Andrea Herrmann: The gig economy may need further regulation

Temporary, flexible jobs have become commonplace and companies are increasingly hiring independent contractors and freelancers instead of full-time employees. Although this has always happened, the expansion of internet and smartphone technology has made it easier than ever to connect those offering work and those looking for it, creating the first truly global labour market: the gig economy. But what are the consequences of this shift in the way we work?

Dr. Andrea Herrmann is Associate Professor in Innovation Studies at the Copernicus Institute of Sustainable Development at Utrecht University. In this interview she explains her surprising findings on online labour markets, and how increasing collaboration with industry may not necessarily be a positive thing.

Within your work you focus on online gig jobs that are completed at the computer. What makes these an interesting part of the gig economy?

We’ve all heard of Airbnb, Uber or Foodora. But I’m interested in the lesser known online gigs, offered on platforms like freelancer.com or Upwork.com, where potential employers post jobs that someone can then bid to complete anywhere in the world. The platform-transacted market for these online gigs constitutes the first truly global labour market – a labour market with no boundaries.

How does this global labour market compare with traditional freelancing?

There are of course the same concerns as with traditional freelancers. What happens in terms of healthcare, sick pay and social security more broadly speaking? But the traditional freelancer is more geographically limited and not exposed to international competition. The challenges are more localised and can be addressed through regulation at the national or regional level.

The fear with the online gig economy is that there will be a race to the bottom in terms of labour standards that cannot be addressed through national regulation. If those offering to do a job are not based in the same country, in a bid to offer the cheapest price they risk ending up with unacceptable working conditions. National regulation does not usually protect workers in global markets.

What is your role here as a researcher?

During the Corona months of severe lockdown, the online gig economy grew by 40% in demand and up to 450% in the offering of gig work. Fueled by the Corona crisis, it is fast becoming one of the main labour markets of the future.

With a shared understanding that there should be dignity in work, we should investigate whether the gig economy upholds this. I want to understand under which circumstances it is harmful to workers, and in which situations it brings them benefits. With this understanding I can advise governments on what kinds of regulations will see a net positive for workers.

I want to understand under which circumstances the online gig economy is harmful to workers, and in which situations it brings them benefits.

You’ve had some pretty novel findings recently. Can you tell us about these?

My research shows that for online gig workers, higher education degrees no longer correlate with higher income. People without higher education earn as much as someone with a PhD, and this holds across a range of sectors, including translation, design, programming and copy editing.

Interesting! Why is this so surprising?

One of the main reasons people pursue education is obtaining a certificate that allows them to enter the job market. Traditionally, the higher your education level, the higher your income. In the online gig economy, this no longer is the case.

The online gig economy is fast becoming one of the main labour markets of the future

Our findings therefore question whether, in the online gig economy, a diploma still signals that gig workers hold the necessary skills. This may also have positive implications: The unemployed can find gig work without undergoing retraining, and those unable to get a university education can still make a good living. Although both these things are undeniably positive, it may still be necessary to regulate platforms.

Why might it be necessary to regulate platforms?

A diploma is accredited by the state. Access to traditional forms of work is thus ultimately controlled by the state. This is not the case in the gig economy, where it is chiefly reviews that determine income levels.

Reviews, and the way in which work requesters review gig work, are decided by the platforms themselves. Does an employer have to leave a review, what kind of scale is used, and what are the consequences of a bad review? This is all decided by the platform, which therefore control access to work.

There are also reports of gig workers who are penalised for being unable to respond to gig requests, or who are willing to work for free to avoid a bad review. To re-gain control over who gets access to labour markets in the gig economy, governments may need to issue regulation on how the review systems of platforms are to be designed.

In terms of next steps, what are the biggest challenges to your research?

In the long run, the biggest challenge is acquiring funding that allows me to ask critical questions which are of high societal relevance but challenging for platforms or requesters of gig work.

I am currently funded by a Dutch Research Council (NWO) Vidi grant, a grant that does not require co-funding from private organisations. But research funding is increasingly linked to co-funding from private parties.

In the online gig economy, both corporate work requesters and platforms are unwilling to co-fund research that is not in their interest. And unions are typically short of finance. With the pressure scientists are under to include industry in their research, and the related requirement that industry partners co-fund research, scientists may no longer be able to address important critical questions. I find it alarming that only few seem to be concerned by this.

Further reading

Herrmann, A. M., P. Zaal, M. M. H. Chappin and B. Schemmann (2019). Does Education Still Matter in Online Labor Markets? Perspectives on the Sharing Economy. D. Wruk, A. Oberg and I. Maurer. Newcastle upon Tyne, Cambridge Scholars Publishing: 64-71.

Koutsimpogiorgos, N., J. Van Slageren, A. M. Herrmann and K. Frenken (2020). Conceptualizing the Gig Economy and its Regulatory Problems. Policy and Internet.