Are internet job exchanges depressing western salary levels?

A provocative argument excerpted from Rich Reiben:

“is no longer necessary for a corporation to go to a third-world country to outsource. There are plenty of 99-percenters who are willing to work for almost nothing. A number of sites ask potential workers to bid on jobs. Absurdly low pay is justified by calling the job “an adventure” or :”fun”, as Eric Koester, founder and chief operating officer of Zaarly.com, a mobile peer to peer job bidding site, said on the NPR program On Point recently.

Technology is supposed to be the great equalizer. In a recession, unions dissolve and workers compromise. But in this recession, something more devious is at work. Technology has become a one-way street. Suddenly the guy who wants someone to clean his basement has fifty bidders, some of whom are probably not eating very well these days. Three hours’ work may go for ten or fifteen dollars. Sweatshops in Indonesia have nothing on these “private” employers.

These absurdly low “negotiated fees” are really thinly disguised labor law violations. No legitimate employer could get away with paying $2.00 for a 1000-word article. But the sites are effective and the government winks at them, at least so far. Last fall, start-up Zaarly.com raised $14.1 million through private investment firm Kleiner Perkins and added former Ebay CEO Meg Whitman to its board of directors.

I’m not talking about time-banking or other barter systems, which value labor and services on a relative scale rather than a dollar amount. If a plumber and a lawyer want to exchange services, they are free to negotiate, and time-banking is merely a three-dimensional, indirect corollary. The operative word here is negotiate, and the parties are on a comparatively equal footing. In contrast, the internet’s ability to find a lowest common denominator creates the most unequal bargaining platform since the Emancipation Proclamation: Ebay in reverse, in a manner of speaking; no wonder Ms. Whitman’s input is so valuable.

At some point, sites like Zaarly, Mechanicalturk and Taskrabbit will become large enough to cause the feds, or maybe one or two of the more alert state attorneys general, to sit up and take notice. Meantime, the formation of a new underclass of wage-slaves appears both inexorable and permanent unless and until this economy generates decent jobs for nearly everyone.

I would not hold my breath.”

2. ANAND GIRIDHARADAS chimes in, in the New York Times:

“right here in the West, a new informal economy is in the making — a peculiar byproduct of the digital revolution.

A new group of technology start-ups is building online platforms to facilitate offline transactions in this new informal economy: renting out your spare bedroom (Airbnb ) or Volkswagen (RelayRides ); hawking yourself as a handyman (TaskRabbit ) or personal chef (Kitchit ); selling custom-made furniture (Etsy ); or transcribing someone’s interview tapes (oDesk ). In each case, a transaction that was possible but complicated before is smoothed by the matchmaking skills, quality assurance and rating systems of a known company.

It is a lucrative new labor market, and also a way of going back to what the labor market was like before there were anti-discrimination laws, minimum wages and hours ceilings — with all the liberties and efficiencies and perils that implies.

“What we’re seeing is this throwback to better days of an age-old economy,” said Leah Busque, the founder of TaskRabbit, a pioneer in the field, with 4,000 registered errand runners for hire.

In an America, and a West, struggling to create old-fashioned jobs, complete with salary and insurance and pension, these services can be seen as an opportunity for do-it-yourself job creation.

RelayRides says that you can earn $7,000 a year by letting others drive your car. On oDesk, which specializes in virtual tasks, people peddle their skills as $133-an-hour Web developers, $13-an-hour Danish-to-Swedish translators and $1.67-an-hour icon designers. Meanwhile, over at TaskRabbit, customers seek workers to fetch their groceries, set up their home theaters and, in one case, sew 50 dog booties with Velcro ankle fasteners for a puffy little bichon frisé.

Gary Swart, the chief executive of oDesk, described how companies once struggled to find workers beyond their 50-mile, or 80-kilometer, radius, and employees to find work. But in the new world he envisions, anyone with a computer can choose how, when and for whom to work.

“They have the freedom and flexibility to work from their den in their pajamas at the rate of their choosing,” he said.

What some critics argue is that, in a bad economy, these choices are less than meaningful, and that they result in a race to the bottom for people who cannot afford such a race. These critics warn of a metastasizing economy of freelancers, supporting themselves with tasks rather than jobs, competing ferociously so as to lower wages, working long hours, all while paying for their own health care and retirement plans.

“Technology is supposed to be the great equalizer,” a blogger named Rich Reiben wrote recently. “In a recession, unions dissolve and workers compromise. But in this recession, something more devious is at work. Technology has become a one-way street. Suddenly the guy who wants someone to clean his basement has 50 bidders, some of whom are probably not eating very well these days.”

Then there are the regulatory concerns, for much of this new informal economy operates in a legal no man’s land.

Is renting out your car for a few bucks an hour more analogous to a neighborly gesture (which isn’t regulated) or to a car rental service (which is)? Shelby Clark, the founder of RelayRides, has admitted in the past that his service operates in “a little bit of a legal gray space.”

Are sites like oDesk responsible if employers pay workers below the minimum wage, or are they just glorified phone directories?”

1 Comment Are internet job exchanges depressing western salary levels?

  1. Avatargregorywilliford

    The move to subcontracting instead of employment is not a new trend, nor the exploitation, violation of labor laws, and suppression of wages/benefits ( check “Digital Death Rattle of American Middle Class” here: http://www.ctheory.net/articles.aspx?id=402 ). Perhaps, a comparison between modes of subcontracting are in order. A reasonable comparison might show that internet job exchanges reduce costs to the freelancer in many respects.

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