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Will the On-Demand Economy Raise Global Living Standards?

Source |  |  BY:Arun Sundararajan

The global workforce has begun a significant transition away from full-time salaried jobs and towards a variety of flexible forms of employment, independent businesses of one, freelance work, and other forms of on-demand labour. This shift accompanies the coming of age of crowd-based capitalism and the maturing of new “sharing economy” models of organizing economic activity, like those pioneered by Airbnb, Uber, Etsy and TaskRabbit.

As the on-demand workforce becomes a larger part of modern economies around the world, there are two visions of how this will play out. One portrays a future of empowered microentrepreneurs, individuals who take control of their own destinies on an unprecedented scale, working fewer hours with more flexible schedules, striking a better work-life balance, earning money doing work they enjoy while creating an array of innovative new products and services. The other foresees a dystopian world of disenfranchised workers, a race to the bottom in which work will be defined by low wages, high levels of job insecurity, and the elimination of income stability, labour benefits and an adequate social safety net.

Two Very Different Futures

Which of these futures is more likely? My ongoing research with Professor Marios Kokkodis of Boston College provides an early leading indicator. We have been monitoring hourly wage rates for over 10,000 workers across a range of different occupations on a popular U.S.-based online labour platform, comparing these to the corresponding levels documented by the U.S. Bureau of Labor Statistics. As of summer 2015, average on-demand wage rates remain higher, even after accounting for marketplace fees and differences in wage levels by geography and by profession. Put differently, you can generally expect to earn more per hour getting your freelance work through a digital labour market than by seeking it through traditional channels, even after you pay the platform its commission.


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