Blog

Digital Labour

The changing strategies by digital labour platforms and its impact on freelancers in the Global South

Niels Beerepoot

Policy makers in the Global South have discovered digital labour platforms (e.g. Upwork, Freelancer) as a potential source for employment. In his blog-post of June 28, Brian Nicholson mentioned initiatives in Pakistan and Nigeria that train young people for online work. In the Philippines, the Department of Information and Communications Technology (DICT) organises so-called ‘rural impact sourcing’ workshops around the country. Despite using the term impact sourcing, these events have no connection with the original conceptualisation of impact sourcing which highlights how social enterprises hire and train marginalized individuals for digital work. These events are often sponsored by the country’s main internet providers and aim to make participants interested in becoming ‘Online Filipino Workers’ (as paraphrase of the well-known term Overseas Filipino Worker). Apparently, for policy makers in the Global South, the digital labour market is seen as an infinite source of employment that should be tapped rather than restricted or regulated. Such workshops also still present digital labour platforms as ‘global labour auctions’ in which everyone can participate regardless of his/her location as long as there is digital connectivity (for which an internet provider that you can sign up with is right at hand).

In reality, digital labour platforms (like in this case of Upwork) no longer function as a labour auction. In the past few years a number of measures have been taken by Upwork through which it increasingly benefits and favours a small number of successful, high-earning freelancers. The ease of entry for freelancers had created a situation in which even for jobs with limited remuneration dozens or even hundreds of freelancers would apply. With the platform still retaining a fixed percentage of the agreed remuneration as its fee, the so caused downward pressure on price formation also ate into Upwork’s revenues. Obviously, from a business perspective, it is not in Upwork’s interest to have too many freelancers competing on the platform, causing a downward pressure on price formation and the gains from the work performed to be spread too thinly. The introduction of a $3 per hour minimum wage in 2014 had been a first step attempt at ‘price support’ and additional value capture by Upwork. However, in practice it led to more projects being offered for a (low) fixed amount instead of for an hourly compensation. Therefore, Upwork needed a more drastic shake-up of its business model in order to generate more revenues for its investors.

Upwork’s transformation of recent years is best summarized as a change from labour facilitator to labour arbitrator (see Govil and Patnaik, 2014). The platform now no longer only provides a meeting place for the supply and demand of online labour but is directly involved in the recruitment of freelancers for clients and also handles pay-rolling (through Upwork Payroll). In 2016, it introduced Upwork Pro and Upwork Enterprise. In Upwork Pro clients receive help with drafting the project requirements and Upwork selects and shortlists premium freelancers for the job. Upwork Enterprise is aimed at larger organizations and involves the full-scale management of freelancers by Upwork. Upwork’s commission is no longer a flat 10 per cent, but varies with the size of the project to incentivize higher-value, longer-term projects. The main change for freelancers is that they can ‘buy’ their visibility in the search machine by taking a paid membership of $10 per month, which obviously benefits the financially stronger freelancers. An additional measure is the ‘job success rate’ of freelancers, an algorithmic score that apart from the ‘old’ job performance rating also includes such factors as whether the freelancer has won repeat and larger contracts, and experienced disputes with clients. It clearly favours freelancers who have managed to land longer term collaborations with single clients over those who tend to earn from multiple small gigs (which is more common among freelancers working part time).

Successful freelancers are now invited to join a talent pool which connects them to larger client projects. A catch is that those who accept, are required to be available for Upwork only (committing at least 30 hours per week). On the other side (and seemingly inspired by Taylorist management principles), Upwork has started to suspend accounts of freelancers who lack distinctive skills or who are not generating enough revenues. New freelancers (particularly those with ubiquitous skills) are also no longer automatically accepted on the platform. This means that Upwork now more actively intervenes in the pool of labour it offers to clients, making freelancers vulnerable to sudden policy changes by the platform. Once freelancers work via the platform, Upwork expects their loyalty and exclusive, full-time availability. However, Upwork does not offer any kind of social protection in return. Upwork tries to control (and discipline) its labour pool through negative measures (such as the fear of terminating the profile or reduce the visibility in the search machine). Here you can wonder how well aware they are of the everyday lives and responsibilities of their freelancers in the Global South.

This blog showed the contradiction between Southern policy makers who (still) view digital labour platforms as an infinite source for employment, and the platform which is tightening the grip on its pool of freelancers and which makes it increasingly hard for new entrants to join. Recent measures by the platform work against freelancers from the Global South, particularly the many of them working in the low-skill segment of the digital labour platform. By providing more services and introducing more rules, platforms like Upwork increase their influence on how freelance labour is globally traded and, in the process, try capturing a larger share of the value that they help to create. Upwork’s evolution from a discrete facilitator towards an ever more manifest, some may say obtrusive arbitrator, shows that in fact a new intermediary, equipped with new measures for disciplining labour, has been born. Not only does this require new legislation, it also requires a debate with platform owners with regard to their responsibilities towards their community of workers.

Govil, A. and S. Patnaik (2014). The Future of BPO: How Human Cloud and Infrastructure Cloud are changing the Game. Los Angeles: Avasant Research http://avasant.com/insights/digital/the-future-of-bpo-how-human-cloud-and-infrastructure-cloud-are-changing-the-game/

Digital Economy, Digital Labour

Early regulatory reforms can benefit developing countries in the digital economy

RumanaB

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 Economy, Digital Enterprise, DIODE General

Open data platforms and development in Latin America

Carla Bonina

There is increasing excitement about the developmental effects that data released in open format could bring to the global south. The so called open data—data released in digital format, publicly available for anyone to use—promise to contribute to key development goals, such as economic growth, job creation, inclusion and access to public services. To illustrate the economic potential, McKinsey estimated in 2013 that the economic value of open data could reach between $1 and $3 trillion per year. Although these figures remain highly speculative, the rationale is that by using or re-using open data, new products and business can be created, innovation can be spurred, and productive processes can be optimised to achieve gains in productivity. That includes governments and public organisations. Open data can help improving the delivery and quality of public services and can contribute to the efficiency of internal operations. Equally important, open data is seen as central means to increase transparency, fight corruption, as well as promote inclusion and civic participation. The latter has been particularly acknowledged in the commitments that governments endorse when joining the global Open Government Partnership.

Open data in Latin America

As a region, Latin America has moved comparatively quickly in embracing open data initiatives. Mexico, Uruguay and Brazil lead the table among the developing world and are amongst the top 18 best performing countries in the 2016 Open Data Barometer, a global ranking led by the World Wide Web Foundation that ranks countries according to the publication and readiness of key government datasets and evidence of its impact. In addition, the region has now five countries within the top 20 of the 2017 Open Data Index—a survey coordinated by the Open Knowledge Foundation that measures the state of open government data around the world.

The commercial, for profit approach of open data has yet to take off in Latin America. More often, what is found in the region is a growing open data ecosystem that is moving forward an agenda of accountability, innovation and participation. The region holds its own Open Data Conference (AbreLatam/ConDatos) annually since 2013. The annual meet up has strengthened regional communities that use open data to offer tangible solutions in areas of public health, government transparency, transportation and urban planning. A self-reported survey gathered in Abrelatam reveals 196 projects from 135 organisations in these areas.

The ecosystem in Latin America means that different actors have contributed to unlock the value of open data in the region. Governments are important ones—they build open data platforms that form the supply side of the data value chain. But the realisation of the value of these platforms lie on the applications and services that are built on top of the data. The city of Buenos Aires, for example, used hackathons and apps competitions to engage developers and start-ups to co-create new services. In Montevideo, the municipality partnered with the civil society organisation DATA to run a platform called Por Mi Barrio, developed based on the UK’s FixMyStreet initiative. Por Mi Barrio helps people to report street problems like broken street lights or potholes and link it to the municipality to fix them. NGOs and local activist are, thus, another crucial actor in the ecosystem. Ciudadano Inteligente in Chile and SocialTIC in Mexico, both promote transparency, inclusion and citizen participation through open data and the use of new informational technologies. Journalists also contribute to open up government data for accountability purposes. Argentine newspaper La Nación and its data division LNData won the Data Journalism Award for their work on opening up unstructured, closed and opaque data from Argentina’s Senate expenses in times of no freedom of information laws and controversies surrounding media access to government information. In Peru, the organization Convoca opened up public data to help users understand the behaviour of extractive industries in Peru and its impact on people’s lives. The project, called Excesos sin Castigo (“Excesses Unpunished”) won the Data Journalism Award in 2016.

Research into open data platforms and their ecosystem

Despite the anecdotal evidence, the mechanisms through which open data can scale and harness developmental goals have not yet been clearly established. My current programme of research examines how open government data fosters innovation and enables economic and social development in Latin America. One of my ongoing projects, jointly with my colleague Ben Eaton, studies empirically how engagement with open government data platforms unfolds in Buenos Aires, Mexico City and Montevideo. In specific terms, we ask how the installed base (the actors in the ecosystem) is mobilised in open data platforms. Drawing from literature on digital platforms, we aim to understand the context, formation, grow and functioning of the installed base, and to offer insights on the ways actors interact to use and generate value from these platforms. The results of this work will be ready in 2018, so watch this space for research insights and policy implications.

Digital Economy

Defining, Conceptualising and Measuring the Digital Economy

Richard Heeks

It is generally understood that the digital economy in developing countries is growing, and growing fast.  But what is the digital economy, and how large is it?

A newly-released working paper from the University of Manchester’s Centre for Development Informatics – “Defining, Conceptualising and Measuring the Digital Economy” – addresses this question.  It was developed as part of the DIODE strategic network, which is funded by the UK’s Economic and Social Research Council as part of the Global Challenges Research Fund initiative.

“Digital economy” is typically dated back to Don Tapscott’s 1996 book of the same name.  It has been in fairly continuous use since, with a particular growth in interest in the past two-three years linked to resurgence of “digital” as a terminology.

Looking across the definitions, one can identify three scopes of definition as summarised in the figure below:

  • The core of the digital economy is the “digital sector”: more often called the “IT sector” or “ICT sector”, and based on the OECD definition of specific ICT-related manufacturing and services sub-sectors.
  • The “digital economy” as we define it is “that part of economic output derived solely or primarily from digital technologies with a business model based on digital goods or services”. It means the digital sector plus ICT-enabled business that extends the boundaries of economic activity.  The latter covers new digital business models such as platform-based firms.
  • A much wider scope encompasses all economic activity based on digital technologies; thus also including application of ICTs to intensify existing economic activity in manufacturing, services and primary production. We refer to this as the “digitalised economy”.

Digital Economy Three Scopes

Measuring the digital economy faces challenges of fuzzy boundaries, poor data quality, pricing problems, and invisibility of much digital activity.  But, reviewing the measures that are available, we estimate the digital economy as defined here to constitute around 5% of global GDP and 3% of global employment.

There is significant unevenness between and within regions.  For example, the digital economy likely constitutes a two-to-three times higher share of GDP in the global North than the global South.  Conversely, digital economy growth rates in the global South are estimated to be twice as fast as those in the global North.

Combined with higher-than-average wage and productivity levels, this points to the growing importance of the digital economy in developing countries.  Yet growth is constrained by a set of serious barriers and a lack of knowledge including policy guidance.  All this supports DIODE’s goal of strengthening the research base on digital economies in the global South.

Digital Labour

Development and crowdsourcing

nicholsonbrian

A recent publication at the IFIP 9.4 conference in Indonesia “Understanding the Development Implications of Online Outsourcing” focused on analysing interviews with Upwork freelancers in the Pakistan Himalayas.  The framework we used was based on the DFID livelihoods and this was useful in making sense of the extent to which the Upwork platform was contributing to development.  The Youth Employment Programme (http://www.youthemp.com) of Pakistan’s Khyber Pakhtunkhwa (KPK) provincial government which aims to train 40,000 young people to use Upwork and similar platforms.  This is an integral part of Pakistan government policy in the region to bring marginalised people into gainful employment.  The results of our study were mixed, some of the freelancers were unable to engage at all even though they had been trained.  The frictionless marketplace was too intense and demanding for many of them. Others were seen to engage in a very limited way but a few were able to make a living and there was evidence of collectives developing into small businesses.  The success of the winners is encouraging but a lot are falling by the wayside.  There are many policy initiatives:

  • The NaijaCloud initiative in Nigeria, sponsored by the World Bank and supported by the national government, which provides awareness workshops on online outsourcing.
  • Malaysia’s eRezeki initiative (https://erezeki.my/en/home) which has trained hundreds of freelancers and now uses a “walled garden” approach with US crowdsourcing platform Massolutions: a managed portal for OO work such that the work process is controlled by government.

Protecting the individual worker from the intensity of competition inherent in multinational freelancing platforms is a facet of ERezeki .  The workers never actually engage with the platform, instead a government controlled portal mediates the work and protects the worker from bidding and managing clients.  This is not the only mechanism for reintermediating controls over the frictionless work platform marketplace.  A good example is cooperative platforms  where the workers also manage the platform thus offering a more equitable relationship for the workers.  Clearly there is more work to be done on how best to mediate plaform based “gig economy” for development exploring the limits and downsides of Upwork and other purely commercial logic driven platforms; in country alternatives such as Iran’s Ponisha to PPP arrangements and other business models including cooperatives.