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<Dec 02, 19> The Disaggregation of Labor: An Article by Utkarsh Sinha of Bexley in PeopleMattres

Updated: Mar 30

There is potentially, a fundamentally new economic definition of labor around the corner, and our education, skilling, social security and policy framework needs to be upgraded urgently to respond to this impending wave.

The Disaggregation of Labor

What is employment? Is it simply: a job? A contract? An agreement? At its core, for as long as this word has existed in its present form, employment has implied a two-way relationship: between an employee, who agrees to render some service, and an employer who agrees to compensate the employee for the satisfactory rendition of those services. In the perverse end of the employment spectrum lies slavery: a forced, indefinite agreement enforced by the employer for the employee to deliver as much as is feasible, for minimal compensation: often, mere sustenance. The other end of that spectrum lies the promise of a long term, stable employment with pay, perks and benefits, often extending post retirement.

Contract workers lie somewhere along the middle of that spectrum: they eschew long term certainty, benefits and perks to enjoy greater pay and flexibility. For centuries, millennia perhaps - every form of employer - employee engagement could be pegged against this spectrum.

Until the disruption of the gig economy: we are essentially now forking on a new axis perpendicular to the spectrum, adding a new dimension to the contract labor. There are three key factors shaping this bisection: first, negotiation of terms are no longer between an employee and an employer. This change is not trivial. Much of the bargaining ability of both sides lay in the human factor involved in the process of negotiation. In its absence, there is every possibility that the balance of power can weigh on a particular side.

The second factor causing the rise along this axis is the seamless ability for work itself to be broken down into smaller and smaller discrete parts. A London Black Cab driver has to go through a rigorous, five year certification process. He (usually, it's a man), has to be able to pass a highly difficult set of oral examinations, which involve complex route navigations between increasingly obscure points in the city. Essentially, in addition to proving his ability to drive a car, he has to prove himself to be an able navigator. Technology disrupts that: navigation is no longer key to the task of a driver. Essentially, one of the key aspects - that served as a barrier to entry for a job - has been disrupted out of existence. This disaggregation has had a profound effect: essentially, anyone with a license (and hence, hopefully, the ability to drive) and access to a smartphone has the ability to be a driver.

Let us examine that in more detail: what was two jobs melded in one (navigation and driving) has been reduced to one (simply, driving). This has great effects on the price a consumer pays: when you no longer have to pay for someone to have invested time that is essentially equivalent to going to college, you can afford to pay them less. But is this disaggregation unique to driving? Are other skills immune from it? The answer is: no - and this in itself, is not a new phenomenon. I am a banker, and many of my colleagues have no prior training in accounting or math. A literature major can be an effective banker today. This was decidedly not the case before the advent and widespread use of computer models and Excel in our job. When a slide-rule and log tables were the tools of the trade, proficiency in those was non-negotiable.

If this phenomenon isn’t new, what makes the present disruption so unique? The answer lies in the third aspect: the sheer pace, scale and ubiquity of change. The ability exists now to disaggregate labor into constituent pieces, price them effectively, and find hot-swappable employees willing and just skilled enough to offer those discrete pieces for the offered price. The long term effects of this are yet to be seen, but are making themselves apparent. Income and job security are taking a hit for the vast majority of blue-collared jobs. But the trends of disaggregation are not likely to remain limited there: its exponential pace implies white-collared jobs will be impacted soon.

We have, potentially, a fundamentally new economic definition of labor around the corner, and our education, skilling, social security and policy framework needs to be upgraded - urgently - to respond to this impending wave.

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