The gig economy is growing at a tremendous rate, such that independent workers make up a larger proportion of the workforce now than ever before. A recent study from Oxford University explores whether this contingent workforce are now a viable alternative to the more traditional process of offshoring work to (often lower cost) countries overseas.
The study reveals that platforms such as Upwork and Fiverr offer companies an efficient and cost effective way to hire knowledge workers from overseas, who are often cheaper than the same workers would be in the domestic labor market. What’s more, it allows the company to tap into talent in these markets without having to set up an office there.
“Many knowledge workers in emerging economies are benefitting from this arrangement,” the authors say. “Knowledge workers who previously worked at outsourcing companies in countries like the Philippines, for example, can now work directly for Western clients through these online platforms. Workers can earn more this way, and avoid gruelling commutes. However, their income and work hours can be less predictable.”
Talent matching
Most of the online platforms provide companies with a number of different ways of understanding the skills and experience of the workers bidding for work, including traditional resumes, skill tests and feedback from previous clients. This typically benefits both parties, as it provides a way for workers to validate their skills, and clients a way to have confidence in the kind of person they’re hiring. This ability to communicate reputation is something that the researchers believe benefits workers from low-income countries more than their peers from high-income countries.
They hypothesize that this is because the online reputation overcomes the natural bias clients have in assuming that workers from low-income countries are less skilled or productive unless they have clear information to the contrary. Indeed, participants in the study found that it only took a few positive reviews for their presence in a low-income country to be irrelevant.
Suffice to say, even though the income of workers from low-income countries rises as they gain a track record on the platforms, they remain considerably cheaper than comparable workers in high-income countries. Of course, the importance of reputation to the income of each worker presents a considerable advantage to the platforms themselves, as it significantly raises the switching costs of moving elsewhere for each worker.
“The experience and project history that low-income workers build up on a specific platform is so valuable to their ability to secure future work,” the researchers explain. “This creates very high switching costs for workers to move between platforms. We should be looking at the implications on things such as dependence, value capture, and working conditions, in the same way that we would scrutinize the effects of multinational enterprises and traditional outsourcing.”
Suffice to say, it isn’t clear whether the rise of gig platforms such as those analyzed in the paper have coincided with a decline in offshoring via more traditional means. It does nonetheless add an interesting element to the discussion on gig work.
