out for their own interests and demand accountability.

Entrepreneur Caterina Fake noted that both eBay and Etsy, an online crafts marketplace, are used by “a lot of disenfranchised people,” especially women who are restricted to their homes because of financial reasons or social restrictions such as having to wear burqas. “These platforms create opportunities for them and an equal playing field,” she said, adding that there are still gender biases at play online. For example, a woman with a name like Pat or Chris who puts a photo of a male to identify herself can increase her sales by 29 percent, she said. Fake added that there is a lot of sharing of knowledge and know-how among people on such sites. On Etsy, there are over 7,000 “street teams,” or self-organized groups of people, who trade tips about merchandising, customer service and other business practices.

Unlike day laborer jobs where unskilled men are picked up from the street to perform menial jobs, the online work marketplaces allow a worker to develop a reputation that could help him or her gain future employment. The important point is that these people are entering the economy and getting new opportunities to improve themselves, said Esther Dyson, the investor and entrepreneur: “They can get a reputation. They learn about work. They get paid. They get work skills.”

Transparency is a two-way street: Many online work marketplaces let workers rate employers and complain if they are cheating them. Customers of Uber and Lyft, the app-driven livery services, may rate the service of drivers—but drivers can also rate customers and their courtesy and behavior. By bringing new transparency to certain types of market dealings, online work marketplaces can help eliminate “leakage,” or corruption, which in countries like India, represent a massive drain on economic performance. When police officers in Afghanistan began to be paid via mobile money, it amounted to a 30 percent raise in their pay overnight because they were finally getting the full amount of money owed to them.

Systems of transparency are now institutionalized through a number of “supply chain monitoring tools,” said Janah. An example is Labor Link, a mobile platform that “gives companies real-time data from their supply chain or field operations, and gives workers and farmers a voice to report on conditions in their workplace or community.” GoodGuide is a consumer platform that lets people scan a product bar code to learn if it is associated with slave labor, environmental abuses or other ethically dubious practices. There are also a number of new e-commerce platforms, such as Zady, that feature ethically made goods. The Fair Wage Guide, developed by the company World of Good lets consumers calculate a fair wage based on the cost of living in various countries, and in rural and urban locations.

There are also a number of crowdfunding moneys—Kiva, GlobalGiving, Samahope—that channel funds toward needs that governments in developing countries often cannot or will not fund. There are even ways to make direct cash transfers for philanthropic purposes. Through a new website called GiveDirectly, people can make recurring donations via Google Wallet.

Does Digital Work Need to be Regulated?

Because the new forms of work deviate so greatly from traditional forms, it is not surprising that existing regulatory systems and legal protections are poorly suited to address abuses. For example, should digital outsourcing work performed by children in developing countries be considered child labor? Should minimum wage laws apply? Does labor that is compensated with airline miles or points in a game count as “work?”

Then there is the question of who exactly is the employer—the online platform (such as oDesk or Mechanical Turk) that acts as a market broker, or the person who is directly hiring someone? And should such employers be responsible for paying benefits for work? Janah says that some online labor marketplaces have decided not to offer training or other support lest governments regard them legally as employers. The situation gets even murkier: “If you have a group of workers who work together in the same office building, and whose work is all mediated through oDesk, should they be regulated as employees under formal employment law, or should they be regarded as contractors? Government hasn’t kept pace with the new forms of work,” said Janah.

For Paul Moreton of Capital One, the discontinuities of wages around the world is causing new stresses: “We have a minimum wage that artificially raises what people would work for, as well as labor unions that artificially raise what people would be willing to take. Is that maintainable when you go to a global workforce? Does this mean that the U.S. needs to move downward [in wages] in order to get to that level playing field?” “This seems like a very tough problem,” said Peter Vessenes of the Bitcoin Foundation. “We have all these ‘baked-in’ costs in the U.S. that push up against a global labor force.” Such gaps are likely to fuel social unrest, both agreed.

And yet, Leila Janah believes that pitting one nation’s citizens against another is not the answer: “The average American might say, ‘Oh, you’re ruining America with this global marketplace.’ Well, I think what we’re doing is promoting a global meritocracy.” Janah rejects the argument that “American jobs are somehow more worthwhile than jobs in other places.”

But there remains the question: Are the new digitally mediated forms of work providing “good jobs?” According to a Gallup survey cited by author Jim Clifton, a “good job” is a stable, reliable income from 30 hours of work or more each week. By this standard, none of the online work marketplaces offer “good jobs.”

Leila Janah closed by noting that the various e-commerce and fast-expanding work marketplaces raise questions that we do not really have the answers for: “We haven’t thought about how we make the next generation of people successful on these platforms. How do we regulate this work? How do we incentivize companies to be inclusive and responsible? How do we prevent entire communities of people from being left completely behind? What’s the role for government and other institutions in addressing these questions?”

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