Working in the Cloud: How the Platform Economy Will Transform Employment

July 25, 2015

This week, the Roosevelt Institute’s Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

Digital platforms are the base upon which an increasing number of activities—economic, social, and political—are being organized. If the Industrial Revolution was organized around the factory, today’s changes are organized around the algorithms running in the cloud. The salience of these digital platforms suggests that we are in the midst of a reorganization of our economy in which the platform firms are developing power roughly equivalent to that of Ford, General Motors, and General Electric of earlier eras.

Like the Industrial Revolution, this “platform economy” is already having a profound impact on firm organization, employment relationships, and types of work available across a wide variety of economic activities. Will the digital economy in this current manifestation, based ultimately on the operation of algorithms in cloud computing, inexorably lead to the elimination of jobs and work? Or are new opportunities for work emerging? In what new ways is value being created and captured?

In our thought brief, we maintain that even as algorithms automate work, “new work” is being created. App stores, YouTube, Uber, TaskRabbit, Homejoy, and many other platform firms are transforming industries by linking together “workers” with customers in new ways. In some cases, this is displacing or threatening existing, often regulated, service providers such as taxis and hotels. In other cases, it is formalizing previously less organized or locally organized work. Finally, other platforms, such as app stores and YouTube, are creating entirely new occupations or occupational branches.

And yet, everywhere “employment” appears to be more precarious than ever, with the emergence of the Gig/1099 Economy and non-monetarily-compensated value creation such as user-created content on Facebook or YouTube. Paradoxically, it could be argued that more value than ever is being created, even while traditional notions of employment are challenged. These changes are not likely to result in the “workerless” society, but rather in a society within which the preponderance of the work and value creation is more dispersed than ever before, even as the platform owner centralizes the transactions and captures value from them.

The particular configuration of the platform economy will vary greatly across countries and across sectors, both in service and traditional manufacturing sectors. W know from examining previous technological changes that the manner in which technology is deployed and utilized powerfully shapes the employment outcomes, both in terms of the number and character of jobs. As existing firms and new firms are established to deploy these new ICT technologies, they are overturning existing domestic employment and challenging social policies. This creates conundrums for policymakers concerned about employment and equality as they are pushed to support these transformations, but also to prepare for what are likely disconcerting outcomes. Supporting the transformation requires, for example, not only building the information infrastructure but also creating the market rules to encourage experimentation and new methods of value creation. This will engender intense political fights about who captures the value and who suffers the consequences of these transformations.