The Future of Work in the Digital Economy: Promise and Peril

On the positive side, these new ways of employment can open up some opportunity. The platforms are efficient at matching workers with short-term jobs, and some workers who don’t need full-time work like the flexibility that these services can provide. For “labor market outsiders”—those who historically have had difficulty finding full-time work, including immigrants, young people, and to some extent women and seniors—they can benefit from having another pathway to part-time, temporary work. For workers in the tech industry, where wages tend to be higher than average, this kind of flexible, contingent work might be preferable.

But in other occupations and industries, working as a precarious worker in the “sharing” economy turns out to be not very sharing. The Silicon Valley inventors of what is also known as the “gig economy” say that their companies are “liberating workers” to become “independent” and “their own CEOs.” In reality, workers are taking ever-smaller jobs (“gigs” and “micro-gigs”) and earning low wages with no safety net or job guarantee, while the companies profit handsomely.

The prototype for the new digital company is Upwork, which is based in San Francisco and has a mere 250 regular employees who are able to use digital technologies to oversee 10 million freelancers and contractors all over the world. The types of jobs on Upwork include architects, engineers, lawyers, website and app designers, translators, software developers, logo and graphic designers and more. German workers bid for jobs alongside workers from India, Thailand, the US and elsewhere, scrounging for work in an online labor auction in which the lowest wage-bidders often win in a global race to the bottom.

In the US, where these trends are furthest developed, this type of precariat-fueled company not only is gaining a foothold in Silicon Valley, but increasingly in industries of the traditional economy, such as in the auto industry, pharmaceutical companies, universities, transportation, newspapers, broadcasting, arts and entertainment, stock trading and more. For example in some US auto plants a majority of workers are temps, receiving less salary, less job security, and fewer safety-net benefits than the regular employees, even though the temps do the exact same job. The temp sector has provided nearly a fifth of the total job growth within the US since the recession ended; nearly half of the new jobs created in the so-called “recovery” pay only a bit more than minimum wage.

The rapid implementation of software and algorithmic productivity has resulted in an increase in the use of contractors, temps, freelancers and part-timers. Add to this increasing use of automation, robots, algorithms and artificial intelligence, and it’s no wonder that economist Nouriel Roubini has said, “The factory of the future may be 1,000 robots and one worker manning them.”

Despite the business-friendly rhetoric calling these workers the “CEOs of their own business,” the reality is quite different. These workers spend a lot of (unpaid) time hustling to find the next job. Many freelancers and contractors have multiple employers in a single day, and have to juggle multiple gigs, including ensuring that the businesses actually pay them. These sorts of workers also have to pay the employer’s half of social security.

In a regular job, a worker gets paid “on the clock” for an agreed-upon number of hours per day. Rest breaks, staff meetings, training, even time at the water cooler are all paid time in a regular job. But the gig economy overturns this social contract. It reduces workers’ labor value to only those exact minutes they are producing a report or designing a logo or cleaning someone’s house. It’s as if a football star only gets paid when kicking a goal, or a chef is paid by the meal. There are no annual salaries or payment for training or research. It’s piecework, like in the 19th and early 20th centuries, a “back to the future” employment situation.

One worker tried to make a go of it utilizing TaskRabbit and other labor brokerage websites, but found himself running like a hamster on a wheel. “The wages offered look decent at first until you realize that you spend at least half your time commuting (from gig to gig) and/or dealing with flakes, neither of which is paid,” he said. “Add in the 15% self-employment tax, the cut that the sites take (usually 10% to 20% of each gig), and it really starts to suck.”

But no worries, while more workers might be under-employed and underpaid, you will be able to earn extra money by “monetizing your assets”—rent out your house on Airbnb, or your car on Uber, or your spare drill and other personal possessions on other websites.

Many business leaders speak glowingly of this hyper-efficiency. Leah Busque, CEO of TaskRabbit, explains it away by saying, “We’re about empowering these independent contractors to build out their own businesses.” But we have to ask—efficient for whom? How are we to define efficiency in a modern economy? Isn’t full employment with decent-paying and stable jobs “efficient”?

These changes to the economy can potentially affect much more than individual workers and their families. The German economy, like the US economy, is driven 70% by consumer spending. So what happens if not enough people have decent paying jobs, and so do not have enough money to buy up the goods and services produced by the businesses? Lacking fewer customers, the businesses would have to lay off more employees which would result in even fewer customers—a downward spiral of recessionary and deflationary pressures.

Don’t get me wrong, the digital economy and innovation certainly show potential—but only if properly regulated. Otherwise, these services threaten to further undercut the middle class and the broader macroeconomy that has been such an economic success in the post-World War II era.

Fortunately there are pragmatic policy solutions that could be implemented. One of those would create a “portable safety net” which would stay with a worker who moves from job to job. We could assign to each worker an Individual Security Account, and every business that hires that worker would pay a small amount of “safety net” premium, prorated to the number of hours worked for that business. This universal safety net would be something like a system of “Künstlersozialkasse for alle,” building upon the existing support for artists and musicians to create a system which encompasses other occupations that either currently or in the future are shut out of the welfare system.

Innovative policies like that would help maintain the middle class and act as an “automatic stabilizer” for the broader macro-economy, better ensuring that technology and innovation would enrich all of society instead of just a handful of winners in a winner-take-all society.

Steven Hill is a journalist and the Holtzbrinck Fellow at the American Academy in Berlin. He is the author of Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism Are Screwing American Workers. Find him @StevenHill1776