The COVID-19 pandemic has accelerated changes that were already under way, both in society and at work. These include the expanded use of digital platforms and related technological innovations like cloud computing and the use of big data and algorithms. The result has been innovative ways of working, and flexibility for both workers and businesses.
The remote working arrangements adopted by many during the past year have brought a rise in e-commerce, e-services and online freelance work. The flagship report by the International Labour Organisation (ILO) states that “for many who lost their jobs, in both developing and developed countries, digital labour platforms have offered opportunities to earn some income.” Many businesses have relied on digital labour platforms to keep operating, reach new markets and reduce costs.
Two types of digital labour platforms
Currently, there are two main types of digital labour platform: online web-based platforms, where tasks are performed online and remotely by workers; and location-based platforms, where tasks are performed at a specified physical location by individuals. Online web-based platforms include microtask, freelance, contest-based, competitive programming and medical consultation platforms, while location-based platforms include those offering taxi, delivery, domestic, care and home services.
Online web-based platforms are also gaining popularity among businesses. Many freelance and competitive programming platforms, such as Upwork though less well-known have been operating for over two decades. Online web-based labour platforms offer varied services to both individual customers and business clients. For instance, freelance and contest-based platforms enable workers to connect with clients for specific tasks ranging from translation to graphic design, while medical consultation platforms allow individuals to access medical advice from doctors online.
Replacing traditional transactions
Through the use of technology, location-based platforms mediate various services, such as taxi and delivery services, which often continue to operate in parallel with traditional labour markets. Other such mediated services include domestic, care and home services such as Urbanclap, with individual workers providing labour services at the homes of individual customers. Digital labour platforms are enabling the reorganization of activities that have conventionally relied on traditional employment relationships into work performed by independent contractors or the self-employed.
A number of digital labour platforms compete with businesses in traditional sectors, relying on data and competitive pricing. Location-based platforms, such as taxi platforms Uber and Ola, have disrupted established transportation business models by harnessing data and algorithms to match passengers with drivers in real time. Similarly, freelance platforms, such as Freelancer are competing with traditional employment agencies by matching tasks with workers for businesses at a lower cost and without the need to abide by the protections associated with an employment relationship.
The ILO report observes that digital platforms have been able to build on some of the distinct features of the digital economy, and have penetrated diverse sectors of the economy. In addition, increasing reliance on ICTs, from smartphones to computers, has created multiple opportunities for platform businesses to emerge and thrive. Moreover, the nature and organization of the digital economy has further facilitated the rapid rise of platform businesses. For instance, the availability of cloud infrastructure services at reduced costs, along with the availability of venture capital funding, has reduced entry barriers and enabled the rapid growth of digital platforms over the past decade.
All in the cloud
Cloud infrastructure has facilitated the growth of digital platforms in many countries and regions, as it makes them asset light. Investment by platforms in traditional capital assets, such as cars, hotels or warehouses, is often minimal; platforms tend to invest instead in digital infrastructure and are overwhelmingly dependent on data, skills, ideas and physical assets provided by their users. For example, Uber does not heavily invest in cars, but it has been able to expand and scale in 69 countries at an unprecedented pace (within 11 years of its creation). Furthermore, cloud infrastructure services allow platform businesses to be virtual and mobile as they operate with intangibles, and their users (clients and workers) can be based anywhere in the world.
Concentration of power and wealth
Cloud services and computing providers tend to be concentrated among a few large multinational enterprises such as Alibaba, Alphabet (includes Google), Amazon, Apple, Facebook, Microsoft. While some of these companies also manufacture products, they are predominantly platform businesses which are able to employ some of the distinct features of the digital economy to create new and extremely efficient ways of facilitating the interaction of large numbers of users, applications and businesses or service providers. They are geographically concentrated in just two countries, China and the United States.
The concentration of wealth among a few platform companies may in some instances allow them not only to coordinate, steer and manage innovation and development, but also to shape infrastructure development in the digital economy. Their dominant position allows them to determine the boundaries governing the digital economy and who should participate in it. They use various mechanisms, such as licensing of their intellectual property rights, and technical frameworks, to provide access to cloud services.
They also regulate access to the use of platform infrastructure by determining whether they will be more “open” or “closed”. The concentration of power among platform companies raises challenges for countries as they shape their economies, particularly when governments and businesses are seeking to establish secure and decent employment for their workers, a situation which primarily affects developing countries. For example, online microtask platforms such as AMT outsource data-processing, clerical and low-end tasks, which are used for training AI, to workers dispersed around the world. Consequently, while these platforms create opportunities to earn an income, the quality of the work created raises some important considerations. The question of quality of work arises not only in terms of remuneration, regularity of work and social protection, but also in terms of the content of the work, as such tasks can be repetitive, low end and mind-numbing, and they are often performed by highly educated workers. As a large proportion of workers in developing countries continue to work in the informal economy, this development trajectory of the digital economy might push highly educated and skilled workers in these countries to pursue work under precarious or informal working conditions and uncertain work arrangements, and therefore requires careful policy considerations.