Dynamic wages make work a gamble

{"text":[[{"start":null,"text":"

"}],[{"start":5.8,"text":"Sometimes, a “scandal” comes along that leaves you underwhelmed. In my case, I have struggled to muster much outrage over complaints that “dynamic pricing” algorithms push up the price of items such as pop concert tickets when demand is high. The notion that prices might rise when demand outstrips supply doesn’t strike me as particularly outlandish. It’s just that, these days, companies have much more data at their disposal to gauge demand and supply in real time, and in a world of ecommerce, a much easier way to change prices quickly in response."}],[{"start":48.43,"text":"But what if you took that logic, and applied it to wages? What if you couldn’t predict how much you would be paid each day, regardless of the hours you put in or the performance you achieved, because your pay rate would be varied by an algorithm, based on a range of factors you couldn’t necessarily control?"}],[{"start":70.92,"text":"This is not a hypothetical scenario. Over the past few years, a number of gig economy companies in the ride-hailing and food-delivery sectors have implemented algorithmically determined dynamic pay for the workers on their platforms. This means that rather than earning a fee per task based on a predictable formula (such as time or distance), they are now offered a bespoke fee for each task, which they must quickly decide whether to accept or reject in their app."}],[{"start":105.06,"text":"Deliveroo, for example, tells riders that “the fee for each order is unique” and is based on estimates of time, distance, the rider’s location, the time of day, the day of the week, the busyness of the restaurant and a number of other factors."}],[{"start":124.65,"text":"What’s in it for the companies? The use of these algorithms might well help to make the matching between customers and workers more efficient, potentially benefiting both sides. That said, it doesn’t take a hardened cynic to suspect another aim of the business could be to make sure it never pays more than it needs to. Indeed Len Sherman, an adjunct professor at Columbia Business School, has argued that Uber’s recent improvements in profitability can be attributed to its implementation of dynamic pricing and pay."}],[{"start":161.8,"text":"When researchers at the University of Oxford’s department of computer science analysed data volunteered by 258 Uber drivers covering more than 1.5mn trips between 2016 and 2024, they concluded that after dynamic pay and pricing was introduced in London in 2023, “Uber’s cut has increased, job allocation and pay is less predictable, inequality between drivers [has] increased, and drivers spend more time waiting for jobs.”"}],[{"start":201.09,"text":"That said, the study was based on only a small sample of drivers and could not isolate the causal effect of dynamic pay from other market factors that may have been at play. An Uber spokesperson said: “We do not recognise the figures in this report”, and added that drivers were given “a weekly summary of their earnings, which includes a clear breakdown of what Uber and the driver received from trips”."}],[{"start":231.57,"text":"Deliveroo told me its pay model was “designed for flexibility and transparency” and that “riders see the fee they’ll get paid upfront, along with the restaurant and customer locations, empowering them to accept or reject orders with all the necessary information”. Both Uber and Deliveroo have minimum pay rates in the UK."}],[{"start":257.25,"text":"In truth, it is very hard to know from the outside what effect dynamic pay has on workers — and for workers, that is part of the problem. Without knowing why exactly your pay changes, it is easy to suspect you are not being treated fairly."}],[{"start":279.48,"text":"When the Low Pay Commission (LPC), the independent UK body appointed by the government to advise on minimum wages, investigated the gig economy in a report last year, it heard “frequent complaints about the opacity of pay, with platform workers across several sectors agreeing this had worsened over time”. One worker told the commission: “On delivery you don’t have a set structure for the price, so they make it up as they go in my opinion.” Another said: “They’ve upped the prices, the delivery fee, but we . . . actually get less money.”"}],[{"start":319.97,"text":"The other problem is the uncertainty. Of course, when you are paid by the task rather than the hour, you already have an uncertain income because the number of tasks might vary. But dynamic pay adds another layer of unpredictability. The LPC report found that pay was often “composite and variable” and “rates changed from hour to hour” which “aggravated . . . income insecurity”."}],[{"start":349.75,"text":"Reuben Binns, one of the researchers in the Oxford study, has come to a similar conclusion. “To have that uncertainty hanging over you all the time . . . it turns work into a gamble, basically,” he told me. Indeed, Veena Dubal, a law professor at University of California, Irvine, has described the use of algorithms to set pay as the “gamblification” of work."}],[{"start":374.8,"text":"There is a lesson here too for companies that want to use dynamic pricing for consumer goods and services (and for people like me, who have hitherto had trouble seeing what the fuss is about when it comes to prices). Unpredictability and opacity do not sit well with people; they breed insecurity and mistrust. If these practices continue to expand, and trying to buy things or earn money begins to feel increasingly like making a series of bets in the dark, then more and more people will start to suspect the corollary: that the house always wins."}],[{"start":423.49,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1754993432_4578.mp3"}