The field of personnel economics is crowded with academic studies on how employers can screen workers and avoid hiring bad employees, but little work has been done on how workers can do the same with employers.
Economists Aaron Sojourner and Alan Benson and computer scientist Akhmed Umyarov of the University of Minnesota’s Carlson School decided to take on this question, using an online labor market as their laboratory. In the process, they gained new insights into wage theft and ways that people are combatting it.
Millions of people are finding and doing work through websites such as Upwork, Amazon’s Mechanical Turk (M-Turk), TaskRabbit, and Fiverr. Variously called the “gig” economy and the “on-demand workforce,” the number of people engaged in such work isn’t clear. Nor are the labor laws that apply to the online workplace.
Online work “is a big gray area,” notes Sojourner, an assistant professor in the Carlson School's Center for Human Resources & Labor Studies. “It’s not well understood at all. And it is rising in importance, although there is some debate about how important it is.”
While new terrain, these online labor markets provide a perfect laboratory for Sojourner and his fellow University of Minnesota researchers to look into the behavior of employers and employees. They chose to use M-Turk, a massive website where people can be hired to perform “micro-tasks” – small jobs that might take only few minutes – for as little as 10 cents.
At the time of the study, most workers on the site were in the United States. Today, M-Turk claims to provide access to a half million workers in 190 countries.
Unlike some other online labor markets, M-Turk provides no protections if a worker is not paid, so wage theft occurs regularly.
“In this market, employers can choose to simply not pay a worker for their work product,” Benson said. “They can use that work but then say, ‘Oh it’s defective,’ provide no evidence that it’s defective and decline to pay them.”
With no recourse through M-Turk, workers who use the site collaborated with computer graduate students from the University of California-San Diego to develop their own tool, called Turkopticon, to rate employers. This tool has been an effective deterrent against wage theft, the researchers learned.
“What we found in our research is this collective action, this form of sharing the reputation [of employers] with their fellow workers, discourages employers, discourages people who post those tasks, from treating those workers unfairly,” Benson said.
How the study was done
The researchers conducted two experiments. The first tested the validity of the Turkopticon ratings from the standpoint of a worker. A research assistant randomly selected tasks from employers rated good, bad, or no reputation and sent them to a second research assistant, who was not informed of the ratings and performed the work.
The researchers found that “badly rated employers committed wage theft about five times as often as the well-rated employers,” Sojourner said. “And a worker who followed the strategy of only working for highly rated employers would make about 40 percent more per hour than a worker who ended up only working for low-rated employers.”
The second experiment measured the effect of employers’ reputations on their ability to recruit workers. The researchers created 36 employers on Mechanical Turk, then endowed them with good, bad or no ratings using Turkopticon. They examined the rate they attracted workers to posted jobs.
Employers with good reputations attracted workers 50 percent more quickly than employers with no rating and 100 percent more quickly than employers with bad reputations, the researchers found.
“If I have a good reputation, as soon as I treat workers unfairly, then workers who communicate that information to others, they also have the power to ruin that reputation and my ability to get workers in the future,” explained Benson. “That’s what our experiment shows.”
Turkopticon – the tool that workers use to share this information – is interesting because it depends on workers putting the good of the community above their own self-interest.
Online workers are “voluntarily contributing their own experience and their own private information to this common pool that other workers could benefit from,” said Sojourner. “In a sense, it’s really a form of mutual aid or worker solidarity.”
Lessons for the broader labor market
Results were published in November in a discussion paper titled “Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market.”
Sojourner and Benson believe their findings can be applicable to all kinds of workplaces. Economists have long seen the value of “full information” and “the idea that, where information isn’t perfect, there are opportunities for people to get ripped off and for markets to not function well,” Sojourner said.
The growth of communications technologies that accompany these online platforms may provide a solution for workers who lack other forms of organization and information sharing – such as a union, he said.
Currently, organizations like the Freelancers Union and websites such as Glassdoor and Contratados are filling some of that need, allowing workers to share information about employers throughout the economy.
For example, the Freelancers Union arose to help small contractors and freelancers avoid difficult or unforthcoming clients. The website Contratados helps Spanish-speaking migrants avoid abusive employers and understand their rights. Glassdoor helps everyone from minimum wage workers to executives share their experience with employers.
“Whatever institutions, whatever organizations, create these solutions that are picked up and useful to workers, that help them gain information they want, are going to thrive,” Sojourner said. “There’s a big opportunity to create those solutions and create that value, to fill these dark spaces with light.”
More research needs to be done – and then applied to a labor-management relations system that hasn’t been fundamentally updated in decades.
The online labor market “is a world where laws haven’t caught up to the economic reality, haven’t caught up to the trends,” said Benson. “It’s kind of the Wild West for labor rights.”