Author Archive
The Gig Economy – Don’t Quit Your Day Job
Friday, March 11th, 2016
Steven Hill is an internationally renowned political writer and researcher. His latest book Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism are Screwing American Workers deals with the “freelance society” and the impact of the sharing-economy on the labour market and working conditions. We’ve talked with him in Berlin, where he is a fellow at the American Academy this spring.
Ralf Grötker: Where is the major difference between companies such as Uber or Taskrabbit, who like to present themselves as “just a website”, and more traditional temporal work agencies?
Steven Hill: Temporal work agencies used to give you a job for a couple of days or even a few months. With these new services, which I call the “gig economy”, it’s really just for an afternoon. But the way Uber conducts business is becoming more and more the dominant model. Take Upwork, formerly known as Elance oDesk. This company is a broker for freelancers, many of them in the creative sector. More than 10 million freelancers worldwide offer their services via Upwork. But the company itself has just a staff of 800 people – only one third of them being regular employees, the rest freelancers themselves. To many, Upwork represents the company of the future. I would rather call it the “lean and mean”-style of conducting business.
Before the arrival of Taskrabbit and like companies, one used to hire a carpenter who was doing carpentry as a job and who was working on a regular labor contract. He had social security. But these days, you hire a contractor from an online service. He is not member of a labor union, he operates without a safety net of social security, and will make hardly more money than minimal wage. Especially in the US, after the economy crashed in 2008, we see this happen. Good jobs are being replaced by bad jobs.
Or take a company like Spare5. Spare5 recruits freelancers for jobs which are so small that they can be done while waiting for the bus, such as manually labeling websites representing certain products, so that these products can be found easier by customers using search engines. Jobs – if you still want to call it that – are actually getting smaller and smaller. Communication technology makes this possible.
RG: How big is the “gig economy”, actually?
SH: There is a lot of debate in the US about this question. The bureau of labor statistics says: The gig economy doesn’t really show up in our numbers. Other researchers think that in households and employer surveys, people are just not reporting that they have second and third jobs. Judging by the numbers of 1099 forms, which, in the US, employers file for their freelance-contractors, the whole gig-economy business has been going up by 20 percent in the recent past. The number of people filing for Schedule SE, which is for self-employment, at the Internal Revenue Service, is also up by 20 percent.
The issue of wages, in my view, is tied to the globalization of trade and services and other trends.
RG: You propose to fix at least some of the problems of the “gig economy” with the introduction of an Individual Security Account. The basic idea: If you hire a freelancer, you will have to pay a certain amount into a social insurance-pot, in addition to the remuneration which the freelancer himself gets paid. Out of that insurance, social security, healthcare, unemployment benefits and injured workers compensations will be covered. Who should actually pay into these accounts: individual consumers or companies such as Uber or Upwork?
SH: Definitely the companies! At least in those cases, where they act not as a marketplace only, but employ freelancers as contractors who are bound to the company’s own rules. It just would be too hard for the government to pass costs for Security Accounts directly on to consumers. Surely, those companies also will pass the cost for the Individual Security Account on to the consumers. But that’s how it should be. Many of those consumers will be the people who are at the same time benefitting from the social security plan of the Account. A rising tide will float all the boats.
RG: An Individual Security Account still doesn’t change anything about the very low income which very many freelancers make. Do you also have a solution for this?
SH: It’s right that the Individual Security Account doesn’t change the income situation. There is not one fix to all of this. But still: There are two ways to increase the standard of living of a worker. One is to give him more money, so that he can afford to buy what he needs. The other way is to lower the costs of the things he needs to buy. Healthcare for sure is among these things. If one manages to make the individual worker to be part of larger pool, then costs for health insurance can be drastically reduced. This way, he doesn’t need higher wages. Also: The issue of wages, in my view, is tied to the globalization of trade and services and other trends. More and more, we are in competition with countries where wages are much lower. All this is fairly complex. That’s why I have chosen on focusing on the Individual Security Account.
“Paid Prioritisation Prohibited”
Tuesday, November 3rd, 2015
3 Questions to Nathalie Vandystadt, European Commission spokesperson for the Digital Single Market.
On 27th October, the European Parliament voted to adopt an agreement reached in June to end roaming charges by 2017 and to set net neutrality rules in the EU for the first time. After the vote, Netopia asked three questions to Nathalie Vandystadt, European Commission spokesperson for the Digital Single Market.
Per Strömbäck: Does the EP vote allow for a two-speed internet? (That is not the same as a neutral network)
Nathalie Vandystadt: No, on the contrary, the vote has fully ensured that every European must be able to have access to an open internet and all content and service providers will be able to provide their services via a high-quality open internet. But more and more innovative services require a certain transmission quality in order to work properly – not just today’s services, such as IPTV, but new ones such as telemedicine or automated driving. These and other services that can emerge in the future can be developed as long as they do not harm the availability and the quality of the open internet.
It is not a question of fast lanes and slow lanes – as paid prioritisation is not allowed – but of making sure that all needs are served, that all opportunities can be seized and that no one is forced to pay for a service that is not needed.
The Regulation sets very clear and strong conditions for the provision of such specialised services and includes the necessary safeguards to ensure that the open internet is not negatively affected. Such services have to meet the following conditions:
– They have to be optimised for specific content, applications or services;
– Optimisation must be objectively necessary to meet service requirements for specific levels of quality that are not assured by the internet access service.
The text also sets very clear safeguards to avoid that the provision of these services impairs the internet access. These services:
– Cannot be a substitute to internet access services;
– Can only be provided if there is sufficient network capacity to provide them in addition to any internet access service;
– Must not be to the detriment of the availability or general quality of internet access services for end-users.
PS : Netflix have done battle with ISPs over net neutrality in order to avoid special charges, but now some ISPs start to pay Netflix – reversing the interests. How does such a change influence the Commission’s telecom single market policy?
NV: The Telecoms Single Market Regulation is based on principles (non-discrimination, access to content of the end user’s choice etc) in order to be future proof.
The Regulation will not change because of changes to the commercial behaviour of some operators
PS : Can a ”neutral” network guarantee fair competition and free speech? Is that not a case for active governance rather than the absence of authorities?
NV: The new rules will create a positive individual right of end users to access or distribute internet content and services of their choice. This right can be enforced by courts as well as by regulatory authorities. The rules apply to all customers of internet access service.
National regulatory authorities are fully present in this process. They shall monitor and enforce compliance with the open internet rules. These authorities will thus have the power and obligation to examine how the traffic management practices of internet service providers affect the end-users’ (consumers and businesses) rights to access and distribute content, applications and services of their choice. They will have to ensure that the quality of the open internet access service reflects advances in technology. National regulatory authorities will also have to ensure that the availability and quality of the open internet access service is not degraded by traffic discrimination through internet service providers or by the provision of specialised services. Regulatory authorities furthermore have the responsibility to assess commercial practices, e.g. as regards differentiated data pricing such as zero-rating, to ensure that they do not circumvent the provisions of the Regulation, including those on non-discriminatory traffic management, and do not lead to situations where the choice of end-users would be materially reduced in practice, in their specific market circumstances. Regulators are also empowered to set minimum quality of service requirements on internet access providers and other appropriate and necessary measures to ensure that all end-users enjoy an open internet access service of good quality.
The Mystery of the Digital Economy: Where Is the Money? Where Are the Jobs?
Tuesday, October 20th, 2015
A Critical Look at the #DigitalSingleMarket strategy Part 1
Time and time again we were promised innovation, progress and not least added value from the digital economy. But now economists are increasingly scratching their heads, because we certainly see a lot of disruption through the effects of digital economy, but – in a broad sense – no added value. The German economic magazine Wirtschaftswoche recently reported that the growth of both industrialised countries and emerging markets is slowing considerably, and that the world economy needs a new growth story. Digitization was hailed by many as such a growth story, but at the moment it does not deliver – at least not on a macroeconomic scale. In the United States the economy has shrunk even faster than anywhere else on the world: Yet Silicon Valley is still hailed as the role model of technological innovation. Is there perhaps a connection between digitization and declining economic growth?
First we have to see the bigger picture.
Looking For Growth: Brand Value
The economic performance of GAFA (Google, Apple, Facebook, Amazon) stands in sharp contrast to the overall performance of the world economy. According to Google’s new report, the company improved its turnover by 11% in the second quarter of 2015, and is projected to reach a yearly turnover of 65 Billion € in 2015 (71 Billion US$). The others are on a similar course, so the question why this growth does not affect the general economy does become more and more crucial.
At the same time, many businesses at the fringes of digitization are becoming dissatisfied with the political frame conditions. Whether the entire creative industry, logistics, taxi drivers or even telecom access providers: Everybody fights for a level playing field with GAFA. So where does the growth of GAFA come from, and is it perhaps partially borrowed value from other businesses instead of a classic added value?
Where does the growth of GAFA come from, and is it perhaps partially borrowed value from other businesses instead of a classic added value?
A look at the development of companies’ brand value supports this argument. Brand value companies like Interbrand’s Best Global Brands or Millward Brown’s Brandz try to put a fixed economic value to a company brand. The brand value is based on certain factors, like image reception in public, stock performance and financial performances of the companies. This way company brands can be put into performance charts like music or book sales. As a result you can compare businesses in a broader scale in terms of performance and development over a longer time. And while the brand studies of Millward Brown Brands and Interbrand often disagree in terms of exact value or position of a specific brand, they show the very same tendency: Not only does the brand value of digital companies like Apple and Google soar at unparalleled speeds. At the same time, the values of media and entertainment companies have been going down and being pushed out from the top 100 brand value charts. While 2006 still saw media brands like the New York Times or Reuters in the Top 100 brands, those brands have been completely pushed out of the top 100 in the last decade. Also, Apple and Google overtook Coca Cola as the world’s most successful brand in 2013, while Disney remains the only entertainment brand left in those studies (though it has lost positions). Facebook and Amazon are both top climbers in the recent 2014 studies.
So if you consider the brand values to be representative as the broader picture of the branches in economy, then the last decade has not only seen a rapid growth of digital technology brands, but at the same time a very steep decline of media and entertainment brands. This is a parallel development to many companies’ financial performance. So, does the digital economy favor tech over content in general? And is the internet revolution and digital economy not supposed to liberate content and make the entire economy prosper, not just a few digital technology companies?
Continue reading in Part 2.