Digital Economy, Digital Labour

Early regulatory reforms can benefit developing countries in the digital economy

Over the last few years, the use of digital technologies has grown rapidly. The Internet has played a key role in driving this digital growth. However, whilst these new developments have created many advantages and brought varying degrees of development and ‘inclusivity’ in developing economies, issues of governance and policy are growing almost simultaneously with every new innovation and development in digital technologies. While a clear majority of these are issues of infrastructure (technical), online security and privacy (ethical), there are also other emerging aspects which require immediate policy reviews.

Take for example bike-sharing platforms. Cities in the UK have recently seen a splurge of hi-tech rental bikes on its streets. These ‘dockless’ hire systems allow users to pick up and leave the bike anywhere for just £1 an hour, locking and unlocking them with a simple smartphone app. The flexibility of use of these station-less smart bikes (unlike the Transport for London’s Boris/Santander bikes that need docking at specific docking stations) has popularised use of oBike (a Singapore start-up) and moBike (a Chinese start-up).

While this new pollution-free, high-tech bike-sharing transport system has provided many, especially those without the potential of owning a personal bike, an opportunity to travel around the city quickly and at minimal costs, this newly introduced digital economy business model has raised new regulatory issues.

The bikes are not quite as nature-friendly when they are left at any nook and corner.  In London, the masses of bikes created a huge hindrance for pedestrians, wheelchair users and those with buggies, as they began cluttering the streets and blocking paths. In Manchester, newly launched Mobikes were reported being sabotaged, stolen or dumped in canals and bins.

Such outcomes highlight emerging tensions for policymakers as they seek to encourage innovation and business start-ups, and promote sustainability.

The above refers to incidences in a developed country with supposedly advanced transport systems and planning regulations. If the same approach were to be applied in developing economies, leaving these dockless bikes lying around in the streets that are already overwhelmed with traffic, vendors and pedestrians can lead to even more drastic consequences, not ruling out the added possibility of these bikes being pilfered. Already, in China, where this business model was initially carried out, piles of these hire bikes were found dumped on the streets of Shenzhen. While the idea of introducing these bikes in China was for a sustainable cause – to help lower congestion and air pollution – it led to further unnecessary congestion and pile-ups.

Other parallels can be drawn with similar business models and platform companies, such as the food delivery courier Deliveroo, the car-hailing platform Uber, and the home-sharing app, Airbnb, where governance is a growing issue.

The recent legal actions against Deliveroo and Uber highlight the issues around  self-employed contractors without access to benefits such as sick pay, paid holiday, pensions, and protection afforded by the minimum wage.

Deliveroo claimed that the current law does not cater to the flexible working system where the company pays its workers by the job and not by the hour, and even called for a change in UK law to be able to give its workers more rights. Uber too maintained that its drivers are self-employed contractors rather than permanent employees and are not entitled to such benefits.

Despite these persistent claims, Deliveroo was forced to remove a controversial clause in its agreement which restricted couriers’ ability to challenge their self-employed status at an employment tribunal and work for other companies. Deliveroo was also made to remove a clause that obliged riders to give two weeks’ notice to terminate their agreement with Deliveroo. Uber on the other hand lost a court case when the employment tribunal ruled in favour of cab drivers and ordered Uber to pay drivers national living wage and holiday pay (though Uber is appealing the decision).

In a similar incident in 2012, an MTurk[1] worker filed an employment lawsuit in California against CrowdFlower, an intermediary firm between the MTurk platform and several end-clients. The microworkers claimed they were misclassified as independent contractors and paid less than the legal minimum wage. The suit obtained class action status and was settled in 2014 for $585,000 in favour of MTurk workers who had done more than a minimal amount of work for CrowdFlower.

While the above cases show a positive outcome to cases against gig economy operators in developed economies, where ministers can order a crackdown on these firms, such sophisticated and organised systems are often absent or lacking in developing economies with similar problems. Lawsuits can be highly unaffordable for those in developing countries, not forgetting that these gig economy workers may also be illiterate (e.g. cab drivers, courier personnel etc.) and unaware of their legal rights. Corruption within the legal system may also hinder gig workers in these economies from filing cases, where companies are powerful and able sometimes to bribe their way out of such sticky situations. These drawbacks open the door for greater exploitation of workers within developing economies.

Laws need updating to cater to the new business models of the digital economy. However, with innovation moving faster than regulation being brought in, legislation is rarely achieved quickly. What little legislation exists only serves narrow interests and provides minimal protection for workers and users. So what are the implications for developing countries? And how can developed economies lead the process for change to benefit developing countries?

For one, developed economies are leaders in setting standards and perhaps need to do more in terms of ensuring that these high standards are met not only within its own jurisdictions but also across borders where such international companies operate. Governments in developing economies also need to be more proactive in understanding and regulating new models of work as well as working with platform firms to curtail exploitation. The weak labour laws and governance in developing countries can sometimes be an attraction for companies in the West keen to penetrate markets in developing countries. This often leaves workers in developing economies open to exploitation and at a severe disadvantage as their governments are more interested in attracting new business investments and businesses in gaining entry to new markets. It is common knowledge that online microworkers in developing economies are paid less than their counterparts in developed economies for the same work. It highlights the need to reform existing regulatory frameworks.

Further, with relatively weak institutions and capacity for implementing policy in developing countries, the issues can be even more detrimental. Shocking stories of rapes by Uber and Ola cab drivers have been a regular headline in the news in India, and growing. This resulted in a temporary ban on these services in New Delhi, as it was discovered that Uber had not carried out proper verification checks on drivers. But little has been done in terms of legislation to avoid these incidents in future. Such negative occurrences can be a hindrance to the growth of the digital economy in developing economies that can otherwise benefit from the use of digital technologies.

It is also well-known that there is a massive digital divide between developed and developing countries, urban and rural regions, when it comes to anything digital. Within developing economies, rural areas and women and girls are often found to be excluded from participation in the digital economy due to various infrastructural and cultural issues.  Thus, new business and employment models are not quite accessible to these women or to those at the bottom of the pyramid who live below the poverty line and struggle to buy a meal a day, let alone have the income to pay for bike hire. There is a danger that such business models, while bringing new benefits, can also create a wider divide among urban-and-rural regions, and consequently between developed-and-developing economies.

As new business models of the digital economy make their way to the Global South, the importance of developing sound digital economy policies in developing/emerging countries must be emphasised. Emerging/developing markets are the engines of global growth and generate some of the most attractive investment opportunities globally. The IMF have projected that emerging/developing economies will grow by 4.5% in 2017, versus just 2% in developed economies. If governments in such emerging and developing economies want to entice and sustain foreign investors and innovators, they would need to focus on serious legislative strategies early on, that would not only benefit businesses but also citizens. While developing countries can ‘learn’ from some of the experiences of developed countries, they would still need to design policies that meet their own needs and which fit their local setting. For instance, policies in developing countries need greater focus on regional and gender inclusivity and other technical and social issues to reduce inequality and enable participation of the underprivileged in the digital economy. Regulatory reforms are also needed that ensure platform operators’ responsibility when it comes to protection of users against exploitation and hazards.

It is evident that the challenges of regulation exist not only within developed economies but also in developing economies, when it comes to digital platforms. New legislation needs to be put in place as developments in digital technologies grow. While one may insist that it’s “a grey area”, reform in existing regulatory frameworks is paramount and urgent, especially in developing countries with weak institutional settings, inadequate education systems and large pools of labour. It will ensure that such aspects as the sharing/gig economy will serve as an opportunity rather than be used as a tool for exploitation.

[1] MTurk or Mechanical Turk: The oldest and most well-known microwork platform owned by Amazon

Digital Labour

Harnessing the Digital Revolution for Inclusive Prosperity

I had the pleasure of attending the Digital Development Summit 2017 on 13 March 2017 where digital interest groups from around the world gathered together to discuss the future of work in the digital economy. Hosted by the Institute of Development Studies (IDS) in collaboration with the World Wide Web Foundation and Nesta in London, the Summit featured thought leaders from think tanks, government, the private sector and academia, and offered new perspectives, actionable takeaways, and access to a phenomenal and diverse network of like-minded digital evangelists.

The overall theme of the Summit was based around the future of work in a digitised world where advances in digital technologies threaten to disrupt labour markets around the world. Some of the big questions deliberated at the Summit were – What would be the impact of technology in the next 10-15 years? And how could we ensure that no one was left behind in the digital economy?

 It is believed that the huge technological change brought about by the digital revolution could spawn mass unemployment especially in developing countries. It is difficult to comprehend that 2/3 of jobs may be under threat due to automation in developing countries and likely to be more disruptive than in the developed world. Interestingly, though there is huge emphasis on Decent Work and Economic Growth in the newly established UN Sustainable Development Goals (SDGs), there is no mention of digital technologies in work-related outcomes.

New technologies are bringing opportunities and challenges to working lives in the global South. However, significant and urgent changes are needed to prepare for the impacts, whether intended or unintended, brought about by automation and digitisation. A key discussion that struck me at the Summit was the dilemma of automation and artificial intelligence and its consequences.  As Ben Ramalingam of IDS put it, it could lead to people being accountable to “robo bosses”.  Duncan Green from Oxfam also pointed out that AI will enable lots of consumers but no human producers.

Yet, with innovations moving at a faster pace than regulation, and policies being put into place, how well-prepared are developing countries – envisaged to receive the greatest impacts from these new technological developments – to cope with these future impacts?

The Summit allowed for deeper discussions on these aspects by incorporating a few practical and interactive exercises using grids and the World Café method that allowed all delegates to engage in discussions on the future of work in developing countries. Using real-life examples from research carried out in emerging economies the first exercise explored how different jobs fare within the digital economy, keeping in mind the adaptive capacity (high or low) and exposure (high or low) to digital technologies by each individual. Using a four quadrant grid, this exercise helped elevate thinking into the current scenario of workers, whether they are in full-time jobs, entrepreneurs or freelancing in the gig economy. It opened up conversations on the complexity of issues related to the impact of digitisation on individual working lives.

Exercise 2 (World Café) then led to deeper thinking on the actions that would be required by different stakeholders to help build prosperity and resilience in the face of the digital economy. This interactive discussion resulted in an interesting and extensive input of ideas and perspectives through several conversational rounds from delegates from diverse backgrounds – from transnational interactions and conversations required by developed and developing countries’ governments to establishing universal minimum wages, bringing in new standards and regulations and training for those with low digital capacity and low exposure, among others, being proposed. Of course, it was noted that different countries have different priorities and needs, which need to be considered as well.

Such on-going multi-stakeholder gatherings bring out diverse discussions and help shape the futures of vulnerable people in developing (and developed) economies through conversations that matter. Of course most at the Summit had a very optimistic view (including myself) about the future of the digital economy but as we all left the Summit it was evident that there was much to be done in terms of securing the future of work in developing countries and an ingrained understanding that there is a need for all stakeholders … including and not limited to – the government,  private sector, academics, unions, think tanks, NGOs, etc… to put people at the forefront and to work together to ensure decent work for all.