Weekly Update

Workforce-as-a-service, while precarious, is here to stay

The online marketplace for creative and professional freelance work is growing steadily. One indication came last week as Fiverr raised $30 million from a group pf well-known investors, including Qumra Capital, who led the round, and existing investors Bessemer Venture Partners and Accel Partners participating. Qumra Capital Managing Partner Erez Shachar has taken a seat on the board. Valuation was not disclosed.

Fiverr is not a clone of TaskRabbit, but it shares an aesthetic: a site where you can get a hireling to do something for you cheap, hence the Fiverr name. But otherwise the orientation of the service is more business professional services, albeit super economical.

This weekend, the NY Times ran a much discussed article by Natasha Singer (see In the Sharing Economy, Workers Find Both Freedom and Uncertainty), that explored the lives of individuals trying to piece together a work life from services like Fiverr, Uber, Lyft, and TaskRabbit, and the lengths they have to go through to eke out a living. While we know this is a growing trend, authoritative statistics are hard to find. From Singer’s piece:

There are no definitive statistics on how many people work in the gig economy. But according to a report from MBO Partners, a company that provides consulting services to independent contractors, about 17.7 million Americans last year worked more than half time as independent contributors, among them project workers.

With piecemeal gigs easier to obtain than long-term employment, a new class of laborer, dependent on precarious work and wages, is emerging. In place of the “proletariat,” Guy Standing, a labor economist, calls them the “precariat.”

“They may be able to paint someone’s shed this week,” says Dr. Standing, a professor of developmental studies at the University of London. “But they don’t know what will happen next week.”

He views peer marketplaces as part of a larger global phenomenon, in which labor brokers encourage people to work on contingency without basic employment benefits or protections. The companies essentially channel one-off tasks to the fastest taker or lowest bidder, he says, pitting workers against one another in a kind of labor elimination match.

The flexible timetables of project work are a trade-off for regular employment income and benefits. Retailers, restaurant chains and other employers may require more rigid work schedules than piecemeal gigs, or, worse, keep their workers guessing from week to week about which hours they will work. But many of those employers also offer workers benefits like disability pay or commuter discounts.

My viewpoint is that these market platforms (or ‘placeforms’) are filling a need, helping individuals or businesses get various work tasks done in a fast and economical way. And those that participate are also benefitting, in that the economics of work are shifting, and larger numbers of workers find full-time jobs harder to find.

At the same time, Standing’s comments have validity: the precariat have little certainty in their work, and as a result, operate under the threat that there might be no work tomorrow, or the day after. Even those with slightly more stable working relationships — like the part-timers at Starbucks — live with a constantly shifting schedule that makes normal life nearly impossible (see Starbucks agrees to change scheduling policies: Too little, too late?). And this lack of certainty suggests that we need a different and better social contract. For example, couldn’t these services assess a small fee on each gig and hold that in escrow to help the workers pay their social security assessment? Otherwise, the workers are required to do that themselves.

Instead, the precariat are faced with the prospect of endlessly changing work agreements. For example, last month TaskRabbit changed the approach it uses for customers to select helpers though the service, and Uber unilaterally dropped its fees in many cities to undercut alternatives. This market is very wild west, and the ones that get pinched at the end of the day are the task workers.

Another event last week, Adecco Group, a large HR solutions provider, acquired OnForce, a provider of technical personnel in an on-demand basis. Terms were not released. There have been other mergers and investments in 2014 — like Work Market’s $10 million round in May (see Work Market raises $10M to move the freelance labor “placeform” forward) and the merger of eLance and oDesk (see oDesk and Elance announce a merger) — which show the growth potential for what some are calling workforce-as-a-service.

There is no doubt that placeforms are essential to support the workforce-as-a-service market, and that these can help all involved if implemented wisely. For example, WAAS players can expel companies that attempt to cheat workers, and can establish what is the average rate for an iPhone developer in Berlin, which freelancers and companies may not be able to do. But the tendency towards a race-to-the-bottom fee cutting threatens the security of the freelancers on which the market for WAAS relies.