Fast Company recently reported that contractors at multiple delivery platforms have partnered with labor advocacy group Working Washington to demand a $15/hour minimum wage across the entire gig economy.

What’s up for Debate?

Not every platform company relies on contractors. Some, like Lyft and TaskRabbit, have formal contractors. Others, like Atlassian and Shopify, look after communities of external developers who are not "contractors," per se -- but create value through their platforms.

But I believe that all platforms can learn from this debate.

The three platforms involved in this debate --  Instacart, DoorDash, and Amazon Flex  --  pay contractors on a per-hour or per-gig basis, guaranteeing a minimum level of pay per job.

However, these companies have come under fire for things like using customer tips to cover part of this minimum per-job fee and “batching” multiple deliveries into one assignment -- so that the per-gig cost becomes lower for the platform -- and not covering worker expenses, like vehicle maintenance and gas money.

Advocates for contractors say that this practice is a way for platforms to pass payroll costs onto the customer -- instead of paying workers a fair wage. Now, contractors are seeking a $15/hour minimum wage, plus reimbursement for any expenses incurred by their assignments.

Why All Platforms Should Watch This Story Closely

Ideally, true platforms are not simply self-contained ecosystems. Rather, they attract a diverse group of creators and consumers, operate marketplaces that accelerate a value-exchange and a generation of economic activity and wealth -- and are governed by a set of shared behavioral standards.

True platforms, then, could be akin to micro-economies. An economy requires the “management of resources … with a view toward productivity” -- and  in a platform ecosystem, supply, demand, and value-exchange must all work in harmony.

To that end, platforms have a responsibility to build trust and goodwill between the customer and the service provider -- for example, a contractor. And while not every platform formally employs contractors, all tend to serve multiple types of creators and consumers.

In my experience, many platforms -- some of which have open APIs and hundreds of partners using its technology and tools -- have constituents that aren't limited to users. Instead, they might also include other platforms like SaaS businesses, consumer platforms, and indie developers who leverage that technology to build valuable, niche solutions for shared audiences.

These aren’t formal “contractor” groups -- but they are certainly people that platforms have a commitment to serve well. If the right economic incentives do not exist within the platform we’re building, platform participants won’t succeed -- and neither, arguably, will the rest of us.

Having been part of several platform teams -- including those at Facebook, Intercom, and Zalando -- there are two things that resonate with me from this debate.

1. Successful platforms give participants the freedom to set their own prices, when possible.

Pricing is at the core of this debate. In the case of the gig economy minimum wage debate, contractors feel that the price determined for their work is unfair and too low -- and, I might assume, the platforms involved feel that they've “optimized” payments for the value received by consumers.

Clearly, these two groups do not agree on what “price” accurately represents the value each group is creating and exchanging.

One way platforms can avoid this kind of disagreement is by allowing end users and/or creators to set their own prices. That model has worked well at companies like Fiverr and Upwork, both of which migrated from a top-down pricing model to a more fluid system, where pricing is mutually set by contractors and buyers.

Another benefit of this approach is that any participant, anywhere in the world, can compete equally for the same business -- and not just on price.

To some extent, that model controls for economic imbalance. $100 USD, for instance, has a different value in the United States than in Ukraine, and even within countries where the same rules can apply. (Having lived in London and visited Liverpool, for instance, I've observed that £1 buys you less in the former, and more in the latter.)

In their paper “Digital Labor Markets and Global Talent Flows,” John Horton, William Kerr and Christopher Stanton demonstrate that the geographical flow of labor on Upwork is asymmetric: 

Source: HBS

The asymmetry in these labor flows demonstrates the important reality that wealth is created when platforms maximize connections between creators and consumers  --  regardless of physical location.

The vast majority of Upwork’s value exchange happens across borders, and it’s this set-your-own-price model that’s created even more opportunities for creators and consumers to connect, and to transact with each other.

Through this transition, Upwork has sidestepped the potential stumbling block of setting a "wrong" or "unfair" price for services provided through its platform. Consumers and creators apply their own unit of value to each exchange, up front. The platform “lets the customer decide.”

2. Before monetizing, consider all constituents’ interests.

At a product company, the value exchange between vendor and buyer is very simple: Consumers expect a quality product from the vendor, and vendors expect to be paid.

But that exchange becomes more complicated when you’re a platform. Not only do providers sell their products to consumers -- they must also look after their own relationships with third-party creators who build on top of that platform, provide mechanisms for those creators to connect with consumers, and ensure the quality of goods or services delivered via the consumer-creator relationship.

Each of these value-exchange events is an opportunity to generate revenue, which is one reason we’re seeing more and more companies aspire to become platforms. But a common pitfall of monetization is that, sometimes, it serves only one group’s interests -- at the expense of another’s.

Platforms looking to monetize their ecosystems could do well to preempt similar issues by ensuring they create a fair and balanced playing field for all participants. While platforms may earn more in the short term with aggressive monetization tactics -- the ones that fail to build long-term goodwill, trust, and positive financial outcomes for creators can result in the collapse of their micro-economy .  In turn, the consumer experience is negatively impacted, as niche needs will no longer be served.

What Do Platforms Owe to Their Micro-Economies?

This debate is the latest permutation of a question more and more platforms will face: When a platform creates a new type of behavior, are they responsible for regulating that behavior on  --  or off -- of the platform itself?

We’ve seen this discussion unfold as companies like Facebook and Twitter have taken heat for failing to stop hate speech, harassment, and misinformation on their platforms. In this scenario, platforms are contending with their own policy decisions, rather than external unintended consequences -- but I’d argue that the most important takeaway is a natural extension of this broader question.

The individuals responsible for monetization and governance decisions at platform companies have to remember that, at the end of the day, all platform participants are humans. They’re more than the bits and bytes logging each delivery made or order completed . They’re real people, with bills to pay and families to feed.

The individuals responsible for monetization and governance decisions at platform companies have to remember that, at the end of the day, all platform participants are humans. They’re more than the bits and bytes logging each delivery made or order completed . They’re real people, with bills to pay and families to feed.

They also happen to be the reason that platforms evolve and grow in the first place. The decisions made by platforms, then, can have profound effects on these lives -- and it could be argued that they have an obligation to be transparent and upfront about how they’ll interact with this foundation of humans, and leave room for informed decisions on how or where to spend their working hours.

The most successful platforms, ideally, are the ones where all participants feel they are being treated fairly, and where value is distributed equally. Deliberately creating parity between constituent groups, and ensuring each cohort’s interests are protected isn’t just the right thing to do . It ensures the micro-economy will be around far into the future.

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