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06 Dec 2016

Uberization Can Also Mean Destruction

An entire portion of the sharing economy is enabled by “uberized” work forces. Unfortunately, the reality behind uberized work is in fact Taylorism 2.0! We speak with Thibault Daudigeos and Vincent Pasquier who highlight the limits of the sharing economy and its associated management challenges.

Thibault Daudigeos is a researcher in the Alternative Forms of Markets and Organizations team at Grenoble Ecole de Management. Vincent Pasquier is a PhD student in Management Sciences at Grenoble Ecole de Management.

“Uberization is promoted as a movement to free workers and allow them to work on a case by case approach without organizational constraints. However, for the majority of these workers, the reality is quite different: multiple part-time jobs, task allocation and low payments per task.”

With this view of uberization, who are the winners and losers of this change?

There are two primary winners: consumers and the startups that are leading this sharing economy. For consumers, they receive better services in terms of time, quality and pricing. Uber is the best illustration of this with its improved service (GPS tracking of taxis, ergonomic web interface, etc.) and lower pricing than traditional taxis. The second winners of this change are the startups who are on their way to becoming or have already become giants (Uber, AirBnB, Amazon, etc.).

However, the situation for employees is quite different. These new business and organization models have definitely created flexibility for workers. They also enable people who live far away from job markets to find employment. However, uberization also causes destruction. The primary impact is economic. The first quantitative studies on this subject are quite clear: in the majority of cases, uberization translates to lower wages. And this profits consumers and intermediaries.

For example, the Amazon Mechanical Turk platform provides US workers with an average wage of $5.15 per hour, which is 35% lower than the US’s minimum wage. And their minimum wage is already very low compared to French minimum wage.

Uberization is designed to reduce the cost of work. Could you explain the main methods to reduce costs through uberization?

There are two primary factors that, when combined, explain the lower salaries created by uberization. First, by increasing the potential number of job offers via the web, these platforms increase competition between workers. Competition can even become global if you’re speaking about digital services such as graphic design. There is also a legal factor. These platforms are operating in a grey zone in terms of labor force laws and regulations.

They fix their wages freely with independent workers and avoid minimum wages that would be required if they were to actually hire employees. Yet they retain a form of power over workers that’s very similar to an employer. Legal action is being taken on this principle in various countries. Because these startups are building on a legal vacuum to quickly earn market shares, economists sometimes describe them as being part of a “hold up” economy rather than a sharing economy.

From this perspective, uberization can be seen as a step back towards the environment that existed before the creation of work regulations in the 19th century. Back then, intermediaries organized the use of workers in exchange for a commission, much like current internet platforms. Yet our work regulations were created precisely to fight against this type of approach. While it would appear that this legal grey zone will not last indefinitely, it will have lasted long enough for these players to become major actors in their sector of activity.

What are the management challenges associated with uberization?

In terms of management and workforce organization, uberization can create two changes: a division of tasks and externalization. For example, tasks carried out by a sales or legal department could be divided up and placed online to find external service providers. However, such changes imply managerial risks that have already been greatly explored in sociology and the science of work.

For managers and employees, uberization will bring questions in terms of organization: how can you encourage a group dynamic? How to encourage worker engagement when they’re no longer part of a shared identity with solidarity and proximity? How can you encourage collective intelligence, skills sharing and innovation when working groups are temporary or simply don’t exist?

In fact, uberization causes numerous challenges that are in stark contrast with most companies’ current efforts to free themselves of the organizational constraints of a Taylorist approach.

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