Advanced markets for irregular work

What’s their problem?

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Markets for someone seeking Irregular Work are inadequate. But there is nothing like the public infrastructure on offer to job-seekers.

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Market failure: so many markets

Debate about non-standard work often focuses on “Gig Economy” activity, then on issues such as worker classification or portable benefits. But, reporting points to a more fundamental challenge; problems of finding any sort of Irregular Work, then low quality tasks and lack of control if it materializes. Cracking this could solve wider issues.

offline2Most Irregular Work is still found by word-of-mouth; going from café to bar to shop to homeowner asking for ad hoc employment, probably for cash in hand. This is largely invisible in official data. Deteriorating conditions for workers are more visible in online marketplaces for on-demand labor. Investors poured a record $17.8bn into launching these markets in 2015.

Well known markets include Wonolo (on demand office or depot staff), Deliv (shopping to your door), Rover (Dogwalking), Rota (Bar work), Doordash (on-demand meals) and Luxe (car parking).

Each is fighting for dominance in their vertical sector. But behind any headliner are countless competitors trying to grab share. Assume, as one example, you sought work doing deliveries of food in Seattle in 2014; potential buyers of your time would have been divided between fiercely rival forums including PostmatesMunchery, PeachdLishEat24GrubHub, Bitesquad and Caviar. But a year later, it all changed: Amazon launched a food delivery exchange in Seattle then Uber muscled in.

Where should you have invested  your time building employers and a track record? You couldn’t know; each site guards its sales data and plans. For maximum exposure to food delivery work you needed to trade across all these services. That’s hard: algorithms running Market A will probably downgrade you if you aren’t immediately available for an assignment because you’re doing a booking from Market B.

deliveryFor investors it’s fascinating trying to back a winner in this cacophony. Less so if you urgently need a few dollars worth of local work. Inflated investment in these companies will inevitably tail. Workers will take the hit: many will find their labor market evaporating.

 

 

Tight focus markets

To maximize bookings you need to not just be a market expert; you have to monitor sectors. As well as food, you may be willing to – for example – deliver fuel to cars. There seems to be demand, and now marketplaces, in multiple cities, each with funds to expand. So, do you bet on the eventual success of Filld, Purple, FuelMe, Neighborhood Fuel or Fueldrop? Or wait for someone else to come in later? Or accept the entire sector might be closed down?

You probably don’t care about any of these nuances, you just need the best work possible. And endless delivery runs may not be your life aspiration. There could be a shortage of home electricians, beauticians, tutors or other careers of interest in the area you will travel at times you want to work. It could be worth your while adding those skills to your portfolio. You don’t know. There is no market data to tell you which sectors you should be aiming for and no help getting there. Compare that to the quality of support and data available to job-seekers.

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Your need is for access to all sorts of work with progression opportunities between them. But your labor market is focused around investor priorities and convenience for buyers. You are a commodity.

 

 

Why the niche approach?

160216 investorsThere’s now a 5-step business model for launching a profitable on-demand labor marketplace:

  1. Identify a niche service where someone will pay someone else to do something. Set up a website to match buyers and sellers.
  2. Advertise, particularly by buying Google AdWords such as “Birmingham” and “House Cleaning” if your forum wants to offer that service in the city. This drives buyers and aspiring sellers to your fledgling market. You will need to outspend competitors to come top of searches, so your investors have to see quick take up. A tight niche keeps this huge spend focused and cost-effective. TaskRabbit for instance narrowed the range of tasks it brokers in 2014.
  3. Sidestep expensive and technologically complex regulatory protections for workers, expect your sellers to sort out their own tax affairs (then don’t worry if they don’t). But present yourself as empowering workers who want to “be their own boss”.
  4. controlAs you acquire buyers and sellers, ensure you own their relationships, track records and market insights. Guard this data. Erect barriers to interaction with other markets.
  5. Increase your cut of each transaction. With everyone locked in you have the economics of rent; irresistible to investors.

 

Get this model right and returns can be eye watering. But a sector with multiple markets slugging it out for dominance creates shifting sands where employers and workers never know where they should find each other.

Get it wrong and a marketplace can quickly disintegrate. Investors in Homejoy pulled the plug in July 2015, leaving workers who may have strived to build a good rating starting again at the bottom of yet another exchange. So did; Prim and Washio (on-demand laundry) Rewinery (wine deliveries), Kitchit (meals cooked in your home), Cherry (car washes) and countless other markets claiming to empower independent workers. Markets coming perilously close to implosion strive to conceal it.

So, it should be good news when a dominant, here-to-stay, marketplace has stabilized in a sector? No. When one market gets to supremacy it allows the model to really kick in.

slash2Witness – for example – mini-cabbing colossus Uber’s unilateral slashing of workers’ rates while increasing its own cut in January 2016. Investor enthusiasm was obvious, boosting Uber’s efforts to develop driverless mini-cabs. That piled pressure on other markets to follow.

 

 

Market mechanisms

The current crop of online markets for piecemeal work are better than old ways of finding that work: flyers, print adverts, street canvassing. That doesn’t make them the best possible facility for this kind of labor. Strip out gimmicks and the business model above tends to deliver marketplaces using some combination of two mechanisms:

  • 160216 BabyClassified ads.: Look for a babysitter this evening on Sitter.com. The site will offer several sellers in your area who could be available and willing. Send a message to the ones you like, wait for responses, negotiate and make arrangements with your final choice. It’s time consuming and uncertain for all concerned. Historically some sites have been blatant about forcing a downwards auction; buyer lists a need, cheapest worker seals the deal.
  • Algorithmic assignment: The buyer inputs a need. Immediately the market tells them which worker will fulfil it at what cost. TaskRabbit has used this method. It’s fast and smooth for the buyer. But behind the scenes, workers are scurrying around as instructed by messages on their phones with little control or ability to plan.

Offer in a classified ads marketplace and you spend hours responding to bookings you then don’t get. But you can at least trade across multiple markets with some control. Sell algorithmically and you live “on call” pretty much locked into one marketplace at a time for fear of downgrading.

Trading desk1Markets can be so much better than this in the 21st century. Look – for example – at the exchanges financial institutions have built. A bank with a $25m Forex swap to sell today doesn’t write an advert or simply wait to be told who has bought it at what price. They set parameters, trading strategy and goals then watch as sophisticated markets sell for them; opening opportunities, maximizing profit and managing risk in ways unthought of 20 years ago.

New marketplaces have created unimaginable opportunities and income for financiers: ask a Wall Street trader. They have done little for flexible labor: ask a Taskrabbit.160216 Broom

 

 

Consequences of inadequate markets

There is human cost to proliferating, low quality, forums for purchasing low skilled labor. Millions of households will struggle to feed their kids tonight because parents couldn’t sell today’s hours. There was almost certainly some demand for the labor in each case and chances to progress, although it may have required training. But no one knows where the demand is or how to turn it into a ramp to a personalized career.

The current model for “gig” work is shaping this workforce in key ways:

  • Sharecon1“Gig workers” are upscale: Like most issues here, we don’t know for sure. But it seems unemployed graduates are doing many of the chores in the task economy, not people who may need the work more.
  • Unmet demand: Figures endorsed by British anti-poverty charity JRF point to £100m, some 2% of our GDP, in demand for irregular work that goes unmet every day because of market inefficiencies.

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  • Churn: Pay is often lower than expected. Workers move from market to market. Risk of transaction failure is high. That keeps quality of workforce low.

 

  • Economic loss: Small businesses often need to flex headcount, particularly in the growth phase towards job creation. Inefficiency of flexi-labor markets makes it difficult. Their corporate competitors have the scale to deploy staff just-in-time through brutally efficient scheduling tools.

 

  • 160216 regulationDistorted regulation: Many on-demand labor markets now flout regulation in their quest for growth. That unfairly penalizes businesses playing by the rules. Competitive pressure forces everyone to cut costs of staff.

 

 

 

Searching for solutions

Policymakers are looking at creating new categories of worker with responsibilities spread across multiple employers. Courts are pressuring “gig” work markets to recognize rights and collectivization for workers. Numerous charities are probing labor market problems for women, immigrants, youth, dislocated workers or low-income households in a given area.

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Entrepreneurs are – of course – addressing inefficiencies for buyers and sellers. Alfred works across multiple markets to meet buyers’ needs. Workgenius wants to do the same for sellers. Peers subjectively ranks individual markets. Sherpashare merges individual’s data from all rideshare services. Credly and Traity tackle lack of co-ordinated track records. Stride healthcare, Honest Dollar and Policy Genius target financial products at “gig” workers. Marketplaces run as co-operatives are getting some traction.

Gnomes

But administering new rules – or building add-ons – across basic, unstable, ring fenced, regulator-resistant markets may not be the only way to a solution.

It could be we have a problem in the foundations: This sprawling part of the workforce needs access to a better local marketplace. That has to be genuinely built around workers’ interests. So it has to maximize flow of bookings, then transparently enforce regulation while operating at low overhead. It should also incentivise diverse insights, interventions, individualization and innovations across the whole terrain of hourly working, not just one sector.

 

→ Why do they matter?