Exploring the Uncharted Territory of the On-Demand Economy
More and more tech startups are pitching business plans to become “the Uber of [fill-in –the-blank]” — with hopes to be the next billion-dollar Unicorn in the on-demand economy. The surge of Uber, Airbnb, Thumbtack, Upwork and many other business platforms that match customers and service providers ‘on-demand’ is not just a technology story: It raises important economic issues. How is value being created and who benefits
To address these questions, we’re bringing together a fascinating mix of experts from academia, business and the public sector to the MIT IDE On-Demand Economy Conference on March 15. We will chart the trends and come up with research areas to focus on. We also want to put today’s models into historical context.
I’m very optimistic that an on-demand economy will not only help boost delivery of essential services, but it can also make more efficient use of labor and capital.
Take ride sharing: A personal vehicle that would otherwise be idle 90% of the time can be put to use by its owners to the benefit of those seeking low-cost transportation. This concept can be applied to other industries and services, from the financial sector to insurance companies and real estate. (See my comments at the 2015 World Economic Forum here.)
Disappointingly, despite all the buzz and potential gains, U.S. data that would help us measure the size of the contingent workforce is incomplete and outdated. One recent article about the on-demand economy notes that: “Keeping tabs on temporary and on-demand workers is no easy task. Some were part time, others full time. Some were self-employed; others found gigs through staffing agencies.” It goes on to explain that The Bureau of Labor Statistics’ first supplement to the Current Population Survey gave three different definitions of contingent workers; each with a different employment estimate. “The BLS re-ran the contingent survey four times over the next decade, but then its funding dried up. In 2005, the combined total of contingent and alternative workers topped 18 million people, or 13.6% of the labor force.” This January a new supplement was finally approved for inclusion in the May 2017 CPS.
At our March 15 IDE conference, Harvard labor economist Larry Katz will present new research he’s been doing with Alan Krueger about the On-Demand economy. They document its growth and discuss implications for wages and employment. We will also hear directly from platform executives at Linked-In, Upwork, Airbnb and Uber, as well as thought leaders from the Freelancers Union, Thumbtack, McKinsey, the National Labor Relations Board, the Economic Policy Institute, Manpower, BurningGlass and the Service Employees International Union, among others.
In these complex times, the basic definition of work is blurring along with what benefits workers should accrue –and who should pay for them.
With employees changing jobs more often and being their own boss, they gain flexibility and independence. In return, they may have to trade off steady income and generous benefits. Since the 1950s, key benefits — such as health, disability and retirement — have been linked to full-time jobs in the U.S. By contrast, on-demand workers are usually exempt from benefits coverage, challenging long-held assumptions about how we provide a social safety net. Some groups support creation of a new category of worker — between W2 employees and 1099 contractors — that would bridge the benefits gap. In countries such as Denmark, benefits already are decoupled from employment, and the government provides economic assistance. U.S. Sen. Mark Warner, from Virginia, will be a keynote speaker at the conference discussing some new policy ideas and solutions for these workers.
Ultimately, the best way to protect workers is not to lock in old ways of organizing, but to embrace the future in ways that grow the economic pie and also create shared prosperity. That’s why the MIT IDE is inviting workers, governments, business and entrepreneurs to invent sustainable and equitable work models as part of the Inclusive Innovation Competition. Clearly, in the On-Demand Economy we need different ways to use technology to complement work, not just to replace work and reduce the value of workers.
Erik Brynjolfsson is the Director of the MIT Initiative on the Digital Economy. He is also the Schussel Family Professor of Management at MIT Sloan, Chairman of MIT Sloan Management Review, and a research associate at the National Bureau of Economic Research. Erik’s research examines the effects of information technologies on business strategy, productivity and performance. Along with Andrew McAfee, he wrote the best-selling book The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies, as well as Race Against the Machine.
Originally published at digitalcommunity.mit.edu on March 7, 2016.
