Online Gig Economy Up 26% Over Last Year: Oxford Internet Institute

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This is the first in a series of posts reporting on recent findings of the Oxford Internet Institute’s iLabour Project, which we reported on back in September 2016. We will also cover other findings on enterprise adoption.

The Oxford Internet Institute recently highlighted a sharp rise in its Online Labour Index, which “measures the utilization of online labor across countries and occupations by tracking the number of projects and tasks in real time.”

The “normalized” index is based on the number of new projects posted daily to six of the largest English-language labor platforms, reportedly accounting for at least 60% of all traffic to English-language online labour platforms. According to the index methodology overview, these platforms represent a “range of different market mechanisms and contracting styles, from online piecework to hourly freelancing.” Details of the methodology can be found here.

The iLabour Index Is Up

It is important to emphasize that the index measures the category of “digitally delivered” labor. This consists of online freelancing and crowd work — “temporary and project-based work conducted remotely over digital platforms.” Vili Lehdonvirta, an associate professor and senior research fellow at the Oxford Internet Institute, noted that unlike the local gig economy of driving and delivery work, this online gig economy often requires specialized skills such as programming and graphic design.

The chart below represents the index, which increased 40 basis points (or 40%) between the months of January and May 2017, but then declined by 15 basis points by early July. The factors driving these changes are still being investigated.

Kässi, O. & Lehdonvirta, V. (2016) Online Labour Index: Measuring the Online Gig Economy for Policy and Research. Paper presented at Internet, Politics & Policy 2016, 22-23 September, Oxford, UK. http://ilabour.oii.ox.ac.uk/online-labour-index/

Earlier in the year, Lehdonvirta thought he might have been observing just cyclical changes. “Turns out it was not just seasonal variation,” he said. “Now that we have gathered a full year’s worth of data and more, we can see that the market grew by 25.5% from July 1, 2016, to June, 30, 2017! This means that over a quarter more tasks and projects were posted in a day than just a year before. A little under half of this growth was due to a dramatic spurt in the last three months of the period.”

Lehdonvirta also pointed to insights that arise from breaking down the index by occupation:

  • Software development and technology work — not surprisingly — is both the largest (about 50% of all projects) and the fastest growing occupational category (increasing to 48.8 points in June 2017 from 35.0 index points in July 2016, an increase of 37%).
  • Creative and multimedia, the next largest category (about a quarter of all posted projects) grew 21% over the same period.
  • Clerical and data entry, which consists largely of the kind of work done on Amazon Mechanical Turk, remained flat.
  • Professional services (the likes of accounting, business consulting and legal advice), the smallest category (less than 3% of projects measured in the index), was the fastest growing category (43% over period).

While some of these growth rates may seem high, we can be almost sure that this growth is taking place in the context of an longer-term trend upward. In contrast, the index measurements go back just a year.

Where Do Requests for Online Work Come From?

Another set of data tracked within the Online Labour Project in conjunction with index is the demand side breakdown of projects posted by country/region and occupational category, as shown below:

As an overlay to this data, Lehdonvirta noted: “If we break down the index by employer/client country, we can see that growth was fastest in Europe (excluding U.K.) and slowest in India and Africa, which didn’t grow at all. United States has retained its position as the dominant employer country, having a market share of 46%. But last year its share was 52%, so employers elsewhere in the world are catching up.”

Spend Matters Perspective

The iLabour Index is an important new measure of the growth in this category of online work. It is perhaps informative that Staffing Industry Analysts’ measurement and the iLabour Index have the category growing at double digits.

But just one year of measurements is perhaps little for such a complex index. Had it started several years earlier, the current increase would appear less pronounced. More time will be needed to see how it behaves and discern what is reflects.

Notwithstanding that, the aggregate global spend on these platforms that support “online work” is still small (probably less than $5 billion, compared with the total global staffing industry spend of about $400 billion). That said, Staffing Industry Analysts has reported that spend in a similarly defined online work category increased 20% in 2016, while total global staffing industry growth was in the low single digits.

In effect, online/remote, digital platform-intermediated work will likely have a future, based on the observed trends and the inherent logic and benefits of the model. Over time, it will become more mainstream in the enterprise and could very well be the next challenge (or opportunity) beyond SOW for procurement over the next few years.

Various surveys suggest that a large and increasing percentage of contingent workforce managers are now aware of online work platforms and the potential for accessing online labor services through new digital sourcing channel. A vast majority of the practitioners, however, consider adoption to be at seminal stage, with relatively few procurement groups in large enterprises pursuing trials or committing to serious enterprise adoption programs. On the other hand, the no doubt maverick use of these platforms is fairly significant and growing.

We have counseled over the past few years that the mainstreaming of alternative digital labor channels in the enterprise is just a matter of time, and therefore keeping track of and building knowledge about these developments is critical. In most organizations, establishing rigorous capabilities and effective processes for managing the SOW/services categories is one of the highest priorities. But we have noted elsewhere (see: The Future of Digital Sourcing Channels for Labor and Services: Supply Side or Demand Side Driven? and A User’s Guide to the Gig Economy for Procurement Practitioners) that alternative digital labor channels represent a new set of challenges and opportunities on the horizon, and they will require increasing anticipation and preparation. iLabour Index may be a good way to keep a finger on the pulse.

What’s up next? While we touched upon the demand side here, in the next post in this series, we will turn our attention to characteristics of the supply side.

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