More than one-third of the U.S. workforce (36%) participated in the gig economy in 2018, a figure that some predict could rise to more than 50% by 2023. This trend accelerated significantly in 2020, largely driven by the fallout from Covid-19 and its impact on small businesses and larger employers’ budget and resulting mass layoffs.
Regardless of whether this shift is being driven by individual preference or necessity, there are significant public policy interests at hand: many safety net benefits for individuals in the U.S. have been funded or administered by employers. Accordingly, there have been state legislative efforts to force the companies enabling gig work – technology platforms such as Lyft, DoorDash, UpWork and others – to categorize the workers as ‘employees’.
2020 saw platform companies fight back, collectively spending $200 million to promote (and subsequently win) the Proposition 22 direct ballot measure in California, which exempts these companies from classifying independent contractors as employees.
With platform tech giants spending this type of capital to protect their interests, questions have come up around how to protect workers concerns.
One answer? A ‘public market’ marketplace option: creating a government-run gig economy platform, which could infuse competition into marketplaces that have historically been thought of as “winner take all” and could protect for gig workers’ interests and that of the public.
But, should the government be in the gig economy marketplace business?
British entrepreneur, Wingham Rowan, founder of Modern Markets for All and a long-time TV and media figure, believes so. A vocal proponent for a public gig-work option, Rowan believes that having government-run marketplaces is the best way to improve in the best interest of gig workers and provide a public good — and the only way to address what he outlines as the key issues impacting gig workers.The public marketplaces, which Rowan calls “Public Official E-Markets”, or POEMs, would be overseen by government entities or non-profits to ensure they are run as public utilities.
Roadblocks To Public Platforms Solving The Gig Economy’s Problems
There are a few problems with taking a POEM-approach to expanding the gig economy that Rowan and policymakers should consider prior to making any investments:
1. Big vision vs nailing the narrow “core interaction”
Rowan outlines a big, bold vision for how a government-run gig economy platform could provide a public benefit, with the article noting that, “If public e-markets really took off, they would fill with a constant hum of microeconomic activity, drawing an ever-wider set of people into exchanges of goods and services without private companies cashing in.”
The challenge with this big vision is that by their very nature, platforms that seek to be successful must start out with a very limited scope. Why? Three key reasons:
- The value of the platform itself tends to come from the size of the network of users of the platform (commonly referred to as Network Effects);
- In order to attract users they typically face a “chicken and egg” adoption problem in which each “side” of users (buyers or sellers, for instance) wait for the other to join; and
- In order to create enough value to keep each side on the platform, they need to quickly facilitate enough value to both sides that both decide to continue using the platform (and not other methods) for future interactions
This may all sound easy, but even if one solves the adoption problem, this can prove a false victory if the third piece is not addressed in time. Termed the “core interaction”, this seemingly simple concept largely explains the difference between eBay and Yahoo! Auction, Bumble’s success by putting women in control, and Lyft’s increasing ride-matching success.
If the platform cannot create successful interactions for those first early users, those users drop off the platform, which reduces the value to remaining users. Indeed, Rowan himself seems to recognize the folly of ‘big vision’ thinking based on his experience with a government-run platform: “‘The first week, with very little publicity, they had eighteen thousand hours of residents’ availability for work…. [but] they had seventy hours of demand from employers, because nobody had thought to outreach to the demand side.’”
2. Government as matchmaker and holder of sensitive financial information
A primary role of most gig economy platforms is to help reduce “search costs” by providing a curation function: to make a match between supplier and consumer as easy, fast and successful as possible. This curation can come in different forms: Lyft uses GPS to efficiently match drivers and riders; Amazon allows users to rate the quality of products and merchants; Airbnb encourages hosts to post pictures so guests aren’t surprised, etc.
A secondary role of platforms is to minimize “transaction costs,” which are all costs associated with consummating a commercial transaction, including those not commonly thought of. Upwork, for instance, provides standardized contracting, dispute resolution, payment, and other services to remove as much friction as possible for both sides (the payer and freelancer) of the transaction.
Rowan makes the case that a government-run platform could fulfill the same set of functions: “As on Uber, buyers and sellers would accumulate reliability records; unlike on Uber, features such as health-care contributions and retirement benefits could be built in.”
To this end, there are two immediate (and likely many more) questions that come up that pose a challenge for any government-run platform:
- When push comes to shove, which “side’s” interest should drive the matching algorithm?
- Do we really want the government (or a contractor) storing the type of sensitive personal information necessary to make transactions seamless?
Regarding the first, there are typically small nuances that make or break a platform’s matching success. Bumble IPO’d this year because it put women (not men) in charge of matchmaking and the first point of outreach; similarly, Lyft outperforms Uber with a smaller network in part because it focused on and prioritized the importance of managing the quality of both its drivers and riders. At the end of the day, the challenge for a public marketplace will be in determining which side’s interests are preferred in order to determine the proper matching algorithm — and this isn’t easy, especially when trying to serve a public good.
Regarding the second — and what could ultimately be the public option’s fatal flaw — it maps back to consumer trust. Platforms like Uber and Lyft, DoorDash and GrubHub, etc. all store personal and financial data about its users to drive quick, seamless transactions. Will the American public want the government to have visibility and control of our private information? There will be inherent trust issues in that people may not trust a government-run platform for that very reason.
3. Platforms require organizational agility, not exactly the government’s strong suit
From 2006 to 2016, research indicates that 94% of large federal information technology projects were unsuccessful, more than 50% were delayed, over budget, or didn’t meet expectations, and 41.4% were deemed complete failures. Because governments and nonprofits typically do not have the technical skills, experience or resources required, they are not in the position to launch, manage, grow, govern, or monetize a gig-focused platform company.
Furthermore, developing a plan to attract and create value for just one set of users requires rapid testing and iterating on a multitude of factors; doing this for two different sets of users is even harder.
There are also user interface and experience (UI/UX) considerations, which require both a very specific set of technical skills to build and constant improvements to keep up with changing market expectations. We don’t usually associate public utilities with having a slick UI, but this is an incredibly important part of creating platform “stickiness” in terms of keeping people active on the platform.
Shortcomings in both of these areas should raise a red flag: research suggests that platform companies fail at twice the rate as non-platform tech startups. And in a recent study of 250 platforms, the authors found that many gig economy platforms collapsed within two to three years because they did not have enough users or funding.
While Rowan does mention having a private company involved in public platform development in his article, simply outsourcing this function and to a private company with the lowest bid for the job — or, worse, to a government entity or non-profit with little to no experience in platform development and marketplace creation — is likely to be the public platform demise.
An Example And Exception: HealthCare.Gov
With the enactment of the Affordable Care Act (ACA) in March 2010 came the introduction of health insurance exchange marketplaces, including Healthcare.Gov. Launched on October 1, 2013, HealthCare.gov lets consumers compare and shop for coverage, identify if they qualify for federal subsidies, and enroll in a chosen plan.
Like other federal IT efforts, Healthcare.Gov’s rollout was anything but smooth. The initial failure was mocked by government officials and talk show personalities alike, with only six individuals successfully completing and signing up for individual insurance on launch day. It also came in at ~17X its initial $93.7M budget, ultimately costing $1.7B.
Today, the experience on HealthCare.gov is much different than it was eight years ago. This is largely because of the government’s fixed technical issues with the site itself, but also because the platform itself serves different functions than those that Rowan envisions.
First, HealthCare.gov itself has a process by which individuals can identify if they qualify for a subsidy. Second, the insurance exchanges aggregate vast amounts of information from multiple plans and provides that information in a standard format, allowing for easy search and meaningful comparison shopping. Third, the nature of shopping for health insurance is more similar to buying a house than hailing a taxi: purchasing decisions are few and far between, and there is significant money at stake in the transaction, and there
Finally, HealthCare.gov now has the budget behind it to make it work after substantial budget cuts under Trump. The Biden administration recently committed $50 million in spending to help market and promote Obamacare insurance options to eligible enrollees. The administration is also working to secure more “navigators,” human beings available to help walk enrollees through their options and the process to ensure they are paying the lowest price possible.
Public vs. Private Run Marketplaces and Platforms, And What Can Work
With both state and federal public health insurance exchanges as an example, there are certainly instances where the government can play a role in public marketplace development:
- There is a high-degree of information asymmetry between consumer and supplier
- The cost of a failed transaction (or poor quality service) is high
- There is significant utility provided to a large group of consumers by standardizing and simplifying the way options are presented
- Purchasing decisions or information exchange needs are infrequent
When these conditions are met, a government-run (or sponsored) platform may yield value.
But for most other marketplace and platforms seeking to make commercial and information exchange more efficient, private capital is much better positioned to succeed. In healthcare, for instance, despite millions of taxpayer dollars invested into interoperability efforts, adoption and use remains low. While there are additional contributing factors for why this is the case, it is also true that most forms of health information exchange deal with frequent interactions between providers (and/or patients), different groups of providers and patients have different information needs, and standardization at too high a level renders information to any one constituent virtually meaningless.
Tidal ETF – SoFi Gig Economy ETF (GIGE) gains 0.41% to Close at $37.71 on October 21
Tidal ETF Trust – SoFi Gig Economy ETF (NASDAQ: GIGE) shares gained 0.41%, or $0.1528 per share, to close Thursday at $37.71. After opening the day at $37.36, shares of Tidal ETF – SoFi Gig Economy ETF fluctuated between $37.81 and $37.24. 5,487 shares traded hands an increase from their 30 day average of 3,522. Thursday’s activity brought Tidal ETF – SoFi Gig Economy ETF’s market cap to $32,056,900.
Visit Tidal ETF Trust – SoFi Gig Economy ETF’s profile for more information.
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Breaking the Supply Chain Bottleneck
Since the start of the global pandemic, historically low interest rates and government spending have inhibited saving and encouraged borrowing and spending to lift the economy during the challenging period. The US Federal Reserve and government have pumped far more liquidity into the financial system than during the 2008 global financial crisis. We have seen an increase in inflationary pressures because of the stimulus. Moreover, the pandemic’s unintended consequences have created shortages and supply chain bottlenecks that have only exacerbated rising prices.
Walgreens Investing Additional $5.2 Billion in Primary Care Provider VillageMD
Walgreens Boots Alliance Inc (Nasdaq: WBA) will invest $5.2 billion in primary care provider VillageMD as part of the pharmacy chain’s plan to open more co-located practices within its drugstores across the US.
The investment announced Thursday increases the Deerfield, Illinois-based chain’s stake in VillageMD to 63% from the 30% it acquired in July 2020.
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Revenge represents an amazing human activity. In business, kicking opponents when they are down comes with the territory. As Huawei struggles with US government sanctions, Xiaomi steps in to introduce competing products and grab market share. Former Communists learn quickly about the free market economy. No employee at Facebook (NASDAQ: FB) asks the giant to go easy on Myspace. Remember Myspace? No Apple (NASDAQ: AAPL) executive lends a helping hand to Motorola, which is even harder to remember. This new series looks at a few savory examples of business payback.
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Moves wants to reward gig workers with shares in Uber, Lyft, DoorDash, Grubhub – TechCrunch
Moves, a Toronto-based gig economy fintech startup, wants to reward gig workers with stocks from the companies for which they drive. The first version of the Moves Collective, as the startup’s new service is called, launches on Thursday with Uber stocks available and then quickly offer Lyft, DoorDash and Grubhub shares, says CEO of Moves, Matt Spoke.
Moves’s thesis is this: If gig workers become shareholders, they might feel more economic alignment to the platforms they work for. Furthermore, if enough workers own stocks in these companies through the Moves Collective, they might be able to form a voting bloc in the future and actually influence company decisions. Moves says it already owns a “significant and growing stake” in these companies, all of which are common shares with voting rights.
Over the past year, poor working conditions for gig economy workers have led to worker protests and attempts by states like California, Illinois, Massachusetts, New Jersey and New York to reclassify gig workers as employees, worthy of all the basic rights that status affords, such as health care, vacation pay and paid sick leave. Companies like Uber, Lyft, DoorDash and Instacart have fought back against the ongoing debacle in California over Prop 22 and have formed a coalition in Massachusetts to get a proposal on the November 2022 ballot that would classify gig workers as independent contractors.
“Gig workers contribute a huge amount of value to the gig economy, but they don’t get any of the economic returns as a result of the value they’re contributing, and that’s what we’re trying to solve for is effectively making them feel like they have an economic stake in the success of the companies that they work for,” Matt Spoke, CEO of Moves, told TechCrunch.
Workers who are already a part of the Moves platform – which enables gig workers to track and manage their money from different companies, have access to a monthly spending account and instant business cash advances up to $1,000 – are eligible to sign up for the Collective and receive rewards in the form of stocks. Moves will give workers a series of “tasks” to complete, like refer three friends or participate in a user survey, in order to receive free stocks, or fractions of stocks, which then go into the user’s own brokerage account that Moves has opened for them.
In the long run, the Moves Collective, aptly named, is meant to bring gig workers together and leverage the power in numbers to create a voice that can be used in corporate governance decisions. Moves would propose proxy material submissions at annual general shareholder meetings of the major platforms in order to ensure the interests of gig workers are heard, says Spoke.
Moves’s primary business relies on interchange rates that it is accumulated every time a gig worker uses their Moves card to make a purchase, and it’s that revenue which funds the shares Moves gives back to the workers.
“We’re effectively trading off revenue to acquire new customers and hold on to them, if you want to think of it that way,” said Spoke. “So the revenues we earn off the use of your checking account are being put back into the product to finance these rewards that are effectively denominated in stocks.”
At the moment, the program is invite-only and shares are accumulated via a partnership with Bumped Financial, a stock rewards program. Spoke says Moves will also keep an eye out for Instacart’s IPO to purchase stock for its platform, and is even considering supporting Amazon stock for Flex delivery people or Target stock for Shipt workers.
All of the app-based gig economy companies “suffer from the same problem,” says Spoke, “which is a massively high percentage of driver and worker churn rates. Their workers just don’t stick around. They either leave to go to another gig app or they leave the gig economy altogether. So these companies are spending tens if not hundreds of millions of dollars replacing workers all the time.”
Before their IPOs Uber and Lyft considered issuing stock to drivers as a mechanism to increase retention and create worker loyalty, but there are different regulatory issues that got in the way of a sincere effort on the companies’ parts. In the end, the two companies decided to reward some more active drivers with a one-time cash award that gave them the option to buy stock. Uber, for example, set aside 5.4 million shares, which was 3% of total shares, of its common stock for drivers, but said it would offer those to the public if drivers didn’t scoop them up.
For reference, former Uber founder and CEO Travis Kalanick, who owned 8.6% of Uber at the time of public filing, made about $5 billion on his stake, and Alphabet, which owned 5.2% of the company, took home around $3.2 billion. U.S.-based drivers at the time had the option of using cash bonuses which could be used to purchase up to $10,000 worth of company stock.
Companies that rely on the gig economy do have a harder regulatory time giving out stock options to workers. SEC Rule 701 allows companies to issue stock to employees, consultants and advisors as compensation without having to submit detailed financial records, but gig companies don’t fit neatly into that current exemption. In 2018, the SEC called for comment on possible ways to expand the rule to adjust to the changing nature of work relationships. Uber responded, albeit past the deadline, but with a request that the SEC revise the rule in order to allow “partners to share in the growth of the company which could lead to enhanced earning and saving opportunities for the partner and for the generations ahead.”
As the laws currently stand, if Uber or Lyft were so inclined to incentivize drivers themselves with stocks, it would encroach dangerously on employer territory. However, the company’s past stance signals it might makes sense to one day outsource this kind of service.
“Uber, Lyft, DoorDash and Instacart have come together on topics like Prop 22, they’re lobbying together against new regulations, and so I don’t think it’s inconceivable that they would see this as being generally positive for the industry,” said Spoke. “Eventually I think we’re going to end up wanting to find some way to share the economics with them. Fast forward a year or two years, I definitely see us talking to Uber about the tangible benefits that we are able to demonstrate and say, ‘A driver that was issued Uber stock is X% more likely to stick around longer, so you should be partially participating in funding this.’”
Moves says it currently has about 10,000 users on its platform across all 50 states. The company was founded in February 2020, right before ride-hailing took a massive pandemic-sized dip, and has been in the markets since April 2021. The plan is to begin fundraising again in the first half of next year, but Spoke said Moves doesn’t want to do that until it refines the unit economics in the narrative of the business and creates a use case for Moves Collective.
“It’s not that Uber doesn’t care about their drivers but that their drivers are not their primary stakeholder,” said Spoke. “Their primary stakeholder is their consumer. They do everything they can to innovate value for the consumer side of their markets, and often the workers are sort of an afterthought.”
Gender and gig work: Perspectives from domestic work in India
Platforms have the potential to be instrumental in protecting workers rights, but the current platform design is not optimised to protect workers’ interests especially those of women in the gig economy, argues Ambika Tandon, a senior researcher at the Centre for Internet and Society in India and an author of the report on ‘Platforms, Power and Politics: Perspectives from Domestic and Care Work in India’.
Digital labour platforms, broadly defined as digital interfaces that enable the exchange of goods or services, have grown exponentially in cities across the world. In sectors such as transportation and delivery, Uber and similar platforms have achieved dominant status, while in other sectors platforms are still making inroads to transform consumption patterns. Researchers at India’s Centre for Internet and Society, sought to understand the impact platforms have had on the paid domestic and care work sector in India, given its importance for women workers. The workforce in this sector is largely constituted of women from Dalit, Bahujan and Adivasi (or caste-oppressed) and low-income groups, with a long history of socioeconomic and legal devaluation and lack of recognition. In this context, platforms have positioned themselves as intermediaries that will improve wages and conditions of work, pushing the sector towards formalisation.
To assess the impact of digital platforms on processes of recruitment and placement and on organisation and conditions of work, we undertook 60 in-depth interviews between June and November 2019. We chose two metropolitan cities, New Delhi in north India and Bengaluru in south India, as our field sites. These are key nodes in the migration corridors of domestic workers in the country. We spoke to workers who were searching for hourly or regular work through platforms, representatives of platform companies and state and central governments, as well as domestic workers unions. We found that platform design breeds and amplifies exclusion and discrimination along the lines of gender and caste, among other social characteristics.
Uber for domestic work
We found that the function of digital platforms in the sector is contingent on the historical organisation of domestic work, rather than any fundamental re-organisation of the supply chain. Unlike in the global North, platforms in India have thus far been unable to ‘gig-ify’, that is, break up most tasks that constitute domestic work – including child and elderly care and cooking – into short-term granular services that have been standardised. Domestic workers continue to find regular term full-time placements through marketplace platforms, which only connect employers to workers with no other role in determining work conditions. HelpersNearMe and Helper4u are examples of platforms that play this role by listing profiles of workers and making these available to employers. These placements are no different from work in the ‘offline’ sector, with complete informality and very little standardisation around hours, wages, and task constitution. As compared to this, on-demand platforms that offer short-term gigs (similar to the Uber model) have grown exponentially in the ‘deep’ cleaning segment by marketing it as a professional service with higher value than ‘regular’ cleaning services.
The function of digital platforms in the sector is contingent on the historical organisation of domestic work, rather than any fundamental re-organisation of the supply chain.
Cleaning gigs provided by on-demand companies have higher hourly wages than ‘regular’ cleaning services in the traditional sector. But accessing these opportunities requires workers to have regular access to a smartphone throughout the day, to be able to accept or reject tasks and receive payments through a mobile application or web-portal. Women workers from low income families have very low levels of digital access, with most phones being shared between families and controlled by male members. Also, the use of technical equipment such as vacuum cleaners and chemicals has led to deep cleaning being viewed as a masculine task. As a result, almost all cleaning workers we identified in the on-demand sector were men, even though cleaning is a feminised job role in the traditional economy. Some cleaning workers we spoke to did not identify as domestic workers at all, but rather viewed their work as holding a higher status than traditional cleaning. This trend of masculinisation of a job role coinciding with higher wages and social status has also been seen in other sectors globally, such as software programming.
Promises and risks of low-tech platforms
One of the reasons that women workers are more likely to find work through marketplace platforms rather than on-demand agencies is because they only require workers to have a basic or feature phone for one-time registration, and subsequently to answer calls from potential employers or the platform. Most platforms in this category do not intervene in task allocation or terms of work, which are negotiated directly between workers and employers. Algorithms and digital interfaces then only facilitate matching, as opposed to on-demand work where all aspects of the job are determined by the platform. This allows women workers to register using shared family phones, or those of their friends, neighbours, and in the case of one of our respondents, her landlady’s phone number. These platforms then may be able to provide placement opportunities to workers who are unable to find work through word-of-mouth networks. This is especially crucial as a result of the unemployment crisis triggered by the COVID-19 pandemic. However, unlike with the on-demand model, these platforms do not offer increased wages or provide better conditions of work.
Although marketplace platforms provide an additional route into finding opportunities in the sector, they also codify employers’ biases through their design. All marketplace platforms and digital placement agencies we reviewed – upwards of 20 companies – provide demographic filters to employers for filtering workers’ profiles. These include information on workers’ gender, age, religion, state of origin, and in one case, even caste. While practices of employing workers based on demographic characteristics are rampant in the sector historically, platforms build them in by design and market them as a key feature of what they are able to offer employers. These open up direct avenues for employers to discriminate against workers from minority religions and oppressed castes. It also reinforces gendered occupational segregation, as employers seek out women workers for feminised roles such as cleaning and care work, and men for tasks such as gardening and plumbing.
Power structures endemic to the domestic work sector continue to thrive in the platform economy, as do gender and caste-based occupational segregation.
Platforms have been making claims of formalising the informal sector, especially in global South economies, through increasing efficiency in matching workers to employers. Despite having the potential to be instrumental in protecting workers rights, currently platform design is not optimised to protect workers’ interests. Power structures endemic to the domestic work sector continue to thrive in the platform economy, as do gender and caste-based occupational segregation. To be able to nudge the sector towards formalisation, platforms need to directly intervene in power structures and co-design with workers, rather than merely functioning as digital recruiters. This could imply adopting practices such as removing demographic details where not relevant, introducing written contracts and minimum wage floors for placements, and addressing gender gaps in some segments of the digital economy.
This work forms part of a project on ‘Platforms, Power and Politics: Perspectives from Domestic and Care Work in India’, supported by the Association for Progressive Communications. You can read more about the project here, and find the full project report here.
This article gives the views of the author and does not represent the position of the Media@LSE blog, nor of the London School of Economics and Political Science.
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