Digital platforms can be seen as tools that help us do more and better things on the Internet. Whether it be search engines, social media platforms or media streaming services, most of us use various platforms more and more.
In recent years, the taxi and accommodations industries have seen the rapid rise of a new breed of competitions, which have gone from virtually zero to market dominance in little under a decade. This unprecedented growth in established industries is enabled by new applications of intermediary platforms which in turn are used to match buyers and sellers in new ways. The transactions are further boosted by the use of reputation systems, which enables for increased trust between the parties – if hundreds of strangers have good experiences dealing with a particular seller or buyer, why shouldn’t I trust her?
It is a simple concept but the technology behind it isn’t
It is a simple concept but the technology behind it isn’t. The rapid rise of Uber and AirBnb, the massive amounts of venture capital funding flooding into startup companies building new intermediary platforms, and the fact that consumers seem to like buying services with less hassle all speak towards this phenomenon growing in scope over the next decade. Oh, and the prices are super low too.
More worryingly, the practices on some platforms are pointing towards a much more serious trend in society. Widening income gaps and stagnant wages in most developed countries are clearly harming economic growth, social cohesion and many peoples possibilities to earn a living. The platforms use of self-employed labour to carry out the actual tasks facilitated by the platforms have enabled platform operators to gain a regulatory arbitrage over the competition, meaning the platforms face a much smaller regulatory burden compared to their more traditional competitors who are competing for the same customers. It has also meant that platform operators, such as in the US, can pay the workers wages well below the minimum wage, after expenses are taken into account.
While recognising that there is great potential in this innovative way to organise work, and we most likely haven’t seen its innovative prowess to the fullest yet, we must also recognise that there is little innovation in the casualising of labour standards in order to lower prices and gain competitive advantage over the competition. If this development goes unchecked, income inequality will increase, while social cohesion and mobility will further be impeded, speeding up an already dangerous spiral.