How will the sharing economy alter job training?

by on June 15, 2015 at 1:01 am in Economics, Web/Tech | Permalink

Samir Varma points my attention to this WSJ Christopher Mims piece:

Right now a college student in Sweden—let’s call him Sven—has a rather unusual summer job. He’s in sales, but he hasn’t met anyone from the company whose products he pushes.

His boss is an app. It considers Sven’s strengths and weaknesses as a salesman, matches him with goods from any of a dozen brands, and plots a route through Stockholm optimized to include as many potential customers as possible in the time allotted to him.

The app is like Uber, but for a sales force. It has many of the same dynamics: Companies can use it to get salespeople on demand, and those salespeople choose when to work and which assignments to accept.

I am very much an Uber fan, but if you are looking for drawbacks that passage expresses one potential problem.  Pre-Uber, acquiring worker talent required lumpier investments on the part of the employer.  You would hire a bunch of people, with the expectation of keeping them around for a while, and then train them to do a bunch of things.  Some of them would work their way up the proverbial ladder, based on what you had taught them, many would not.  But you would train and teach them quite a bit, if only because there was no alternative for getting things done.

In a “sharing economy,” a pre-trained worker is very often on call for a short stint, when needed.  The employer thus has less need to invest in option value from the full-time work force and that means less training.  The result is that more workers will have to teach and train themselves, whether for their current jobs or for a future job they might have later on.

I submit many people cannot train themselves very well, even when the pecuniary returns from such training are fairly strongly positive.  The “at work social infrastructure” for that training is no longer there, and so many sharing economy workers will stay put at their ex ante levels of knowledge.

Uber thus shares the same property which is common to so many other parts of the new knowledge economy, namely that the return to self-training is high, and the return to not-self-training is low.  This further helps those with high levels of discipline and conscientiousness.

Here is a good NYT article about French reluctance to accept Uber.

1 Steve Sailer June 15, 2015 at 1:05 am

Isn’t the point of Uber to pay only the marginal costs rather than the average cost of owning a car and driving it for others? Uber is based on there being a whole bunch of people out there who bought themselves cars and now are stretched financially trying to keep them from being repossessed, so they’ll take less per hour to drive people in their own cars than it would make sense if they were considering a buying a car to use to drive people around.

2 Fan of Steve June 15, 2015 at 1:43 am

Lots of uber drivers in DC I speak to specifically leased or bought their cars to be full-time uber drivers. They all love it.

As far as Uber in France: it seems in many countries the default attitude is always that any change is considered suspicious and should be stopped or heavily regulated. At least in the U.S. there are enough states and cities that allow an idea to demonstrate its benefits.

3 meets June 15, 2015 at 4:04 am

They also drive pretty nice cars, at least in Houston. $40k+ and only a couple years old.

Not exactly sure what to make of that, but they all seem happy and I read some stat that a significant percentage drive in addition to regular jobs.

4 carlolspln June 15, 2015 at 4:17 am

‘Lots of uber drivers in DC I speak to specifically leased or bought their cars to be full-time uber drivers’

Then they’re sitting on losses from stranded assets which will never deliver the required return.

‘They all love it’

Highly doubtful:

5 meets June 15, 2015 at 5:43 am

That’s your evidence?

6 carlolspln June 15, 2015 at 6:06 am

Mate, why aren’t you driving for them? 😉

Sounds like you’re missing a trick..

7 meets June 15, 2015 at 6:15 pm

I have no interest or need to drive for uber.

8 BC June 15, 2015 at 7:30 am

I’m not sure what the original “point” of Uber was, but the main result is that it allows individuals to get around the regulatory capture of the taxi cartels, leading to the low cost of entry into the marketplace. That’s why, as Fan of Steve points out, it’s economical for drivers to lease or buy cars to become full-time drivers. It would not have been economical to buy taxi medallions.

9 Sam Arkande June 15, 2015 at 1:33 am

The whole point of Uber isn’t “sharing economy” or whatever you’ll call it.

It’s to organize worldwide transportation by botcars, when the Law will allow it.

Meanwhile, they’re selling information to subscribers.

10 Dan Lavatan June 15, 2015 at 9:45 pm

Botcars will destroy Uber’s competitive advantage – having a big driver network. If botcars become legal, I can just build myself a site/app, order a bunch of cars, use them as collateral against financing, and compete on equal footing as an individual. It is unlikely we will return our cost of capital, just as most early airlines aren’t around now.

We don’t know when it will be legal, and even if it is legal if it will be successful. I doubt Uber’s investors are just killing time to speculate on the future.

11 Sam Arkande June 16, 2015 at 1:06 am

Uber is building his competitive advantage by organizing many faillible, unperfect and generally bad drivers. When botcars will come, it’ll know how to rule them all.

12 Ryan W June 15, 2015 at 1:48 am

I agree with your analysis and think this points to a collective action problem of which Uber is only a striking example.

If I’m a firm, I want to hire the most talent while expending the least amount of resources. Thus, these on-demand “sharing economy” platforms enable me to acquire just the amount of talent I need without the long-term risk of employing a sub-optimal human. I don’t have to pay for training, disability insurance, vacation, or any of those other things that humans like along with their salaries.

However, if all firms make this same calculation, who trains workers? This norm of on-demand labor should result in a long-term deterioration in labor quality. Without that “at work social structure,” younger salespeople (or professors or engineers or journalists, etc.) don’t find mentors, don’t receive specialized training, don’t get recognized for management potential, and don’t know if they can pay their mortgage next month. This is ultimately a constraint on social mobility, since it obliterates one of the ways individuals can better themselves and their financial/social circumstances.

The only solution appears to be political, but I don’t see that happening any time soon. The political donor class and their offspring are the ones benefiting from this trend, since they have already climbed the proverbial ladder and have the resources to introduce their kids to the right people and finance their years of unpaid internships. Moreover, labor unions have become marginalized because they haven’t kept up with changes in political or business culture.

13 jerseycityjoan June 15, 2015 at 5:23 am

Your analysis is great.

The nonelite are coming under increasing pressure. The explosion will come. It will probably surprise us all. Remember, the ones under 30 don’t have much and don’t see how they will ever have much. That’s a key difference from their parents’ generation who lost a lot in the Great Recession — they had good paying fulltime jobs and houses to lose.

14 Kevin C. June 15, 2015 at 7:12 am

“The explosion will come.”

What explosion?

15 anon June 15, 2015 at 7:25 pm

Has Cowen not talked in detail about why he thinks that this supposed “increasing pressure” won’t build up to an explosion? Large inequality is normal for civilization and most of the time the lower classes don’t do anything drastic to try to change that.

16 clay June 15, 2015 at 1:50 pm

Why wouldn’t the market find a solution? If there’s demand for better trained employees, surely someone — perhaps existing head hunters, or perhaps more savvy upstarts — can find a way to develop employees at relatively low costs and then sell experienced employees to the highest bidder.

17 sp6r=underrated June 15, 2015 at 2:33 pm

Why wouldn’t the market find a solution?

Contrary to libertarian ideology, markets aren’t always inefficient.

18 Kyle June 17, 2015 at 7:08 am

I think this is overly pessimistic. Plenty of jobs will still want to have workers who they can develop the way they want, who learn the internal networks of companies, and who they want to invest time into. Having job development is something workers certainly care about (look at the popularity of consulting and investment banking as a 2-3 year stint where you learn a lot if skills and move on), and they’ll take a pay cut or work worse hours to get it. A more flexible labor force could lead to less job investment, but we’re already most of the way towards that world anyway.

Also, how much more training do taxi drivers get than Uber drivers? I assumed that most of the skill fast food workers learn is general work skills like showing up on time and getting along in a work environment. Is that really reduced by the sharing economy? Maybe more etsy workers at home? But are we trying to say entrepreneurs who get customer feedback learn much less than low level company workers who get sent to training sessions?

19 Chris Purnell June 17, 2015 at 12:27 pm

Isn’t this the business model of ‘call girls’?

20 mulp June 15, 2015 at 2:01 am

Owning a car is training?

Does that mean the government giving out reliable cars which are needed for probably more than 3 out of 4 jobs would count as job training?

21 Axa June 15, 2015 at 7:17 am

Look at the fail rate of driver’s license exam in your region. Driving yourself is already a skill. Driving safe and politely others requires even more skill. Most of time skill requires training, it doesn’t matter if my dad taught me to drive, it’s still training.

Also, in Europe you need some money to make sure you get a driver’s license: 2000+ Euros.

22 Adrian Ratnapala June 15, 2015 at 12:33 pm

I read TC as saying Sven-the-salesman’s training was a start-up capital in much the same were an Uber driver’s car is. Though I think the collective action problem is not so bad in the car case.

Lots of people like to own cars own cars. Lots of people people learn how to driv them. People want to do these things even if they do not drive people around for money. Getting a education in philosophy or art history might be similar. Learning to be a salesman might not be.

23 mkt June 15, 2015 at 2:27 am

“I submit many people cannot train themselves very well”

I agree, which is also why the predictions that online education will largely supplant traditional bricks-and-mortar education are bunk. Most college-level students cannot learn things just by sitting at a computer. Yet Tyler and Alex keep touting the future of online education.

24 prior_approval June 15, 2015 at 5:07 am

This time, reading the comments paid off – yep, Prof. Cowen just pointed out that MRU is essentially worthless, especially as it lacks any ‘pecuniary gains.’

25 Turkey Vulture June 15, 2015 at 10:52 am

Most college-level students cannot learn things by sitting in a lecture hall either.

26 anon June 15, 2015 at 7:28 pm

How are in-person lectures are significantly different from watching a lecture on Youtube? College students already do much of their studying on a computer as well.

27 RM June 15, 2015 at 2:42 am

There are limits to the sharing economy, case in point being Task Rabbit. It has to do with trust, verifying the provision of services, predictability of when the service is needed, and the notice time you give to the provider.

1. Task Rabbit builds itself as finding dog walkers, baby sitters, handymen, painters, etc. They all require trust. People are unlikely to hire the first baby sitter sent by task rabbit, or, worse yet, hire a different stranger to baby sit your kid every Friday night. Nor are you going to leave a handyman you met for the first time in your house to paint the living room while you are at work.

2. How does task rabbit verify that the service is being provided? Unlike Uber, there is no way to track whether the handyman is providing the service, typically because these services are scheduled.

3. More often than not, people know well before hand when they will need services such as baby sitting and handymen. Occasionally, one’s hot water tank will suddenly go out but one’s first inclination would be to call the last guy–a known quantity– who fixed the tank rather than an app.

4. Related to 3, one can typically give providers such as baby sitters, handymen, etc., much notice.

I can see a scenario where one uses task rabbit on a few occasions, builds a list of trustworthy, reliable suppliers, and calls them as needed, bypassing the middle man called task rabbit.

Note this is very different from Uber. For example, there is no discernible difference in the quality of taxi drivers or cars. In fact, Uber has already preselected and homogenized quality, so you really do not care who picks you up. But no matter how much task rabbit does the same, 2, 3, and 4 still provide sufficient incentive to eventually bypass task rabbit.

Which bring us to salespeople. Even if trust is not needed (all transaction are electronic), over time the producer and provider still have incentives to bypass the app: the app will never know; chances are that producers know weeks in advance that they will need a salesperson; and producers can provide much notice to contract sales people.

I see only a small role for an app linking producers to salespeople.

28 Prakash June 15, 2015 at 6:08 am

Morgan Warstler’s plan for a wage subsidy linked to a taskrabbit like platform, what he calls “uber for welfare” would have people not skipping the middleman as the providers would benefit from the wage subsidy.

29 greg June 15, 2015 at 3:01 am

Let’s see: Increasing supply, while reducing demand. After all, are not the people who supply the labor in the ‘sharing economy’ also the people who supply the demand for its products and services? The people who own Uber probably don’t use a very large share of Uber’s services.

Or is something else going on, and how far can it go?

And as for training, it seems to me that the expected return to training for an intermittent and perhaps even temporary job is much less than the expected return for a stable, more permanent position, and thus much more difficult for the would be worker to justify, especially if he was expected to foot the entire bill up front, or more likely to indenture himself for an indeterminate time to some- lender.

30 FC June 15, 2015 at 3:02 am

Employer-provided job training is over but Uber didn’t start the fire. In some parts of the USA many municipal governments expect even police officers and firefighters to obtain and pay for their own training and licensing without any guarantee of a job.

31 Richard June 15, 2015 at 6:45 pm

Isn’t that a risk you take if you continue any education past the minimum requirement?

If I take an acting degree then there is a chance that I may not make a success of my acting career and end up waiting tables for years.

32 AIG June 15, 2015 at 4:46 am

Hmm…how is this different from temp work agencies? (other than obviously the speed of coordination). But that’s what temp work agencies do too: allow you to not incur the cost of full-time long-term employment, while being able to hire people for marginal jobs.

But companies do want to keep the best, because they don’t want other companies to have them too. Hence, it seems to me it changes…nothing.

33 Moreno Klaus June 15, 2015 at 4:58 am

So basically we are getting back to the time where the employer has all the power and the employee zero….gotta love the sharing economy…

34 prior_approval June 15, 2015 at 5:08 am

But the rich are getting richer – there is no goal more worthy of supporting than that, at least in the eyes of the rich.

35 Adrian Ratnapala June 15, 2015 at 12:35 pm

We are getting to the point where the bosses no longer own the means of production, but the workers do. Obviously this hands all power to the bosses.

36 Morono Cluus June 15, 2015 at 11:30 pm

No matter the sircumstences, the big-money, multiple-nation, high-powered employers always have all the powers. That’s why Norway is best. They have oil.

37 Bill June 15, 2015 at 6:01 am

I dont know if you are describing a sharing economy (with respect to workers) as much as an independent contractor economy.

38 China Cat June 15, 2015 at 3:57 pm

Yeah. Not sure why the confusion. Uber!=Wikipedia.

39 Ryan June 15, 2015 at 5:51 pm

I guess I’m still hung up on whether we should listen to academics with very little or possibly no industry experience prescribe.

As much as they want to think it is the case, not all industries can possibly model themselves off of Uber. With any company, you’ll have ramp-up time. In other words, it’s not nearly as simple as, “Where you going tonight? I’ve got a driver’s license.”

40 Prakash June 15, 2015 at 6:26 am

I guess the not-sucky-for-labour-future that would be most compatible with free markets is an open (and possibly subsidised) skilling and badging system. Workers could use their work product as a genuine step up the ladder.

41 China Cat June 15, 2015 at 4:00 pm

One might argue that the socializing of primary education is a part of what got us here. The solution is to socialize secondary education and on the job training?

42 Brandon Berg June 15, 2015 at 6:32 am

This doesn’t seem sustainable. I don’t mean that in the alarmist sense, but in the sense that if most workers won’t train themselves, employers will have to, because the alternative is for the employers who lose the bidding war for self-trained workers to give up and go home because they can’t find anyone qualified to work for them.

43 Jeffrey Deutsch June 22, 2015 at 12:47 am

As Peter Cappelli pointed out in his Why Good People Can’t Get Jobs, employers will, one way or another, pay for training. Those workers who have to train themselves (or shell out for it) are obviously going to demand it back in their wages. And employers also face a shortage of skilled workers.

44 rayward June 15, 2015 at 6:42 am

The Uber economy reminds me of the jobs once taken, or created, by resourceful children, such as the boy who would push his parents’ lawn mower from house to house, ring the neighbors’ door bells, and ask the neighbors if he could cut their grass for $5. It was a good arrangement for everyone (the unused mower put in use, the boy learning responsibility and the benefits of hard work, and the neighbors getting the grass cut for cheap), except for those in the grass cutting business (who we called yard men) who were displaced. Today’s “Uber yard men” are young adults, not children, a reflection of limited opportunities for young adults. Or maybe it’s a reflection of delayed maturity by this generation, as many continue to live at home with their parents and find part-time work as Uber yard men, a good arrangement for everyone (the unused car put in use, the young adult learning responsibility and the benefits of hard work, and the neighbors getting a ride for cheap), except for those in the Uber business (who we called cab drivers) who are displaced.

45 Nemo June 15, 2015 at 7:24 am

I guess we’re stuck with the term “sharing economy”, but it’s hard to think of an example of a word used more antithetical to it’s commonly understood meaning. Generally when this term is used nobody is “sharing” anything. A much more apt term would be “renting economy”.

46 derek June 15, 2015 at 7:24 am

What are you selling that can be sold by someone anonymous plucked off the internet? I’d suggest it isn’t labor that is being devalued here.

What is being devalued are old rigid structures who serve themselves rather than the customer. Uber works because someone planning to get up from the table at a restaurant can quickly and reliably arrange a ride. If the expensive highly regulated taxi services couldn’t provide that, then they lost in the competitive game. The taxi market is characterized by high capital cost peak demand. The regulators tried to rationalize the market by limiting supply. Uber tries to limit commitment; part time drivers able to satisfy peak demand by using underutilized capital stock. The taxi services are being hurt because people have a choice now not to ride in a car that doesn’t smell like a goat. In a protected market your choice is to walk or get in the smelly car.

How this translates into other domains is not clear. How many under employed plumbers or HVAC techs are around that need assistance finding customers to capitalize on their skills? How many computer programmers? Economists? Mechanical engineers? Not very many. On the other hand, how many people are capable and qualified to tutor? Lots, and short term specific tutoring where someone knowledgeable in their field picks up some extra cash on short term arrangements intermediated by some matching software app.

If suggest that broadly available skills that provide careers only in protected silos will become characterized by uber type arrangements. They can’t react to the market change because those whole raison d’etre is to structure the market to the advantage of service providers. Other endeavors where skill development is the core competency of the business, all uber could possibly provide is a dispatching service.

47 Axa June 15, 2015 at 8:39 am

Sure, old rigid structures are collapsing……..before that happens Uber is leaving in Driver’s hands the costs of paying licensing costs.

That’s the global trend now, Uber drivers end up paying the very same entry barrier tariffs traditional taxi drivers pay. Uber pays licensing costs to drivers in Germany because costs are ridiculously cheap. That’s no happening in NYC. In Netherlands Uber said the same to drivers, “get a taxi driver license, it’s your problem”. It wouldn’t be a surprise that the battle between Uber and traditional taxis around the world ends this way: “pay for a taxi driver license, now you can work for us”.

Compared to trucking companies that invest in drivers to pass all regulations, Uber avoids this investment by selling the sharing-economy Kool-Aid. What a magnificent use of marketing

48 derek June 15, 2015 at 9:42 am

Trucking went through the owner operator phase which lasted long enough to bankrupt enough drivers to cause a shortage.

Uber and similar arrangements work fine within certain limits. Once they get large enough they face the same real issues that taxi providers have always faced. Their clients now are investors.

But they have accomplished something. The taxi business is not the same anymore, the cosy/corrupt municipal government arrangements aren’t worth the money anymore.

It worked amazingly well using underused capital. There are a few spots here and there where a similar model could work. But otherwise they are a glorified dispatch service. A necessary and profitable business to be in, but no more.

In some ways these businesses remind me of Enron. The core business was to provide a valuable service as a broker for energy buyers and sellers. Great as long as the arrangements were mutually beneficial and the broker was cheaper than making the phone call yourself. It didn’t work out that way because Enron investors became the core clientele.

I’m constantly approached by these types of people who want to be glorified dispatchers for my services. They imagine that my problem is finding work to do.

Eventually uber and others like them will fail when the service providers figure out that they have the same businesses model as Apple. Lock you in then screw you. But that isn’t much different than the traditional taxi business.

49 Axa June 15, 2015 at 10:08 am

Ohhh, thanks for reminding me the owner-operator trucking crash.

How is Uber actively avoiding that outcome?

50 BC June 15, 2015 at 7:42 am

Pre-uber, employees may have bought training (through salary reductions) from their employers, but that training was likely to be employer-specific. Post-uber, if workers buy training with cash from entities other than their employer, it is more likely to be broadly applicable across multiple potential employers. It’s not clear to me that the former is better. In any event, employers are still likely to share training costs with employees for company-specific skills since it will probably be hard to find those company-specific skills through uber, given that such skills are company specific.

I would agree, though, that uber economies tend to de-bundle firms, decreasing enterprise value and increasing individuals’ values. That does help “those with high levels of discipline and conscientiousness” monetize that discipline and conscientiousness, but I’m not sure how much it hurts those without. Part of enterprise value is knowing which employees are most productive at which roles — one can think of a signalling value in firm-sponsored training where only the firm sees the signal. It’s not clear to me that any of that value goes to low-discipline employees rather than being retained by the firm.

51 cig June 15, 2015 at 7:43 am

Long way to say the “sharing economy” only works for crap menial jobs. You won’t go to Mars by bidding for rocket [science] work units on Mechanical Turk in $5 increments.

52 Darin Bellisario June 15, 2015 at 8:16 am

If there is access to training resources, self-sponsored training can still be efficient. Even in a traditional employment model, in a competitive labor market there are no returns to training if that trainng is applicable outside the firm (because you, firm A, could invest in training the employee, but any increased returns realized by that investment can be captured by another firm that attracts them away, paying them just slightly less than the profits they’ll generate). Of course in practice labor markets are sticky – there are searching costs, and costs to changing jobs, as well as poor signalling associated with changing jobs frequently. On top of that, lots of firms have job-specific training that isn’t wholly applicable outside the company. Nevertheless, the point I’m making is that a traditional full-time employment model does not guarantee an efficient or welfare-maximizing training unless employees themselves can invest in their own training, since ultimately in a competitive labor market they can often extract most of that value anyway.

Access to training resources is the key, but if there is a market for it (which a ‘sharing economy’ might only encourage) then those training resources can crop up. For example if I’m an experience Salesperson on one of these platforms, I might be able to make more money training others (for a fee) than performing Sales myself.

53 Engineer June 15, 2015 at 9:28 am

The result is that more workers will have to teach and train themselves, whether for their current jobs or for a future job they might have later on.

Yes this is where things are going.

But you must tease out the implications from that ie. specialization is career suicide. If you want to ensure your continued employability you will need to focus on the skills that are widely and ascendingly in demand.

You might be great at hacking hypervisors, but forget it and learn Rails instead (for now).

54 anon June 15, 2015 at 7:31 pm

Rails seems to be fading as fast as it was booming. Though I see your point!

55 Randy B June 15, 2015 at 10:28 am

“In a “sharing economy,” a pre-trained worker is very often on call for a short stint, when needed. The employer thus has less need to invest in option value from the full-time work force and that means less training. The result is that more workers will have to teach and train themselves, whether for their current jobs or for a future job they might have later on.”

Seems like this has been a growing feature of the non-“sharing economy” for quite some time too. Large corporations are increasingly reliant on contractor/consultant labor in lieu of actual training and investment in human capital.

56 Scott Gustafson June 15, 2015 at 12:59 pm

The result is that more potential employees will have to pay for their own training. Airlines only hire trained pilots to fly their airplanes. Yoga studios only hire trained instructors to teach their classes. (And lots of companies only hire people with college degrees.)

Not exactly a huge change from where we’ve been heading for the last 50+ years.

57 Albigensian June 15, 2015 at 5:37 pm

Community colleges would seem to be the obvious place to obtain training that’s no longer supplied by employers.

Assuming the comm. colleges hire instructors who are actually competent, have relevant skills, and are interested in and able to teach these skills, of course.

Which is not always the case.

58 Tom Warner June 15, 2015 at 8:03 pm

I think you’re extrapolating a bit too far. The article profiles a freelance marketplace and a temping service that apparently focuses on short-term sales assignments. The described freelancers are self-trained but are apparently long-term and well paid. The salesforce temping service provides training, according to the article.

If you look at Uber, it takes advantage of the existing mixed public/private regulation of driving through licensing, police and insurance. A salesforce temping service is going to have to know and test and train its sellers.

59 Lara June 18, 2015 at 3:22 pm

There can be many things that that and alter things, I believe that we should really make a clear mind in what we need to work, so we can concentrate on that completely. I am right now doing Forex trading with OctaFX broker, it’s a regulated company with having 11 awards in just 4 years, so that really boost my chances to be successful and they have brilliant 8 dollars free bonus account, it can be used perfectly for training myself.

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