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Minimum wages on online labour platforms

A response to the ETUI and IG Metall’s request for comment. Download the PDF at:

Wood, A., Graham, M., Anwar, M. A., Ramizo, G. 2017. Minimum wages on online labour platforms. Oxford Internet Institute.

Background

Some members of our research group have recently completed a three-year study of workers on online platforms who live in Africa and Asia (140 interviews; > 600 survey responses; and six months of transaction data from one of the world’s largest platforms).

For some preliminary results, see the following publications:

Graham, M., Hjorth, I., Lehdonvirta, V. 2017. Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods. Transfer: European Review of Labour and Research. 23(2) 135-162. https://doi.org/10.1177/1024258916687250.

Graham, M., Lehdonvirta, V., Wood, A., Barnard, H., Hjorth, I., and Simon, D. P. 2017. The Risks and Rewards of Online Gig Work At the Global Margins. Oxford: Oxford Internet Institute. 

Our research into this topic continues in two ongoing five-year projects (geonet.oii.ox.ac.uk/gig-economy/ and http://ilabour.oii.ox.ac.uk/research/). The platforms that we looked at were global in nature, and in this response we focus on ‘non-geographically sticky work’ (i.e. ‘crowdwork’ or work that can, in theory, be done from anywhere).

Introduction

Based on our research, we believe that any discussion of platform minimum wages is worth foregrounding with a few key points. First, for our Southeast Asian and Sub-Saharan African respondents, it was clear that pay rates were not the most important issue relating to the quality of their jobs. In fact, the pay rates were often significantly higher than what was available locally and were often considered to constitute decent pay. More important issues to emerge from our qualitative interviews and supported by our survey research were the limited social contact which workers experienced, that they often worked long or irregular unsocial hours at intense speeds, that many felt they had at little security and some had low incomes. Nevertheless, the downward pressure on pay rates created by the individualised and competitive design of online labour platforms contributed to these outcomes. However, they were also due to an oversupply of workers relative to clients meaning that there were inadequate earning opportunities to meet the needs of all workers and this in turn generally weakened the bargaining position of workers. Therefore, while implementing minimum wages on online labour platforms might alleviate some of these problems by increasing pay rates at the bottom, doing so might also exacerbate these problems by reducing the supply of clients (by making the platforms less attractive) while increasing the supply of workers (by making the work more attractive). Thus any intervention to increase a platform’s pay rates would require increases in the quality of the services provided in order not to reduce demand and exacerbate the weak position of labour.

Second, our empirical research highlights how the competition on many online labour platforms is international. What is more, we find that many workers perceive themselves as threatened with replacement by workers in other countries who are able to work for less due to the lower cost of living in that country. This international aspect is a key consideration in thinking about minimum wages, as any intervention is likely to unevenly affect workers living in diverse contexts. For example, a minimum wage set at North American or Western European levels would erode the comparative advantage of workers in lower income countries. This is not to suggest a race to the bottom in wages, but rather a need to make sure that minimum wages do not become an overly protectionist measure at the cost of workers in the Global South.

Third, our research has detailed that some platforms have implemented global minimum wages - mainly as an attempt to ensure quality by pricing out low-quality workers. However, a major issue with these minimum wages is that they relate only to hourly paid work when much of the work is paid on the basis of a fixed price per project. This means that the effective wage can be below the minimum hourly rate.

Labour Market Principles for Online Labour Platforms

There is currently insufficient empirical data to fully evaluate the likely labour market consequences of online labour platform minimum wages. Instead we suggest some general labour market principles which we believe should be applied to online labour platforms

First, all work that is done happens somewhere. Therefore, paid work undertaken through online labour platforms should fall under at least one set of national jurisdictions. There are few countries on the planet that do not have some form of regulated labour standards and minimum wage regulations. Therefore, online labour platforms must not exist as mechanisms for the avoidance of labour regulations. Just because a digital platform is used to connect a client with a worker, does not mean that the underlying economic and regulatory geography of that work should be ignored.

We should, as a starting point, adopt the principle that we do not need to reinvent the wheel. Online labour platforms should ensure that the relevant labour laws - including the classification of workers – are being followed. This is not an unusual expectation and it is widely accepted that conventional labour market intermediaries, such as employment agencies and labour brokers, have this responsibility.

When considering this issue it is useful to draw upon the discourse surrounding what is known as ‘tax dodging.’ Both tax evasion and tax avoidance are forms of tax dodging. While only tax evasion is illegal, as only these activities break the letter of the law, both evasion and avoidance are generally seen as harmful and immoral. We argue, therefore, that what matters, when thinking about labour regulation avoidance is the spirit of the law, not the letter of law.

Online labour platforms not only have a responsibility to ensure that the letter of the law is being followed but also the spirit of those laws. This is especially important regarding employment classification as minimum wages often only apply to those classified as “workers” or “employees”. In the spirit of the law, “self-employed contractors” are widely understood as being equal parties to those with whom they are entering into contracts with and thus do not require minimum wages. Conversely, “employees” are regarded as being the more vulnerable party in the relationship and in need of special protections such as minimum wages. However, in the contemporary labour market, many independent contractors are best understood as "self-employed workers" as they are in a vulnerable position due to dependence on a small number of clients and therefore in need of protections. Therefore, the spirit of these laws dictates that self-employed workers i.e. the vulnerable self-employed should be entitled to minimum wages as well as other protections outlined in relevant labour laws. However, much online gig work seems to be oblivious to, or ignore, those regulations. An employer based in Germany who sources work from a worker based in Kenya (via a platform based in the US) rarely has any knowledge of Kenyan labour law. It is also important to note that many countries’ minimum wage regulations include piece work. Under these laws employers are usually required to calculate a minimum piece rate which is not less than the hourly minimum if undertaken by a worker who is somewhat less skilled or more fatigued than the average worker.

Second, (and perhaps somewhat paradoxically), platforms should get rid of their global minimum wages. Global minimums send a message to clients that if they pay above the minimum then they are in compliance with relevant local regulations. However, it is entirely possible for workers to earn above platform minimum wages, but below their client’s national/local minimum wages

Third, we acknowledge that there might be claims that any attempts to enforce minimum wages could be unenforceable given the global and dispersed geographies and networks of online work. However, our research shows that the vast majority of demand for digital work comes from just five countries. Furthermore, a small handful of platforms mediate the vast majority of that work. These two facts demonstrate that initial barriers to regulation are not due to a dispersed geography or dispersed network of work. These topological and geographical bottlenecks in the global trade of digital work offer potential sites in which regulation can be enforced (we realise that many of the other submission to this call deal with some of the specifics of ‘how to do regulation’ and we therefore leave the details of that discussion to others).

We hope that some of these suggestions can help to bring about a fairer set of relationships between the employing class, the governing class, and the working class. Online gig work has brought income and jobs to many, but that does not mean that we should expect it to function as an unregulated labour market.

Organising in the digital wild west: Can strategic bottlenecks help prevent a race to the bottom for online workers?


For decades, large firms have been outsourcing and offshoring jobs. Work flowed from from developed economies to developing ones, where wages were lower and regulations were of a lighter touch. Europeans and North Americans lost jobs, and Asians, South Americans, and Africans gained them.

But the nature of these processes meant that business activities had to be on a certain scale to be outsourced. You could outsource a contract for workers to staff a call-desk that expected thousands of incoming calls a day, but you couldn’t easily just get a small website built or a single recording transcribed.

This is now all changing due to the advent of digital work marketplaces. Platforms like Upwork.com, Freelancer.com, and Fiverr.com mediate the auctioning of work. Clients post tasks and workers bid on them, and work essentially becomes a commodity that can be bought and sold in hourly increments.

Some of my colleagues and I have spent the last few years studying this phenomena. We’ve analysed months worth of transaction data from the world’s largest online work marketplace, and interviewed about 150 digital workers in Asia and Africa.

One of the most noteworthy findings in this research is that workers often underbid each other on online platforms: driving down the costs to employers and the wages received by workers. This happens, in part, because there seems to be an imbalance between the supply and demand of work.

Platforms force workers to look at each other’s bids: heightening a sense of competition. Many workers had stories about the invisible ‘other’ - a worker on the other side of the world who could easily take their place if they aren’t competitive.

A Nigerian worker, for instance, told us:

“Most people, most Filipinos, they work for 50 cents. It’s so embarrassing. You’re a professional. You know how to do this job…It’s really affecting those ones that know how to do the job”.

Whilst Filipinos told us similar stories about workers elsewhere. But the net result is the same: a downwards pressure on wages.

What should be done?

In April, I spoke about these issues at a workshop on digitalisation that was put together by the European Trade Union Confederation in Brussels, and the most interesting question that emerged from the resultant discussion was ‘what should be done’? What sort of response could be had by European workers, politicians, and trade unions?

One option is to do nothing. We could accept that if a Rwandan worker does a contract for a British client, then the service is accepted and performed in Rwanda - and thus governed by the labour laws and standards that operate in that country. But to whose benefit is it to allow work to be so easily bought and sold across borders? Employers or workers?

Another option would be to reconsider the very geography of work. We could rethink where the service is actually provided in the case above? Perhaps the case could be made that the service delivered by the Rwandan worker to the British client was carried out in the UK. Perhaps we could at least envision ways to apply minimum UK labour standards (e.g. working time, discrimination law, health and safety, pregnancy and maternity protection etc.) to all contracts issued by UK employers. A UK employer can’t simply treat a UK worker like a disposable commodity, so why should they be able to do so with a Rwandan-based worker?

This sort of strategy becomes more realistic when we realise that although the supply of work in digital labour markets is truly globalised, the demand for it isn’t. Only a few countries in Western Europe and North America are home to the majority of employers. This fact presents us with strategic bottlenecks at which minimum standards can be enforced.

There is no question that this would not be an easy task to undertake, and people who disagree with this vision might point to the fact that much digital work is divided up atomised micro-tasks. Think of jobs that require a worker to write a letter, or fill out a form. It is true that trying to think about what maternity protection means in that sort of context makes little sense. But, it is also true that many digital workers end up working for months or even years for the same employer: and it is for those workers that we need better protections.

Furthermore, we already have laws that govern how to ensure that fair rates are paid. If we can already figure out how workers who are paid on a “per item” basis can earn at least a minimum wage, then surely we can do the same for a digital worker writing blog content.

Other doubters might also point to the absurdity of paying a Rwandan worker a UK minimum wage. Again, this is a valid concern; but does not necessarily mean that we need no standards at all. Couldn’t we, for instance, envision a law that requires employers to pay workers a living wage in whatever country they are resident in?

Finally, the handful of countries home to the most demand for digital work aren’t the only bottlenecks that we can think about as being strategically useful. The platforms themselves are a bottleneck of sorts. All of the big ones are based in the US, Australia, UK or Israel. In the same way that gang masters and temporary agencies are regulated to ensure that their workers are paid minimum wages and given appropriate protections, digital work platforms should also be expected to do the same.

None of this is to say that there is a simple silver bullet to improve working conditions, and it is all too easy to get into a situation in which we pit the interests of workers in some places over those in others. Look, for instance, at the conflict between Western and Central European workers introduced by implementing the EU Posted Workers Directive.

But it is worth remembering that there are now about 3.5 billion people on the internet: most of whom live in low-wage economies, and many of whom are now able to compete for digital jobs. At the moment, the millions of workers who do digital work do so in a largely unregulated way. And while this may benefit those workers who are able to underbid others at the moment, the status quo points to a race to the bottom for the world’s workers: especially as tens of millions of new internet users join the global network every year.

We can never go back to our pre-globalised world of work, but this doesn’t necessarily mean that we should be satisfied with a digital wild west in which atomised workers are left to fend for themselves.  As transnational digitally-exchanged work becomes ever more common, we can change our expectations. And can use what we know about the economic geographies of digital work to envision and hopefully strive towards alternate futures.

Instead of imagining digital work as being undertaken in digital spaces, beyond the realm of regulation, let’s remember it all happens somewhere. Digital work always has a geography.