Published in February 2021
Can digital labour platforms create fair competition and decent jobs?
Digital labour platforms are now a vital part of contemporary life—they allow us to arrange a ride, order food and access a host of other services online. They accomplish this by connecting clients or customers with workers who undertake these tasks or “gigs”. The past decade has seen the global rise of “gig workers” or “platform workers”, with platforms like Uber, Gojek, Deliveroo, Rappi, Upwork and Topcoder.
Digital labour platforms have created unprecedented opportunities for workers, businesses and society by unleashing innovation on a massive global scale. Yet at the same time, they pose serious threats to decent work and fair competition.
Explore this InfoStory to find out how digital labour platforms impact workers and enterprises around the world and why there is an urgent need for regulatory coherence for the platform economy.
Platform workers' stories
Listen to Sergio and Mercy sharing their experience and describing their challenges
Digital labour platforms: A new form of work and business
In recent years, digital technologies have radically transformed and penetrated different sectors of the economy, shaking the traditional foundations of labour markets to the core.
The information and communication technology revolution and the internet have set in motion a wave of new processes and products, spurring competition and productivity growth. This has led to the rise of digital labour platforms, a new way to organize work and business.
Since 2010, there has been a five-fold rise globally in the number of digital labour platforms that facilitate online work or directly engage workers to provide taxi and delivery services.
What makes digital labour platforms so different?
Platforms are agile and organize work in a fundamentally different way than traditional businesses. They connect businesses and clients to workers, and transform labour processes with major implications for the future of work.
What are the distinguishing features of the platform business model?
- Network effects
- Data is king
- Algorithmic management
- Asset-light
- Venture capital funding
- Pricing strategies
- Rules of platform governance
Network effects
Platforms’ success depends on the network effect: attracting a sufficient number of users from all sides (such as clients and workers) to facilitate activities and allow for growth.
Data is king
Creating value through collecting and monetizing data is probably the biggest shift of platform business. Platforms continuously mine data, transforming economic activity to a level beyond the capacity of traditional business.
Algorithmic management
Platforms use algorithms to match workers with clients and customers. Ratings, client or customer reviews, workers’ skill levels, cancellation or acceptance of work, are some of the key elements of this algorithmic matching. Algorithms also monitor, track and evaluate workers, and thereby organize their work processes.
Asset-light
Platforms tend to invest little in capital assets, factories, warehouses or employees. Instead, they invest in cloud infrastructure and depend on the skills, ideas and physical assets of their users (clients and workers). This allows for rapid expansion in a cost-effective manner.
Venture capital funding
Platforms are financed largely by venture capital funds. For example, taxi platforms use venture capital to provide generous subsidies and bonuses to attract users when entering new markets. This allows them to expand quickly, but once they have a sufficient pool of users, they reduce subsidies and may even increase commissions charged to drivers.
Venture capital funds also enable platforms to operate at a loss for very long periods. Uber has raised US$25.2 billion since 2009 from 28 funding rounds of venture capital and expanded its services in 69 countries, but has yet to register any profits.
Pricing strategies
Platforms use different ways (such as multiple types of fees and subscriptions) to attract and increase users and to enhance network effects. Bonuses, surge pricing, rewards and potential benefits (including profile visibility and priority access to projects) are also key to the business model.
Fees to workers also contribute significantly to platforms’ revenue. In 2019, Upwork earned 62% of its US$ 300 million revenue from various fees to workers, compared to 38% from clients. However, this practice can be contrary to international labour standards, which prohibit agencies, employers and intermediaries from charging such fees.
Rules of platform governance
Workers, clients and businesses have to accept the platform’s terms of service agreements to access the platform. These agreements tend to be unilaterally determined by the platform, and cover aspects such as exclusivity clauses, acceptance/rejection of work, deactivation of accounts, dispute resolution and data usage. This enables platforms to exercise considerable control over workers’ freedom to work and can shape clients’ and businesses’ ability to engage with workers.
What does this mean for traditional businesses?
The rise of digital labour platforms has created both opportunities and challenges for traditional businesses. The ILO conducted interviews with representatives of 85 businesses across varied sectors, which provide insights into how digital labour platforms are changing and challenging traditional businesses.
Opportunities
Platforms offer traditional businesses new ways to outsource a variety of tasks, services and retail activities, which improves their organizational performance. Businesses use online web-based platforms for three broad purposes: recruitment, reducing costs and improving efficiency, and accessing knowledge for innovation.
Platforms also help start-ups grow, and allow some enterprises to reorient their businesses and access wider markets.
Challenges
Platforms also pose major threats to traditional businesses. Many platform strategies make it very challenging for other enterprises – in particular small and medium-sized enterprises (SMEs) – to compete. These include the use of data and algorithms to determine pricing, predict demand and supply, target consumer preferences and provide low or zero cost services.
The advantages platforms enjoy can lead to unfair competition, a problem compounded by the lack of proper regulatory frameworks. Regulation is necessary to ensure a level playing field, where same rules apply to both traditional and platform businesses, especially with regard to social security, working conditions and dispute resolution.
A digitized workforce: Who are the gig workers?
Platforms engage two types of workers: the core workforce, directly hired by the platform, and workers whose work is mediated through these platforms and carried out as a “gig”.
Drawing on surveys conducted with 12,000 respondents, the ILO has compiled a first major comprehensive picture of workers on digital labour platforms in multiple sectors and countries.
Our research shows that they are typically below age 35, male and reside in urban or suburban areas. Over 60% on online web-based platforms are highly educated. Contrary to expectations, so are over 20% of app-based taxi drivers and delivery workers. This may reflect employment contexts, such as a lack of local employment opportunities that correspond to workers’ skill levels.
Is platform work the main source of income?
Platform work is the main source of income for most workers in app-based taxi (84%) and app-based delivery (90%) services, and for about one third of workers on online web-based platforms.
Is there enough work for everyone?
Most workers on online web-based platforms (86%) and delivery platforms (69%) expressed the desire to do more work. However, they are unable to get extra gigs because of excess labour supply and scarcity of tasks. In addition, many workers, especially those from developing countries, are excluded from accessing work and well-paid jobs due to restrictions imposed by the platform or client. This has serious negative impacts on workers’ autonomy, access to work and pay.
Platform workers: Liberated and empowered, or limited by circumstance?
Flexible work schedules, freedom to choose tasks, and the choice to work anytime anywhere make platforms popular. Workers also join platforms to earn additional income or due to the lack of other employment opportunities.
However, platform work presents challenging working conditions. These include low earnings and income volatility, unfair termination of workers’ accounts, limited access to work and social protection, and barriers to multi-homing (connecting to more than one platform).
In practice, algorithmic management shapes work processes and performance in ways that limit platform workers’ autonomy. To make a decent living, they end up working long hours, which has an impact on work–life balance and can lead to stress.
COVID-19 has highlighted the risks for platform workers
Weak social protection coverage has clearly imperiled platform workers during the COVID-19 pandemic. Entirely dependent on task-based work, many cannot afford to self-quarantine without paid sick leave and sickness benefits. Seven out of 10 cannot receive compensation or take paid sick leave if they test positive, posing risks both to themselves and others.
Of the 348 app-based and traditional taxi and delivery workers we surveyed in August 2020 in Chile, India, Kenya and Mexico, 32% worked throughout the crisis because of economic necessity, despite grave concerns of contracting COVID-19 in their work.
The crisis has slashed the incomes of 9 out of 10 taxi drivers, and 7 out of 10 delivery workers in the countries we surveyed, therefore aggravating the already grim situation of platform workers during COVID-19.
The regulatory puzzle
Platforms draft their terms of service agreements unilaterally. These terms are largely unrestricted by labour protection legislation and may entirely bypass processes of social dialogue, with platforms determining all working conditions for workers.
According to ILO Conventions and Recommendations, every worker has universal labour rights. But how can these rights be guaranteed to gig workers?
Regulating digital labour platforms is complex and involves labour law and other laws and policies relevant to decent work. Challenges include applying universal labour rights such as social protection and collective bargaining to platform workers, ensuring fair competition, fair data use, improved data protection and algorithmic accountability, and reforming taxation systems.
Seizing the opportunity
Solutions, including new forms of regulation, are in fact cropping up around the world: a collective bargaining agreement that allows cleaning workers to be recognized as employees in Denmark, a judicial decision extending safety and health legal standards to platform workers in Brazil, and the “right to disconnect” and to obtain a “decent price” for gig work in France. However, these positive solutions are dispersed and not the norm.
Given that platforms also operate across multiple jurisdictions, international policy dialogue and coordination is essential.
Social dialogue between platforms, governments, platform workers and their representatives is likewise vital to ensure that the digital economy becomes a powerful driver for fair competition and decent work for all.
