Capital versus labour in the digital age: Rigged against workers

Many of these are delivered through digital platforms. Digital platforms are increasingly becoming the foundational architecture for economic activity, enabling everything from financial transactions, provision of training and logistics, to the delivery of food and personal care at home.

But behind the scenes, this rise of digital platforms is both fuelling and being fuelled by the hyper-financialization that has come to characterize the global economy in recent decades. 

In this era, private capital is, often unwittingly, pitted against the well-being of labour. A lack of effective governance and regulation exacerbates labour market volatility and widens inequality.

The game: It goes something like this. Venture capital and private equity investors pour investment into a large portfolio of companies at the startup stage, knowing well that most will fail. But the few platforms that do succeed will provide outsized financial returns and will make up for the failed investments.

Backed by investor funding, digital platform startups race to gain market share, often willing to incur significant financial losses in the early stages. 

The idea is that once the digital platform captures a large share of consumers and service providers, it will be able to dominate the ecosystem. The platform then gains oversized influence and leverage over aspects like pricing and other practices that will hopefully turn losses into profits.

What’s more, digital platforms are enabling a world where jobs are broken up into task-based ‘gigs’. Rather than engaging workers under employee contracts, platforms engage self-employed contractors to deliver task-based services using service contracts. 

Niti Aayog estimates that the number of gig workers will increase to 23.5 million by 2029-30, from the current 8-10 million. The digital platforms are seen as intermediaries of transactions rather than employers. 

This frees them from the legal obligation to provide employee entitlements, reducing labour and compliance costs. Incurring losses in favour of more market share is acceptable, but expending resources on labour is financially inefficient.

Another unique facet of digital platforms is their use of the data that they collect from consumers and workers, and the algorithms they use to optimize their businesses.

These are widely accepted ‘risk and reward’ plays. But what happens to workers in this rigged game?

Those who bear the brunt: When platforms fail, direct employees and a large number of gig-workers find themselves without work and without an income. Many workers rely on these to support themselves and their families. Unaware of these risks built into the system, these information asymmetries leave workers at a disadvantage from the get-go.

The platforms that do survive tend to be ones that have been able to capture and hold on to market share. They are now able to determine their own standards in the market. 

This consolidation, where only the fittest platforms survive, along with a large and growing youth population, and a lack of enough jobs in the economy, means that platforms have a surplus pool of labour to source from. This adds to their ability to set the terms of engagement such as commission rates, incentives, and other conditions of work.

In the traditional economy, the state regulatory architecture shapes employment practices. But in the digital transaction economy, platform companies decide. The contract between self-employed contractors and the platform determines the conditions of work, including compensation, incentive structures and often also work hours, much like a traditional employer. 

Yet, labour platforms claim to be aggregators are not legally regarded as employers, since gig workers are not deemed as employees; both are beyond the purview of labour protections and regulations.

Digital platforms deploy various kinds of algorithms. But a lack of transparency in these makes it difficult to govern platforms and spot discrimination when data is biased.

For instance, with digital labour platforms, it is difficult to gauge the quantity and time of work made available to platform workers; how remuneration is calculated and what deductions are made; ratings of workers; sanctions applied to workers; as well as downgrading or de-activation of workers by the platform. There is also a lack of disclosure about the nature of data that algorithms collect; how this information is used; and what for.

The asymmetry of information gives platforms an overwhelming upper hand over workers. Lack of transparency in algorithms and concerns around data collection and privacy weaken the bargaining power of labour.

The urgency of reforms: Better governance of digital platforms—and technology at large—is an essential step towards rebalancing the skewed relationship between capital and labour.

All too often, we are enamored by startup culture that signals entrepreneurial spirit and innovation in our country, but we overlook the cascading effects that this form of hyper-financialization has on workers.

We need appropriate regulatory structures to protect workers in this rigged game. After all, an economy built on the sound foundations of a more stable labour market will benefit businesses too.

The author is founder and executive director of the JustJobs Network.