Working in a platform-based economy - towards a new employment model

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Article

Working in a platform-based economy - towards a new employment model

Pap J., Ph.D. student, Szйchenyi Istvбn University, Doctoral School of Regional- and Economic Sciences, Gyor, Hungary

Makу Cs., Professor Emeritus, National University of Public Services; Research Project Coordinator at the Centre of Social Sciences, Budapest, Hungary

Illйssy M., Research Fellow (TK SZI), Research Department for Social Integration and Social Policy, Budapest, Hungary

Introduction

The contemporary platform economy started with three stories. In the first one, seventeen years ago, a Silicon Valley development project demanded a developer located in Athens. The project team believed that this developer is the best suit for the project. Remote work raised many concerns. Therefore, the developer in Athens and his friend in the Valley created a platform called oDesk, suitable for addressing remote work concerns as visibility and trust. Since their creation was a real success, they thought that their platform could benefit firms looking for a wide range of talents worldwide and freelancers looking for exciting, diverse, and flexible work (Pap & Mako, 2021). The second story started with the following advertisement that appeared online in 2007: “If you're heading out to the ICSID/IDSA World Congress/Connecting '07 event in San Francisco next week and have yet to make accommodations, well, consider networking in your jam-jams. That's right. For “an affordable alternative to hotels in the city,” imagine yourself in a fellow design industry person's home, fresh awake from a snooze on the ol' air mattress, chatting about the day's upcoming events over Pop Tarts and OJ.” (Parker, et al., 2016). In 2008, the third story was born, when two Americans on a cold night in Paris could not get a ride.

The first story led to the foundation of Odesk what was the predecessor of today's Upwork, where approximately 2 billion USD of wage is being transferred annually between clients and workers, millions of tasks are posted and completed, and the platform provides over 5000 skills in 70 different categories of work. The second story refers to Airbnb's birth, which has received 5,8 billion USD venture capital to date and is valued at 31 billion USD. Airbnb supports real-estate owners to provide accommodation services of 5,6 million apartments in 100 000 cities and 220 countries. In the last decade, 800 million guests arrived at one of the four million hosts, who earned 110 billion USD. The name Airbnb is coming from Airbed (inflated bed) and Breakfast service. The third story led to the largest and most unthinkable disruption in the 2010s, and this was the night when the idea of Uber was born. Uber has received 24,5 billion USD in venture capital, and it is valued at 69,05 billion USD. These three unicorns disrupted labor and employment, the industry of accommodation services, and personal transportation. Each disruption is significant and transformative, e.g., there is no return from them, and the authors of this paper are focusing on the first one. As Reich (2015) states, "platform economy is the biggest change in the American workforce in a century." In the following section, the rise of platform-based firms is going to be discussed. In section 2 the key dimensions of the platform economy are introduced. In the third section, the authors introduce the three key research themes in the platform work domain. The fourth section is about two empirical examples of research projects regarding platform work. The last section presents the future research project called CrowdWork21, studying the platform work in four European countries.

Keywords: platform economy, on-demand workforce, crowd work, future of work.

Main material

Rise of the platform-based firms

During the last decade, traditional firms operating in the energy and consumer goods industry lost their place in the most valuable firms' top 5 rankings. Except for Microsoft (who operates in a platform environment and was going through a rocky road) they have been outperformed by platform-based firms. The oil price decrease and the financial crisis of 2008 contributed to the downfall of the firms competing in the traditional 20th-century environment.

Table 1 - Largest market capitalized firms in the USA in 2008 and 2018

Source: https://milfordasset.com/insights/largest-companies-2008-vs-2018-lot-changed

Around 2007 Nokia and Blackberry were the main handset manufacturers in the world. Soon after, Apple introduced the first iPhone, which opened an entirely new ecosystem as a platform. Apple's key competitive advantage was not coming from the hardware but from the open innovation ecosystem (West, 2006; Chesbrough, 2006; in Parker, 2016). The new collective and democratized innovation of 1) application developers, 2) businesses in any given industry who developed a mobile app besides their webpage, and 3) end-users have created unprecedented and unstoppable development traction. Apple today is worth over 2 trillion USD, and it is the most valuable company on the planet. It took only 12 years from the introduction of the 1st iPhone.

It is visible in Table 1 that traditional firms topped in 2008 were founded in the 19th century, while the ones in 2018 were founded in the later part of the 20th century. Platform-based companies develop much faster and achieve higher revenues and profits than traditional companies. Parker et al. (2016) call this the "Network effect." In a platform ecosystem, each new node of the network improves the overall ecosystem's value creation. In traditional pipeline ecosystems, the value creation happens sequentially, i.e., step by step, which actually limits the value chain.

Key dimensions of the platform economy

According to Grabher and Van Tuijl (2020), the four key dimensions of the platform economy are 1) granting assets instead of owning them in the value chain, 2) in terms of governance the change from make or buy to employ or enable, 3) in terms of management from back-end to front-end, and 4) in terms of labor from jobs to gigs. The authors of this paper are engaged heavily in the research domains of 3) and 4). Therefore, in the following part, those will be discussed.

Change in management from back-end to front-end means that firms in the platform economy are not only focusing on the management of the firms' own employees and their supply chain parties but focusing on the external contributors of the firms' ecosystem (Shipilov & Gawer, 2020; in Grabher & Van Tuijl, 2020). Traditionally, companies' back office and management focused on running the business and managing the organization itself, while the up and downstream supply chain were managing the external parties concerned in the value chain. In a platform environment, the line between internal and external stakeholders is blurred. These firms cannot simply let some parts of their organization manage the external contributors, but the external contributors must be connected into the "blood-stream." Imagine that 22 thousand employees are managing the platform in the case of Uber, while there are 5 million drivers and 1,6 billion trips in a quarter (17,5 million trips per day). Millions of drivers and hundreds of millions of users, while only 22 thousand employees. Uber is a prime example of bringing the management of the firm from back-end to front-end.

Jobs becoming gigs in the platform economy is another crucial area, if not the most important, of its dimensions. According to a BLS study in 2017, around 14% of all employment was an alternative work arrangement. Additionally, around 1% of all employment is electronically mediated, the official BLS report sums up at 15% of total employment. However, 15% excludes the millions of platform workers active in the platform economy's part-time work arrangement. In the same year of the BLS studies, Brad Smith, the CEO of Intuit, stated: “the size of the gig economy is 34% of the total workforce, and expected to grow to 43% by 2020”. In the fourth section of this paper, a European study on platform workers' ratio will be introduced.

Three key research themes in the domain of platform work: Terminology Debate, Forms of Labour Market and Form of Platform Work.

Terminology debate

The first key research theme is the terminological debate, i.e., the lack of terminology consent. Since platform work and the related research projects are new, there is a knowledge asymmetry among the different countries, regions, and research organizations. There is not yet globally accepted terminology for platform work. In the USA, where most research activities are carried out, the phenomenon is called the gig economy in the research papers. In Europe, the sharing economy has been used, and recently platform economy became a popular term. In the research project of CrowdWork21, the researchers agreed to use the platform economy and platform work expressions. Based on the authors' systematic literature review of the different search terms, studying over 300 papers in English led to the following conclusions about the research topics in the platform economy:

Disruption of business and labor market.

“Platformization” of work.

“Servitization” of commerce.

Working and employment conditions of platform workers.

The technology infrastructures of the platforms.

Regulation of platform work.

Future of digital work.

It is also a challenge to define platform work; therefore, we use the Eurofound (2018) definition in our research project.

The work is organized online.

There are three parties in a transaction: platform company, client, and worker.

The service provided through the platform solves a given problem of the client.

The resolution of the problem is broken down into specific tasks (“taskification”).

The tasks are outsourced to workers by using a platform.

Demand is dominant in this type of relationship; the assignments are on a one-time on-demand basis.

Forms of Labor Market

The second key research theme is the different forms of the labor market in platform work. Based on the works of Codegone et al. (2016) and Pajarinen et al. (2018), we can distinguish the forms of the labor market based on different dimensions and features. The two main markets are the Online Labor Market (OLM) and Mobile Labor Market (MLM). OLM defines the work as digital work, i.e., the client and worker have no physical connection; the work can be done anywhere, anytime, by anyone (of course, with some considerable restrictions). MLM requires the physical presence of at least the workers. We call the OLM tasks either Microtasks or Projects, depends on the length of the assignment, Amazon Mechanical Turk is a platform for microtasks (they call it HIT - Human Intelligence Tasks), and Upwork is a market for project-like assignments. Microtasks normally do not require a higher level of expertise, knowledge, or education, while projects require expertise in the given domain and proficiency and relevant skills. The dominant forms of transactions for both microwork and projects are Peer to Business. Mostly firms outsource their tasks to this type of on-demand labor force. In MLM, we can distinguish between physical and interactive services, the physical is normally a short-term assignment, and interactive services are long term assignments. Physical services require certain skills but no specific knowledge or education, despite interactive services require domain proficiency. MLM services are Peer to Peer in both cases, and examples are Uber for physical services and TakeLessons for interactive services.

Platform work is a democratized labor market. Clients and workers may change roles at any time. An Uber driver can become a rider, or order food via Deliveroo, or perform work on other platforms as well. Malone (2004) states that in the future, instead of employment by a single employer, workers may engage in a wide variety of tasks available by multiple clients. They will build a portfolio of work rather than being employed by a single firm. In Table 2, there is a visualization of the different forms of the labor market with the key features and examples.

Table 2 - Labor markets in platform work

Source: Codagnone et al. (2016:18-19) йs Pajarinen et al. (2018:5)

Types of platform work

According to Pongratz (2018), we can distinguish between three types of platforms and the corresponding tasks on those platforms. There are so-called microtask platforms, where the complexity of tasks is low, the available income per task is also meager, people are micro workers, and they solve tasks during their short-term assignment. There are Freelance platforms, where the people are freelancers or entrepreneurs, have higher skills, and the complexity of the tasks is high, with a relatively higher wage, people work on projects in this environment. Lastly, there are specialized platforms; these platforms' projects require highly proficient domain expertise and provide a high income for specialized freelancers or entrepreneurs.

Table 3

Source: Pongratz (2018:63-64) edited version.

economy market platform work

Empirical examples

In this section, there will be two empirical examples introduced from the platform working environment research area. The first example will be a study made in Europe about the platform economy's size and platform workers' ratio. The second is about Uber in three different European countries.

Ratio of platform workers in Europe.

Pesole et al. (2018) performed a study in 14 European countries; they estimated the percentage of platform workers in the countries based on Internet users; they used the COLLEEM (2017) survey result and adjusted it. In Table 4, we have highlighted the four countries in the CrowdWork21 project's scope.

Table 4

Source: ETUI Internet and Platform Work Survey, (Piasna-Drahokoupil, 2019:18)

The case of Uber in Sweden, Germany, and Hungary

As it has been mentioned in the introduction part, Uber was founded in 2009 in San Francisco. It spread quickly in large cities globally; during this development, Uber disregarded the market rules everywhere. The firm denied that they are a taxi company. They are rather identified as an IT technology company that provides an IT solution for drivers and riders. However, Uber was not banned in every country. Uber is a prime example of disrupting a certain industry in a platform-manner and engaging with the public at an unthinkable level. Uber became too soon too big to be regulated by authorities in general (Thelen, 2018). Uber and Lyft were part of the 2020 election ballot in California state. The voters were asked to vote whether Uber and Lyft shall treat their drivers as employees or not. Undoubtedly the voters voted in favor of the platform firms. This is a great example of representing the platform mechanism, in which the platform companies are highly engaged with the public and that the government rather delegates the decision to voters than regulating these firms. In Europe, the situation is different; in Sweden, there is a compromised operation model of Uber when it comes to employment and securing drivers' rights. In Hungary, Uber entered the market in 2014, with all its unfair advantage. Soon the competition decided to step up, and the taxi firms organized themselves and went on a strike in 2016; the series of actions led to a point when Uber exited Hungary (Mako et al., 2020) due to a change in legislation that did not favor Uber. In Slovakia, Uber entered the market in 2015. They were operating in a vacuum from a legislation point of view and were in a difficult situation to exit the country. However, the government and regulatory organizations have adapted, so that Uber is still operating in the country today. In Hungary, Uber could not align with the updated law and legislation but was replaced with Bolt, another platform that provides taxi services. Bolt does 100% conform to the Hungarian rules, yet it is still operating in the platform economy.

Concluding Remarks: Finding New Strategies to Organize Europe: Crowdwork21 project

Based on the systematic literature review, there is a significant knowledge gap, especially regarding comparative studies among countries, particularly platform work in Central Eastern European (CEE) countries. CrowdWork21 research project aims to address this knowledge gap, with a special focus on interest representation. There are new forms of interest representation in the platform economy. For example, based on the interviews in the research project, it turned out that, for instance, the Customer Service function of Upwork serves as "grievance management." At traditional companies, the Human Resources organization takes care of this role. Besides, even though the platform companies provide work for tens of millions of people, none of the platform firms identify as an employer. Most if not all of them regard themselves as a neutral intermediary or matchmaker between clients and workers. Still, there are conflicts between the different parties of the platforms. Thus, the platform has to settle these issues. Therefore, platforms must create a dispute resolution system for both sides of the platform users.

The CrowdWork21 project aims to collect empirical evidence for the following segments of platform work (Pap & Mako, 2020).

Nature of platform work (i.e., micro-task vs. macro task, high-skilled vs. low-skilled jobs),

Working conditions (i.e., autonomy in working time setting, incentive system (rating-ranking practice)

Employment status (i.e., entrepreneurs, freelancers, contractors)

Platform as a neutral intermediary or/and slowly engaging in employers' responsibility (e.g., the recent decision of the "Just Eat" platform company to stop using gig workers (Josephs, 2020)

A collective voice and interest representation (i.e., the role of trade unions or emerging grassroots organizations, blog writers' movements, new global employers' initiatives (World Economic Forum, 2020).

The research project started in 2019 and will be finished in 2021. Four countries are participating in the project; Portugal, Spain, Germany, and Hungary. Each country will deliver four case studies of four different platform companies operating in each country. The research consortium developed the method for interviews and case studies collaboratively, thus enabling a comparative study possibility among the four countries. As there are not four platforms that operate in all countries, the team has selected either common ones or the ones that operate in a similar service industry.

References

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