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What We Need To Know About On-Demand Work Platforms Before Regulating Them

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As we fast approach the 2016 election cycle, the future of on-demand work platforms is at a crossroads, with Uber, TaskRabbit and other market leaders facing increased scrutiny and skepticism from regulators and political leaders.

At the same time, these platforms inadvertently contribute to a growing anxiety among the public, who are concerned that the on-demand economy may change the future of work for the worse — if their jobs are not entirely automated out of existence.

Along with several colleagues from the Institute for the Future, I had the opportunity to address some of these very concerns at the Department of Labor, presenting an alternative viewpoint to Secretary Perez and his colleagues.

With a number of technologies emerging together to enable the unprecedented ability to coordinate and allocate resources in real time, a corresponding rise of new work and organizational structures may be an inevitability.

Despite this, a number of policy leaders and many in the media are still having the wrong conversation about these platforms, not asking the right questions about the underlying technology shifts taking place.

Instead, they are attempting to categorize the entire industry as either good or bad. In our view, this is almost like 19th century politicians trying to hold a Yes/No vote on industrialization.

Our perspective is based on direct research into these work platforms over the last two years, which suggest a far more complex ecosystem. Here I share just a few of our recent findings:

  • Alignment between the platform owner’s incentives and worker incentives makes a difference. As a counter-example of this, we recently researched a work platform that strived to ethically compensate workers above average local rates. But paradoxically, because of its bundled pricing structure, workers on the platform actually made less than they would on a more profit-centered, “mercenary” platform simply taking a percentage of wages earned.
  • Distinctive new lifestyles are beginning to take shape within the coordination economy. Many on-demand platform drivers, for example, plan their days so they can be conveniently available in demand “hot zones.” In other words, these drivers are monetizing their existing, daily routines in new ways.
  • Some traditional wage reforms are not reliably beneficial. Recently, a platform implemented a minimum wage policy for its own workers, and, partly as a result, saw some of its best-rated workers quitting the platform entirely, because they were now earning less revenue.

These anecdotal examples are not intended to refute the sharpest critics of work platforms, for we’ve also found considerable evidence to validate many of their chief concerns. For instance, deep pay disparities between contractors on some work platforms and average compensation rates which can fall below the minimum wage on others.

A Call For Positive Platforms

We cannot be passive bystanders to the future of work, hoping that current work platforms, as admirable as many of them are, can evolve into what we need as a country: positive platforms, which we define as on-demand work systems that are intentionally designed to maximize the benefits for everyone connected to them — including, and especially, their workers.

Our simple rule of thumb is that the positive externalities of these platforms can be designed to outweigh their negative externalities.

Collaborating with industry and policy leaders, we are now striving to ask the right questions about this technology — and develop the answers most likely to promote positive platforms.

Are There Standards That Promote Balanced Economic Development That Can Be Feasibly Adopted By Emerging Platforms?

We see great promise in pricing models that don’t commoditize individual tasks, but instead align the interests of the platform with its workers. For instance, a commissions-based model similar to how entertainment agencies operate, where an agency’s revenue is a flat percentage of their client’s earnings. Operating in this way, platform owners would be directly incentivized to maximize their platform workers’ revenue.

How Can New Work Platform Technologies Be Applied To Achieve Socially Positive Outcomes?

We are already seeing platforms that strongly suggest the answer to this is Yes. For instance, as much of the U.S. education system remains in financial distress (both for students and colleges), the crowdsourced platform Duolingo applies a Mechanical Turk-type translation work model that enables teaching languages to its users for free, with incredibly impressive results. (According to the company, there are more people learning language on Duolingo’s platform than in the entire U.S. public school system.)

Similarly, it is not difficult to imagine the immense matchmaking power of on-demand platforms being used to address issues like underemployment and even overall GDP growth, by more dynamically matching people to work and training opportunities.

These are very tentative answers, and much more research is needed. It’s our hope that industry and policy captains continue coming forward to work with us, sharing their data, wisdom and statecraft, so we can better cultivate this technology in a direction we all support.

Ultimately, our traditional corporate/organizational structures are themselves a technology — one that was mostly designed to coordinate mass industrial production. As digital platforms provide new ways of coordinating economic activity, they will upset many of our assumptions about how work and organizations “should” behave.

Our task over the coming decades is to amplify their opportunities while mitigating their challenges. Only together can we design new structures all of us can live with — and work in.

Featured Image: Thinglass/Shutterstock