Online Labor Platforms: Technology for Everyone?

13 October 2016
ABOUT THIS Perspective

Emerging and developing economies in particular are struggling to cope with the global jobs crisis, as vulnerable employment and underemployment continue to plague their labor markets.

The ILO projects that an additional 1.1 million people will be rendered jobless in 2017. Emerging and developing economies in particular are struggling to cope with the global jobs crisis, as vulnerable employment and underemployment continue to plague their labor markets.

In light of this prediction, it is interesting to return to a 2015 study by McKinsey Global Institute (MGI). The study claims that “online talent platforms” – including and LinkedIn, which connect individuals with job opportunities, and on-demand work platforms like Uber and Upwork – will create the equivalent of 72 million full-time jobs and add up to $2.7 trillion to global Gross Domestic Product (GDP) by 2025. A staggering 540 million people could benefit from these platforms. Of this, as many as 60 million people could find work that is a better fit to their skills or preferences, and another 50 million could make the switch from informal to formal employment.

No matter how you slice it, these numbers are incredible.

But how much potential is there really for online talent platforms to solve employment challenges around the world, and overcome the grim forecasts by the ILO and others?

Digital labor platforms have the potential to drive employment and wage growth in developing countries, by creating a level playing field and shifting employment from high-wage to low-wage countries. The platforms could also benefit women by enabling flexible work schedules for those balancing professional and family obligations, or youth given their greater degree of IT literacy. But this assumes that no factor other than an individual’s skills and productivity comes into play. The projected gains from online labor platforms stem from the transparency, dynamism and efficiency that these platforms could potentially inject in the jobs market. The caveat, however, is the ability of these platforms to bridge important information gaps.

A growing body of literature picks up on this very caveat – including a paper by Galperin and Greppi, in JustJobs Network’s forthcoming volume, “Transformations in Technology, Transformations in Work.” The authors examine Nubelo – the largest online labor platform for Spanish-speaking employers and workers – and find that employers, whenever they lack complete information about potential employees, tend to award online labor contracts based on nationality.

Workers based in developing countries are 42 percent less likely than Spanish workers to win contracts from employers in Spain – even when all other factors, like qualification and prior work experience, are equal. Spanish workers also earn a wage premium of 16 percent over workers from other nationalities. These results emerge not because Spanish employers are inherently prejudiced against workers from developing countries, but because their preferences are affected by lack of information.

One thing is clear: Online labor platforms hold immense promise for creating more and better employment for workers worldwide. But this potential needs a supporting policy framework. There is no automatic correlation between the advent and proliferation of such platforms, and the growth of employment opportunities.

What sorts of policies would address the problem?

Galperin and Greppi call for “collaboration between governments in less-developed countries and platform operators for promoting skills training and for the development of certification mechanisms to reduce quality uncertainty among foreign employers.” They also suggest that governments in developing countries should establish procurement policies that favor local talent from online labor platforms, to help these workers establish their credibility on the platform.

Based on case studies like this one from around the world, JJN’s 10-chapter volume sketches the complex and evolving relationship between technological transformation and jobs. The report forms part of broader effort by the JustJobs Network to help governments, civil society and businesses navigate the rapid, large-scale changes that are reshaping the world of work. Read about our “Transformations in Work” campaign here.