Give me my reputation back
Portability, monopsony and the platform economy
‘What has capitalism done for you lately?’ was the question running through recent Labour and Conservative party political get-togethers. Conference halls reverberated to the sound of speeches on the supposed vices, and virtues, of state socialism or free market capitalism. Rarely have two straw-men taken such punishment.
This apparent soul-searching about the nature of our economy didn’t, however, translate into meaningful reflection on the wiring that determines how markets work and who they benefit.
In the US, there has been a surge of interest in how recent increases in market power in some sectors, not least tech, creates winners and losers. The rise of ‘superstar firms’, for instance, is fuelling interest in a 21st century reinvention of anti-trust politics. Traditional nostrums of competition policy are being re-assessed to see if they still suffice in the era of the networked platform economy.
It’s not just competition in consumer markets that is being put under the spotlight, the use of restrictive practices in US labour markets is also coming under scrutiny. Attempts by businesses — in the new and old economy alike — to exercise leverage over workers, to increase their so-called ‘monopsony power’, are receiving particular attention. Most conspicuous is the spread of non-compete contracts preventing workers from moving to competitors in sectors as diverse as tech, fast-food, and even dog sitting. But it also exists in the form of ‘no poaching agreements’ that have been deployed by the majority of all big franchisers in the US — like Burger King, Pizza Hut and McDonald’s — impeding workers from moving roles within the same chain. Who gains from these labour-restraints is no great mystery: hobbling worker mobility is generally a neat way of suppressing wages.
In the UK (and EU) laws and legal judgements have generally made these types of anti-worker restrictive practice harder, so we worry less about this sort of thing. Perhaps we’ve become too relaxed. To see why consider one so far subterranean issue that is about to become more visible: the rules governing the rights of workers over customer ratings of their work in the gig-economy.
The popular image of this segment of our economy is of free-wheeling, hyper-flexible freelancers who come and go as they please. Gig-workers can, after all, work through whichever platform they wish, for as long as they wish. The free-market distilled.
Yet this is a partial account. It overlooks a barrier to mobility: the non-portability of their customer ratings and reviews. This is no side-show. You can’t, as Henry Ford said, “build a reputation on what you are going to do.” Ratings crystallise hard-won reputations; they are the passport to future earning power. Lose them and, regardless of experience or prior standing, you are pretty much starting from scratch.
From freelancers offering their coding services through platforms like Upwork or PeoplePerHour, to drivers contemplating moving from Uber to Lyft, this is an issue that will rise in salience. And the more important ratings are to a worker’s prospects, the more tied they are likely to be to the platform where they first got established.
This state of affairs is all the more odd given that, to avoid being treated as legal employers, platform-companies like Uber present themselves as mere online notice boards used by independent businesses to pick up trade. Strange, then, that these businesses can’t move these reviews with them.
To date policy makers have taken little notice. The prevailing instincts of some political leaders — bow to big-tech in the face of any pressure or treat the whole gig economy like the enemy — instils little confidence. Matthew Taylor’s recent review of employment rights helpfully flagged this issue up as a concern and backed the principle of portability — but there is little indication that the government will act on it.
Many hope that sweeping new rights to data portability, created by EU regulations coming into force next May, will solve the issue. Individuals will be able to move their personal data from one platform to another with heavy fines for companies that fail to comply. Clearly this is a big deal. But it is not, however, at all clear that these rights will extend to reviews written by a third party (a customer) about workers. Indeed, the Information Commissioner’s Office — who have regulatory oversight — indicate this is unlikely. If so, platform companies — well served by the status quo — will breathe a sigh of relief.
Workers, like consumers, need data portability. It should be a guiding regulatory lodestar not just because it makes life easier for individuals but also because it will help to reduce the slant in the playing field that favours online giants rather than those who work through them. The point is not that a right to transfer your own ratings will lead to platform workers moving around en masse. It is the potential threat of switching, as much as the reality, that helps to rebalance power.
At root this is just one relatively small yet symbolic example of how the rules of the game in our digital economy matter. Politics needs to catch-up. It’s often said that the reason so many people feel little affinity to our strand of capitalism is that it leaves them without capital. That means all they have to trade on is their reputation. It would be wise for policy-makers thinking about the gig economy to ensure that a workers’ reputation really is their own.
Gavin Kelly, and Daniel Tomlinson.