Frictionless Exchange: Author Discussion
What happens to markets as the digital age improves their efficiency and introduces them to new domains? As a part of our “Lost in the Super Market: Navigating the Digital Age” collection, American Compass convened contributing writers Wingham Rowan (Modern Markets for All) and Neil Chilson (Charles Koch Institute) to discuss the advent of frictionless exchanges. Wells King (American Compass) moderates.
Wells King: Wingham, let’s start with you. What challenges does digital technology pose in the labor market?
Wingham Rowan: It’s widening the labor market and it’s fragmenting the labor market. And the term gig work, isn’t particularly helpful. I like to think in terms of people who are earning outside a traditional nine to five job. So, there are people building portfolios of earnings. They are renting out their assets, they’re doing odd hours of work, they’re providing services to their neighbors and so on. So, that has been dramatically accelerated by digital technologies. Digital technologies are just changing markets completely at the moment. It’s fascinating and scary.
Wells King: Now, Neil, do you see any real challenges? Or, the challenges that it presents novel to labor markets?
Neil Chilson: The rise of tech has basically been reducing transaction costs, which is something that technology has been doing to labor markets for all of history, essentially. And in my essay, I talk a little bit about one of the earliest technologies. Currency, for example, changed a lot of transaction costs and really totally restructured markets. It gave us what we think of, as markets essentially that are not just barter economies. So, in that sense, it’s not new. What is a bit new about technology is that, usually reductions in transaction costs were bundled with an improved product, or a changed product, right?
So, a company would get better at that. But, now we have platforms that are essentially offering ways to just purely reduce transaction costs, and they don’t really care about what the transactions are. They just, are making that easier. So, when we think of something like eBay, they don’t care what you’re selling out there. They’re just making it easier for people to sell things to other people. There are challenges. I mean, one of the biggest challenges, is that our regulatory structure for the last 100 years or so, has really focused on full-time employment. I think this is something that Wingham addresses in his essay as well. That means these new options for earning income just don’t fit very well in the regulatory structure that we have. And that’s a barrier for people who enjoy the choices and the freedom that these new technologies bring.
Wingham Rowan: Neil, I’d say regulation is one way to approach this, but actually there’s a fantastic opportunity for policy to initiate here. So, the problem we have at the moment, is employment is fragmenting and it’s happening dramatically. So, in 2019, Gallup found 36% of Americans reliant on at least some gig work, probably going to be about 50% by now, that’s huge. And these people are absolutely dependent on markets. So, someone who was in a job, will typically enter the labor market every few years, when it’s time to move on. If you’re doing “gig work”, you can be in and out of the market several times a day in search of your next opportunity. And the way those markets you use, are constructed, who’s interested serve? That breadth, the depth, the data they share with you, the functionality they give you, the overheads they charge you. That’s what’s going to determine your life chances. And the markets that people are using online for gig work at the moment, are by objective standards, terrible.
They’re very good for the buyers. It’s super convenient to book an Uber with a tap on your phone, but what they’re doing to the workforce that delivers in those markets is shocking. And so, don’t think just in terms of regulation. Yes, you want to clamp down on the accesses of these markets, but there is actually scope for governments to say, “We want everyone now to have the best markets that are now possible, to achieve their economic potential. And if the private sector won’t do that, or can’t do that, then policy has to step in. That’s what I think is exciting here.
Neil Chilson: Yeah, I think that really it’s an interesting point. I think about the way that you talk about markets, I would just use the word platform, because all of these platforms operate in markets. And when we think about depending on markets, I think you’re using that word to mean job market, for a very discreet set of people. But, these are platforms and those platforms themselves, operate in markets and they compete for labor. And in this particular case, a lot of the labor, it doesn’t have to be particularly skilled in many cases. And so, what that means is you have a lot of different platforms who are competing for the same suppliers of labor and offering them different things. And to me, that suggests you have to identify some market failure across all of these platforms, rather than any particular problem with any one platform. That somehow, would justify government intervention. And given the breadth of them, and traditional ways that we would analyze market failures, pointing to bad outcomes for some actors in some spaces on some platforms, is not the way that we typically justify, or at least that I would justify government intervention.
Wingham Rowan: Okay. So, let’s get into that. Neil, I would absolutely challenge that these platforms compete for labor. The labor is easy, it’s really easy. If these platforms were seriously competing for labor, they would give work seekers tools to tell them, when they should work? What type of work they should be doing? They would become horizontal markets, allowing progression across all different types of work, to better paid earnings and so on. They don’t, they compete for buyers. That’s why platforms like Uber subsidize buyers when they enter a city, by up to 60%. Honestly, I mean, I’ve spent a lot of time working first at the British government and now for public agencies in California. I can tell you, the labor part is easy, so many people need extra hours of work. So, I would absolutely challenge your assumption, that there’s some great choice out there.
What you have is, and you’re right, there are thousands and thousands of platforms. But, Neil you mentioned money as being a great innovation in markets. You will know better than I do about the Wildcat banking era in American history. When government said, “Hey, we’re not going to issue currency. Lots of people can issue currency, give consumers a choice of currency.” And I think it amounted to something like 36,000 different currencies in America for about 30 years in the 19th century. Which sounds like great consumer choice, except a lot of those currencies weren’t backed by anything, they went bust very quickly. People didn’t know what currency to conduct a transaction in. And eventually the American government came in and said, “Actually, we’re going to have something called the State-backed dollar.
And that sparked innovation and stability, and all financial services and exchanges that just weren’t viable otherwise. So, what we’re saying at this end, is it’s time for a policy that we call Modern Markets For All. And that involves governments saying, “Markets have evolved so dramatically in the last couple of decades, or so. Have our people and our local businesses got the best possible markets in which to achieve their economic potential?” And when you treat markets… Let’s use your term Neil, let’s call them platforms. When you treat these platforms as the plumbing of capitalism, they fall way short of that standard.
Wells King: Neil, if you could maybe speak to the degree of flexibility in exchange perhaps, that the platforms allow and accommodate. I know in your essay, specifically that there really shouldn’t be a paternalistic hand here. Can you perhaps talk about how that is a better alternative.
Neil Chilson: I mean, what you’re saying is that they do compete for talent. It’s just that they don’t have to compete very hard, because there’s so much labor, right? What you’re saying is that people want to work on these platforms so much, that the platforms don’t have to offer a ton of benefits. That the benefits they do offer are enough to get people on the platforms. So, they do compete, it’s just that the supply is very large. I think you’re totally right, that two-sided platforms, they have to make a market to use your term, I’ll flip back there. They have to make us a successful platform. And to do that, they have to have both buyers and sellers and the buyers are the harder ones to convince here.
That’s why the platforms have to get them on board, because otherwise it just doesn’t work. And so, that’s why you see the investment on bringing buyers on, because they’re the skeptical ones. They’re the ones who are like “Really? Should I be staying in some random person’s house in a city I don’t know?” And so, that’s the hard side. And now, the history of money is complicated, but I will say that state-backed currencies have come and gone, they have their own problems as well. It wasn’t like the state-backed currency stopped the Great Depression. In fact, the ability of the government to shape that currency probably caused that. And even today, we have tons of currencies and I’m going to talk about cryptocurrency, right? We have airline miles, we have coupons, we have all ways that we exchange value and they compete with each other for how we exchange value.
So, I would say looking at currency, as a way to reduce transaction costs and they compete with each other too, just like gig economies do. So, to the idea around allowing people to negotiate, it’s really interesting. I think the platforms have a really wide range of the ways in which they allow negotiation. So, something like eBay, eBay does not set prices for me or anything, but Uber does set prices for the consumer. So, there’s lots of different ways that people can try to do this, things like TaskRabbit, you can set your own prices, I think they have some suggested prices. Things like OnlyFans, or more modern things like those.
Those are markets in which people can get very wealthy, if they offer something that people want. And those markets have downsides as well. But, saying that we have, one size fits all approach to markets and supplying it through a single government source, I think has the problem, both of trying to include to any different types of things in one place. And then, also, you’re basically putting the entire economy in the hands of regulators, which is a bit worrying, that the American dollar notwithstanding.
Wingham Rowan: Neil, you’re constructing a straw man. I’m with you, I think it’s great there’s this choice of currencies, and you can trade in air miles and so on. Why are you opposed to a choice in markets? So yes, we can trade in all currencies, but there is the choice of the government-backed dollar, if we choose to use it.
Neil Chilson: Mm-hmm (affirmative).
Wingham Rowan: And a lot of people do. Yeah, we might choose to negotiate in Bitcoin, not a problem. The dollar’s just a public utility. You don’t have to use it, but it’s there if you want it. So, why not allow people to have that choice in markets? Yeah, I could sell my time in Uber. I could trade my stuff in eBay. But, oh well the governments create this public utility market, they don’t run it, they don’t fund it. There’s a concession to private sector operators who do all that. But, yeah, maybe I’ll use that a bit. Maybe, I’ll try it, maybe I don’t like it. It’s just there as a choice.
And I really would pick a bone over your statement that people want to work through these platforms. I’ve spent a lot of time with these people in the fluid economy and they’re often deeply resourceful people who you want in the mainstream economy. I would say very few of them want to work through these platforms. They want to work at times that work for them. And you’re creating a false dichotomy, which the gig work companies have driven into the mainstream, which says, “If you’re going to have flexible work, it has to be through the gig work platforms.” What if you started from a different place and said, “Certain people need to work very flexibly. Why aren’t they entitled to some public infrastructure?” There are public alternatives to staffing agencies. They’re called America’s job centers. There are public alternatives to jump boards, they’re called things like Cal Flexi Jobs you taught there publicly commissioned. So why are you afraid of people having this choice of some sort of government-initiated platform? Yes. It could become terribly powerful, but only if a lot of people choose to use it.
Neil Chilson: Okay. Hey, framing it that way, as it’s just going to be one alternative in the many, many alternatives that people have. I have very little concern about that except the waste of money that I suspect it will be. The profit motive is very good at driving down transaction costs. That is the main reason that these markets work. With no profit motive it’s very hard to see how that system works particularly well.
And what you’re saying is people don’t want to work on these platforms, but it’s the alternative that they have. Right? And that you want to provide a superior alternative. I totally support that. That is a great idea. And in fact, there’s a lot of companies out there trying to do that, both in the sort of the sort of gig economy, but also run the higher skilled markets like Upwork. They’re trying to provide ways for people who are much more like you, I, and Wells, where we have very flexible schedules already, and we can kind of choose to do what we do when we want.
And I’ll tell you, this type of gig economy work is valuable. My mom works at Wegmans. Right? She was a cashier. Now she’s a personal shopper essentially, so that they can do curbside delivery. She loves that job. She thinks it’s way more interesting than working on the cashier. And it is driven by the lowering of transaction costs that don’t just help the gig economy, they’re also helping traditional businesses do things to compete with the services that like DoorDash that were external, but those companies are now trying to bring some of that innovation into the stores to help their customers meet demand.
And so I’m pretty optimistic about the ability of transaction cost to bring in both the buyer and the seller together in ways that are more efficient for both of them. There’s lots of transition issues. A bunch of them are, you mentioned fixing things through regulation. What I was saying, and my initial point was that a lot of our regulatory structures just don’t have a place for people who want to work flexibly. And so it’s not so much a matter of regulating those platforms more it’s that we have all these rules around full-time work and we have other rules around part-time work. And we don’t have anything for people who are working flexibly for lots of different bosses. And there’s a bunch of transaction costs that are from regulation that are there that are very concerning. Employment-based linked healthcare is probably the most prominent one in my mind, the tax breaks for that, which just prefer full-time employment over other types of more flexible works.
Wingham Rowan: Yeah. So I’m absolutely with you on the transaction cost. Should we just say that off the table, they really suck. And coming from a country with cradle-to-grave public health care, I’m no expert on your health system, but yeah, I gather it has its complexities. Why, Neil, do you assume anything that government initiated is going to be quite a waste of money?
Neil Chilson: I don’t. I just think that if the demand is out there for much better ways to connect users and suppliers of labor with sellers, that that is a giant profit opportunity. And I just don’t see why a private company wouldn’t seize that opportunity if it’s as bold and obvious as you claim that it is.
Wingham Rowan: So, would you accept that every so often a new technology comes along, but capitalism can’t deliver its potential. So the list is things like electricity road networks, rail canals, telephony, broadcasting, would you accept that, or we-
Neil Chilson: Those are all what we would call natural monopolies. They’re ones in which there’s the costs for doing the initial investment is so high that you cannot afford to compete. That’s clearly not the labor market. Like you just said, the competition is so high in the labor market that they don’t have to offer very much. And so this is not a natural monopoly situation that’s like those. I worked in telecomm for a long time, so I know those situations quite well. They have their own challenges as well, regulating there, but it is the strongest economic case for government intervention.
Wingham Rowan: Sure. So yes, markets, platforms become a natural monopoly if you want deep broad markets. So one of the problems that so-called gig workers face is the sheer siloed nature of these platforms. So I might be doing deliveries through DoorDash, and I’d like to do a bit of dog walking, so I go to Wag and I could do some childcare, so I go through sitter.com, but actually these are completely incompatible platforms. Actually, I have all sorts of other skills. I can do some gardening. I can drive a van. I’ve been trained how to work a switchboard. I’ve done pick and pack at a warehouse. So it’s very, very difficult to trade in more than two or three of these markets, these platforms at once, because the algorithms running platform A will punish you, if you’re off doing a booking for market B, when platform A needs you.
So I, as a seller of my time, have to start thinking, “Well, which sectors am I going to enter? I’ve got 20 skills. I’m just a normal quote, low skilled person, but actually I have diverse life experience.” So having chosen those sectors, I then have to decide, well, which platform am I going to go on to? So I want to sell at my time, do deliveries, do I go into Uber Eats Postmates, DoorDash there’s dozens of them. I don’t have any data telling me which has the biggest depth of market. I don’t have any sense of patterns of demand in my area. That’s the problem. And if you had a broad, deep market, like we have a broad, deep currency as one choice among many, then I could say, “Oh, well, I’ll ask this broad, deep market, which of my skills should I be selling? What times of day should I be selling them? And how is it going to construct my stepping stones to higher-paid skills?”
And that’s what we’re missing. And with respect Neil, I think you’re coming at this from seeing the gig work companies as a sort of natural service provider. And I’m coming at it, seeing a raging vacuum where there should be a robust public service type platform for the whole range of what regular people sell. And the gig work companies are just, they’re enterprising, they leapt in there, they’ve created these platforms, they’ve attracted the buyers, they tap the investors. It’s not Uber’s job to run a healthy labor market. It’s Uber’s job to maximize their return to investors, which they’re arguably doing okay on. It’s government’s job to ensure that there are healthy labor markets and a healthy economy. Governments have always done that. They’re just not doing it in the digital age because frankly, either A, they’re bit bovine in my view, and B, I think they’re just wowed by the sheer pace, aggressive approach and sophistication of the gig work companies that have rushed in and filled that gap.
Neil Chilson: You make a very persuasive statement. Let me respond to a couple of different ways. First, when you’re talking about people, having to sort of look at different platforms and choose which ones to go on again, you’re talking about competition between these platforms for labor. I just want to be clear about that. The challenge that you’re saying is that people have to sort out for themselves where they can get the most value from these platforms. If I understand your proposal properly, you want to move that choice, or at least support that choice by a government entity that would coordinate demand between these different types of work. Well, at least it would offer information so that they could move between these different types of work. I think that there is an opportunity right there, like I’m sure Uber and DoorDash would love to find a way to be able to say, “Hey, if you’re working on both of these platforms, we want to know and we want to figure out a way to offer you the best value for your time.”
Right? And if there’s a way that they could coordinate on that, I think there, there are opportunities there. But it’s a very hard problem because everybody is going to make those trade-offs differently. Each individual user is going to make those trade-offs differently. To the broad market I think I could see how that would be appealing from the supplier side. But again, buyers are really important. And when I want to find the delivery of something, I don’t want to go to a broad delivering of the Thai food that I love to get on Wednesday nights. I don’t want to go into a broad market. I want to go into the one market that supplies the thing that I do, that I need and that’s DoorDash. Right? Or maybe go Reed’s.
I don’t want to broad market. I want one that is identified that I can quickly identify with the need that I want. And so the breadth of market, I think, is a challenge on the buyer’s side. Even if it might look good to the supplier side. And I think both of those sides are essential for these types of platforms to work. And so saying we’re just going to have a broad one and then we’ll let buyers figure out how to use it, that’s a branding problem, I think that a broad market would have,
Wells King: Wingham, you’ve set up and helped design some of these sort of public option platforms. Can you just describe a little bit what they do, how they go about coordinating sellers and then what the implications are for buyers in terms of their shopping around, price structure, and so on?
Wingham Rowan: Yeah, my background is as a television journalist in Britain, as you can probably tell from the accent. And I was tapped to run a British government program to solve a particular problem around what we now call gig work, which is about 20% of adults cannot do a full-time job. They have medical problems, complex childcare needs, caregiving, studying, and with a flexible schedule and so on. So how do you bring those people into the legitimate labor market and give them progression and control and everything that we all want from our work? And that led to the insight, but government is uniquely able to initiate better markets.
So one of the reasons for that is government is itself a huge buyer in the labor market, particularly when you get down to the lower skilled kind of jobs, professions. So why should government flitter away the benefited houses of buyer by dispersing all that buying through temp agencies and all sorts of things, why doesn’t government say, “We want the maximum bang for our buck, with our buying power. We want a market that moves people along that gets them off public assistance that progresses them.” Neil, this honestly, isn’t about forcing Uber and DoorDash and Postmates to work with each other. You could try that. But you may have followed the battling California last year when they just tried to get these platforms to follow some basic law, giving the workers some basic rights and to $205 million spend by the gig companies later, they realized that wasn’t going to work. So, yeah. Good luck forcing these guys to collaborate because that’s not the business model. The point is not that government sets up some terrifying, huge platform that everyone has to use. Government says,
“Look, we have a set of outcomes we want around progression, employability, getting people into work, economic inclusion, economic efficiency, being able to support and target interventions to support people.” And that isn’t the business model of Uber and so on. And I’m just using Uber as shorthand for many thousands of platforms here. So we government is just going to provide that.
Now, if you’re going to do that on a small scale, as we’re doing it at the moment, which is we just tackle the gig work issue, government is going to have to pay for it ultimately. If government were to do it on a very big scale and say, “We just want markets for everything, which we government will give certain benefits to.” Then you create a concession. So government says, “We spend billions of dollars a year on low-skilled labor. We have access to all the databases of who’s licensed to do what we have all sorts of promotional channels. We’re going to focus all this on a new system of markets. We call it POEMS, public official E markets. It’s open to anyone it’s regulated, but we’re not going to fund it as government. We’re not going to run it. We’re not going to design it.” That’s a concession.
And private sector operators are going to do it. And they’re going to get a markup on each transaction they enable. And if they really grow the economy and huge amounts of activity goes through that platform, they’re going to make a lot of money. And we’re relaxed about that. So, Neil, yeah, I’m all for the profit motive. But this is… Sorry. I’m just going to make this point because I think we’re losing it. This is about government’s ability to create alternatives, not to knock heads from the current.
So I am going to bore you very quickly for 90 seconds with a bit of British history, which is in about the 1840s, the really red hot technology was pumping, moving liquid around and a bunch of startups as you’d expect, shot up around London, pumping river water to well-off households. They made quite a bit of money. The water was dirty. They could only pump at high tide. And then a bunch of people started saying, “Well, if government got involved, you could have coordinated reservoirs. And then you could pump clean water 24/7 to everyone.” A 1848 public health act made it happen. Every country in the world copied us. That’s what I’m talking about here. Now you could still carry on using the dirty little water companies if you wanted. If Neil wants to get his Thai food through DoorDash, not a problem, but an awful lot of people gravitate to the public option.
You don’t have to use the public electricity supply, go and buy your own generator. You can have whatever voltage, whatever ACDC option you want. But a lot of people just choose the public electricity supply because ultimately they don’t really care. And that’s the point about markets and platforms. I suggest an awful lot of people don’t really care what the platform is. They just want the Thai food brought to their door. And what you need is a broad, deep market that will enable that. And of course you allow people to rebadge it and rebrand it and add their own charges and all sorts of things. But it’s about that utility for the less well off that anyone can use as they want to pursue their economic aspirations. So I’m sorry, I went off on one a bit there. I’m sure you can edit it, but yeah, broadly we are doing this on a small scale, sort of like the British government. We’re not doing it with public agencies in California.
Neil Chilson: Yeah, I mean, again, I think what you’re arguing essentially is that everything is a natural monopoly. And I just think the economics just don’t back you up on that. And, again, the example of London pumping water, that, again, arguably a natural monopoly, one where infrastructure only needs to be built once and then it can supply the households. And so I just don’t think that metaphor works for the average type of things that we supply. If it did communism, would’ve worked very well. If essentially we can centralize everything and we just need the infrastructure, then we could have a type of socialism that basically would set up the infrastructure for all markets and then let people go and then keep a hand on that.
And I think that’s a bit challenging economically if you’re just going to blend together natural monopolies with the rest of markets. Having been a government employee in the US, I can tell you, there are many things about their labor system they can wildly improve, but they are not moving anywhere near in the direction of more flexibility and the ability to choose the times that you work. As far as gig, they still have a full-time employment model. They try to work around all of the very heavy restrictions on public employment. And when you can fire people and when you can’t.
By doing contracting, like you were saying, it’s a mess. It’s not a mess because they haven’t adapted to the gig economy. It’s a mess because they haven’t even adapted to the regular labor markets, frankly. So, I agree with you. There’s lots of that could be improved there as the federal government being a buyer of things. And they could offer that as a way to lead about how they think other purchasers should act as well, the buyers of labor. So maybe that’s a point of agreement.
Wingham Rowan: No, it’s not actually. I’m not with you about regulation. Can we just take regulation off the table? The regulatory regime in America is too 20th century for words.
Neil Chilson: Sure. Well, to your point about complexity being the exact areas where government is best suited to step in, having just written a book on Getting Out of Control: Enabling Emergent Leadership in a Complex World, I can’t disagree with you more. Complex areas, especially systems where information is distributed widely are the exact areas where centralized solutions are the least well suited to intervention. And so the decision-making, and one of the reasons that the gig economy is powerful is the reduction in transaction costs doesn’t design what transactions they’re doing. Right? And so the local knowledge between the buyer and the seller can flow. And it’s a matchmaker between the two of them, and they’re trying to identify the specific things they want, and then the platforms make that possible. So in a specific area, they’re connecting people.
But overall, when you’re looking at something as broad as the labor market overall, we’re talking about a system that is distributed, that is a market. That is the main reason why markets are superior to command and control systems is because they can take advantage of the local knowledge that the buyers and the sellers have that they might not even be able to express properly, except when they’re faced with an exchange. And so markets as a discovery process, markets as a way of generating information, and generating innovation are just resistant to efficient centralization. And so the areas where they’re most complex are the ones in which I feel like we need to look for decentralized solutions, much more so than centralized solutions.
Wingham Rowan: We’re already at an era of centralized solutions, Neil. I mean, if I want to sell stuff, I pretty much have to be on Amazon marketplace. If I want to earn money with my car, I really need to pay attention to Uber in most US cities now. So-
Neil Chilson: I can list five alternatives to both of those right now, just off the top of my head. So I just don’t think that’s true. I mean, you can do everything from classifieds in your newspaper to Craigslist, still exists to Etsy and for cars, you could be doing a Touro or Lyft, or there’s been some others in the past. There’s some new rental ones. So I don’t think that there’s… These are markets that where there are big players, but that doesn’t mean there’s no choices.
Wingham Rowan: No, and I’m not saying that. But I’m saying if I want to sell where the majority of buyers are, then my options do narrow. So I’m talking about people who aren’t particularly interested in these platforms in the way that most people aren’t interested in electricity and water and the money supply.
Wingham Rowan: Yeah, I’ll just use dollars and I’ll plug whatever I buy into the domestic electricity supply. I’m suggesting there’s a lot of people out there who don’t share our deep fascination with these emerging platforms, Neil. They just want to get stuff done. They just want to work. I would really say I disagree about government can’t handle complexity. Government has tools that allow other people to handle complexity. To take one example, if you’re going to have a market for truck drivers, who has the definitive database of who is currently licensed to drive a truck? Government. Why don’t you allow that database interface into markets that are delivering the best economic outcomes? As we’re in the plug portion of this podcast, Neil, I must pick up your book. I wrote a couple of books on all this saying pretty much exactly the opposite 25 years ago, which was probably a bit previous, but it’s all updated at modernmarketsforall.org.
Wells King: So one last question, before we wrap up. The process of digital is one where digital technologies essentially bypass or displace pre-existing norms, laws, and institutions that govern human behavior. I would just like to hear what is gained and what is lost in the labor market by the gig economy?
Neil Chilson: Sure. As I mention in my essay, the term disintermediation is probably better called partial disintermediation. Many of the people who are operating in the gig economy are not completely separated from all of the norms of employment. Some of the platforms offer lots of ways for them to get together and get some of the other benefits of traditional employment that we might talk about around friendship. When we talk about employment as an institution and all the norms that come along with it, there’s lots of substitutes for friendship at work. Sometimes it could just be your regular friends, like the ones who you don’t have to work with, or your family and things like that. I think the trade-offs there are flexibility comes with trade-offs. I think if, if anything, Covid tells us that the ability to work from home has some trade-offs.
It’s more flexible, but it has a bunch of trade-offs. I don’t want to pretend like there aren’t things that are beneficial about full-time employment with long-term contracts. There are, and people like them in many ways, but people also like flexibility that comes with some of these other platforms as well. To take a page out of Wingham’s book, I like choice. I like that people would have choices in those situations, and so I think that that’s what we gained from this, from this flexibility, is the ability to strengthen some of our other institutions.
Wingham talked about his great work helping the UK government identify ways that people who cannot work full-time, just cannot work full-time, maybe because of a disability or because they have family responsibilities, they might want to work in these types of jobs that are more flexible time-wise. When you survey gig workers, that is largely what they benefit from. I have a couple mentions in the essay about both primary caretakers, pointing to gig economy work as one of the great ways that they can earn money and still meet their responsibilities from home.
To Wingham’s point, jobs aren’t always awesome. That’s true, both in full employment, it’s true in gig employment, but people want to work and they want to make money and they also want to meet their other responsibilities. I think gig work gives more flexibility there. In addition, one of the other things I mentioned in the essay is some great research that has shown that the existence of gig economies can actually support entrepreneurship in other areas, startups in restaurants or other types of areas, because there’s a flexible market that you can fall back on very easily to earn some money to get you through gaps if you can’t make a run of it in your new endeavor, or if you just need to make some money on the side while you’re trying to pursue your entrepreneurial goals.
I think there’s a lot that we get from flexibility. The main thing from these types of arrangements, the main things are flexibility and the options to make lots of choices. Some of the things that we lose, I think we can substitute in other institutions, and there are things that I think many people would make that trade off, and I’ve seen that we have had people make that trade off, quite a few.
Wingham Rowan: Yeah, and I’d say undoubtedly a huge chunk of adults need to work flexibly, and if you allow them to do that, good things follow. People will take more risks. People can feed their families, and so on. But what follows from that is not, “Oh, thanks gig work companies,” but have they got the best market now possible in which to sell whatever assets, skills, services they want to provide? I would argue strongly they haven’t. Yes, the existing gig work platforms have eased transaction costs, but they have done it at the expense very often of controlling, commoditization, and cheapening the workforce to attract the buyers. That’s just fundamentally unfair. We’ve talked endlessly as if the gig work platforms that are household names, the Uber, the DoorDash, and so on, are the core issue here. Honestly, they’re just the tip of an iceberg. They’re virtually insignificant in labor market terms.
The real numbers of people working irregular hours are on platforms like Kronos, the workforce scheduling systems, and we just don’t know how they’re being configured. These are monopsony markets, one corporate buying the hours of potentially thousands of their employees. Your shadow economy in the US, I think the World Bank estimate now runs at about 10 to 12%, the size of GDP. It’s overwhelmingly made up of people doing odd hours of work. It’s very difficult to have a job in a shadow economy. There are huge numbers of people working irregularly.
The gig work companies make a lot of noise. They’ve got a lot of money, but don’t let them shape our perceptions of it. The real what’s lost with the technology-mediated drive towards more and more flexible work is the stability, because so many people who 10 years ago would have had a nine to five with benefits and some sort of progression pathway are now just scheduled aggressively by a workforce scheduling tool that calls them in and sends them home, often with less than 24 hours notice.
And that’s the loss, so we mustn’t confuse people who would have had a job with people who want to work flexibly. I’m not advocating for rollback to everyone having a nine to five, and that nirvana is ever possible. I’m saying, sorry, one more time, give everyone who is looking for gig work, whether out of choice or whether out of necessity, the best possible platform, because right now if your frame of reference is the household name, gig work companies, your understanding of what these modern market technologies could be doing for people is so distorted you really should go away and rethink.
Wells King: Well, I think this gives us a lot of things to rethink. Neil, Wingham. Thank you both so much, not only for this conversation, but for your essays and the really, really lively debate. I think it’s just the start.
Neil Chilson: Great. Thank you so much. It was great.
Wingham Rowan: Thanks, guys. Great to be with you.