Future of work: Re-defining work (Part 6: Monetising participation)

Future of work: Re-defining work (Part 6: Monetising participation)

Phuah Eng Chye (5 January 2019)

The paradigm of participation[1], as compared with employment, expands the sphere of potential economic engagement. It requires establishing a platform (similar to sharing) to facilitate formal organisation for a broad range of activities to be monetised. But there is a theoretical gap. Economic theory doesn’t really explain why some activities are monetised and others are not. In relation to this, there exists different types of non-monetised output such as housework, government services, volunteer services and free software and content. The value of this non-monetised (free) output is immense. But if these activities or products are not monetised, then it doesn’t generate income and employment for society.

In this context, it is argued GDP is underestimated because it does not incorporate the economic value of unpaid work. According to the International Labour Office (ILO), unpaid work is defined as “a variety of unpaid forms of work which fulfil different functions either for the workers themselves or society as a whole…. (a) unpaid trainee work; (b) volunteer work; (c) own-use provision of goods (work done to produce goods for consumption by the household or family); and (d) own-use provision of services (work done to provide services to the household or family, including unpaid household and care work)”.

The ILO notes that “while unpaid work has long been deemed to have no monetary value”, nonetheless if country-level estimates of unpaid household services are valued on the basis of their replacement (i.e. market) cost, they could amount “to 20 to 60 per cent of GDP in 2015. Similarly, an estimated 971 million people worldwide engage in unpaid, non-compulsory volunteer work. On a full-time equivalent basis, this equates to over 125 million workers, with approximately one quarter participating through organizations and the other three quarters volunteering directly. Tentative estimates as of 2005 place the value of volunteer work at USD1.348 trillion or 2.4 per cent of the entire global economy”.

An explanation provided by Edward P. Lazear is that “even though household work is unpaid, it is associated with an almost ideal incentive structure because it is akin to self-employment, where a high proportion of the rewards to effort are captured either by the provider of the services or by immediate family members. The provider of household services is the residual claimant of services consumed. Services consumed by other family members deliver first best incentives when altruism by the provider is sufficient to make him or her view services consumed by family members as equal in value (on the margin) to those consumed directly. Relatedly, some consumption might be thought of as work…output that is not counted in GDP”.

But the argument to justify adjusting GDP to reflect the value of unpaid work may provide misleading impressions of what income is and isn’t. In this regard, household services are idiosyncratic and shaped by relationships. It is not feasible to extrapolate the value of cooking, cleaning, sex, caring and gardening based on market prices because unpaid activities are shared, bundled, involuntary and not arms-length (autonomous and demand-driven). If one could justify estimating the value of household unpaid work, then there are even stronger claims for estimating and adding the value of free public resources (air, water) and internet resources to GDP. There is also lacking why the same services are priced differently in different countries. If these unpaid or paid work could be valued at the same international prices, then this would lead to a convergence in living standards around the world.

This view reflects a misunderstanding of income. Income doesn’t really measure output. Income measures a country’s capability to monetise and exchange goods and services. This is why the value of services is generally related to the ability to monetise and to the level of income. For example, household-type services have a higher value in a rich community as compared with a poor one. The inability to expand participation and monetise the value of activities or assets reflects there exists information impediments to the generation of income or wealth.

My hypothesis on participation and monetisation is thus based on the paradigm that information drives financialisation[2]. In a low-information environment, it is difficult to monetise activities because documentation and laws relating to activities and ownership are lacking. Matching and processing is manual, time-consuming and expensive. The absence of reliable information and standards on transaction and payment commitments means information asymmetry costs are extremely high.

When information is scarce, finance is scarce as well. Monetisation is limited to a small number of production and trade-related activities. Most work is unpaid and poor communities rely heavily on relationships to meet their needs. This is why it is not a coincidence that family sizes tend to be larger in low-information and low-income environments. Even if these activities could be monetised, the value (and costs) is likely to be low.

In a high-information environment, the information constraints are removed. This makes it easy to monetise a wide range of activities, including unpaid work. In fact, as economies mature, households become modular[3] and more dependent on strangers for services such as cooking, cleaning and caregiving. Sharing platforms provide the organisational capabilities to manage information to scale the range of monetised transactions with strangers.

In this context, there are several pre-requisites to monetising participation – similar to those for platforms or markets. First, an information infrastructure is needed to support autonomous exchange and the ability to organise. Second, rules are needed to facilitate information disclosures and transparency, standardisation and processes that underpin trust in the reliability of the system. In this context, the mere act of introducing rules will itself subject more activities to monetisation. For example, the introduction of welfare schemes will necessitate the collection of information on beneficiaries. Welfare schemes provides income that leads to the monetisation of some unpaid work[4].

Third, monetisation is related to the ability to achieve critical mass. Critical mass is needed not only to justify the costs of managing information but also to sufficient thickness of demand and supply for markets to flourish. This explains why monetisation is more likely to flourish in areas with high population densities. Higher levels of information usage, financialisation and the emergence of highly-populated cities are contributory factors to the monetisation of many unpaid activities, especially household services. 

Monetisation can thus be combined with participation to complement the traditional employment model. The starting point is to establish information-based platforms that provide real-time “connectivity” between individuals and participation opportunities. These platforms would provide individuals opportunities to plug into and earn some income from participating in community-based activities when it suits them.

There are differences between a participation-monetisation paradigm from the traditional employment model. One concern is whether participation would diminish the role of income as a carrot and a stick to incentivise hard work, discipline and innovation. In relation to this, participation-type work forms such as sharing and crowdwork are sometimes regarded as a trojan horse for bad jobs[5]. But participatory work forms also be regarded as a version of rationing working hours which offers the benefits to achieve a better work-life balance. Hence, whether participation is beneficial or disadvantageous to workers depends on whether participatory-type work can be shaped to meet the criteria for a good job.

Sharing platforms[6] derive value from harnessing information, belonging to customers or from crowd participation, in the public domain. Charles Goldfinger notes information has features similar to a public or shared good “whose consumption cannot be limited to a single consumer and therefore is inherently collective”[7].Hence, there are tensions in the participation paradigm relating to ownership of information and controls over access. In this context, expanding participation will increase the quality and value of information and improve the opportunities for creating work. In practice, there will be clashes for ownership and control of information goods and to cordon off intellectual space. Private control implies reduced public access and this will, turn reduce the quality and value of information and diminish the opportunities for creating work.

Participation is also subject to concentration-fragmentation effects[8] where intermediation tends to concentrate and participation to fragment. Monetising participation in social activities thus can end up aggravating distributional inequalities particularly when social and public activities become privatised. In these instances, the bulk of benefits from commercialisation or monetised spillovers (e.g. advertising revenue) will be captured by the platform owner.

The tantalising challenge is whether it is possible to change the work quality and income distribution outcomes without adversely affecting the incentive to supply goods or services that others are willing to pay for. Put another way, could a paradigm of participation-monetisation dilute the dominance of the output and profit motive and broaden the range of objectives based on society’s preferences.

The biggest obstacle to broadening objectives beyond money motives is that the shift from relationships to autonomous participation affects values. Michael J. Sandel points out “we live at a time when almost everything can be bought or sold…Today, the logic of buying or selling no longer applies to material goods alone but increasingly governs the whole of life.” He laments “almost everything is up for sale” such as a prison cell upgrade, blood and organs, drugs, prostitution, the outsourcing of pregnancy to surrogate mothers, the right to pollute, immigrate, prestigious education and to hunt endangered species.”

Michael J. Sandel argues “markets are not mere mechanisms. They embody certain norms. They presuppose – and promote – certain ways of valuing the goods being exchanged. Economists often assume that markets do not touch or taint the goods they regulate. But this is untrue. Markets leave their mark on social norms. Often, market incentives erode or crowd out nonmarket incentives.” He asks “do we want a society where everything is up for sale? Or are there certain moral or civic goods that markets do not honour and money cannot buy?”

It goes further than this. When most activities are monetised, you would really need money to survive as you would have to pay for almost anything you want or need. The more widespread monetisation is, the more illusory the benefits of being frugal or saving. The consequences of a balanced budget and scarce money (monetary contraction) becomes more severe for the poor because the buffer provided by unpaid work would have been diminished by monetisation. Money will be the final arbiter of who gets what.

Hence, monetising participation has significant effects on society. But it opens the door to finding new potential solutions. For example, there has been growing interest in basic income schemes. The flaw in the current approach views the problem of income in isolation from the issue of participation or economic engagement in society. In this regard, basic income can be viewed as a part of a participation-monetisation approach supported by a data platform, expert support, grants and technological assistance from the public and private sectors.

 For example, pilot projects could be launched in areas experiencing high unemployment. But instead of merely providing basic income, participants could be asked or assisted in developing businesses or activities. The basic income individual allocations can be pooled and used to seed several activities. Similarly, civic participation can be monetised and offset against local municipal fees, fines or traded for access to education, housing and healthcare. Another possibility is to credit income to individuals who are taking care of the elderly partially funded by the withdrawal of specific welfare benefits. There is also a need to relate the income and work initiatives with opportunities to own assets. In this regard, success in poverty eradication can only be sustained by increasing the value of assets owned by a community.,

Participation and monetisation also benefit from convergence across business, social and political activities. The participation model can therefore be built around the skills taught in school in tandem. This would include educational preparation to inculcate positive attitudes by signalling an elevation in the status of caregiving.

Monetising participation has macroeconomic consequences[9] as well. The shift from employment to participation delinks income from physical output and strengthens the links between information and income. For example, sharing (as a form of participation) can disrupt employment and asset purchases, and demonetise some economic activities and exert a deflationary influence. On the other hand, if the government decided to provide an income to all persons doing unpaid work; though there is no change in output, national income would rise immediately due to the substitution of non-monetised activities by monetised services. This would be inflationary. Hence, there is a need to deepen our understanding of how the behaviours of profits, wages and prices are inter-related in the participation paradigm.

Largely, macroeconomic outcomes will be determined by how regulations shape participation – whether it leads to an increase or decrease in the monetary elements of exchange; its impact on production, innovation and profits and whether it is funded by savings or debt and the impact on financial stability. There are also “destruction” consequences from the redundancy of legacy organisations and processes. In addition, an expansion in monetisation and “stranger sharing” will tend to increase the external and global proportion of community activities.

Overall, the shift towards participation and monetisation is already redefining work and society. At the moment, we are only scratching the surface on the vast potential of the participation paradigm as attention is mostly fixated on business model issues Participation actually requires a massive rethink on economic models because it will alter development paths with significant global consequences. But it should not be left alone to be a purely market-driven process as there are adverse side-effects that need to be mitigated. Governments therefore need to step up to provide the leadership and to evolve the appropriate regulations to harness the possibilities offered by a participation model.

References

Edward P. Lazear (Summer 2018) “Compensation and incentives in the workplace”. Journal of Economic Perspectives. Volume 32 Number 3. https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.3.195

International Labour Office (ILO) (2018) “The future of labour supply: Demographics, migration and unpaid work.” The Future of Work Centenary Initiative. Issue Note Series No 2.  http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/publication/wcms_534204.pdf

Michael J. Sandel (2012) What money can’t buy – The moral limits of markets. Farrar, Strauss and Giroux.

Phuah Eng Chye (22 December 2018) “Future of work: Re-defining work (Part 5: The economic paradigm of participation)”. Economicsofinformationsociety. http://economicsofinformationsociety.com/future-of-work-re-defining-work-part-5-the-economic-paradigm-of-participation/

Phuah Eng Chye (8 December 2018) “Future of work: Re-defining work (Part 4: Creating jobs from information and its ecosystem)”. Economicsofinformationsociety. http://economicsofinformationsociety.com/future-of-work-re-defining-work-part-4-creating-jobs-from-information-and-its-ecosystem/

Phuah Eng Chye (24 November 2018) “Future of work: Re-defining work (Part 3: Bad jobs, good jobs and what governments could do about it)”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/future-of-work-re-defining-work-part-3-bad-jobs-good-jobs-and-what-governments-could-do-about-it/

Phuah Eng Chye (18 August 2018) “Future of work: Other information effects – polarisation and transience.” Economicsofinformationsociety.com.

Phuah Eng Chye (23 June 2018) “Labour share of income (Part 5: The quandary of labour reform)”. Economicsofinformationsociety.com.

Phuah Eng Chye (10 March 2018) “Organisation of households: Shrinking households, labour market frictions and societal cultures”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/organisation-of-households-shrinking-households-labour-market-frictions-and-societal-cultures/

Phuah Eng Chye (6 January 2018) “The sharing economy: Sharing, social media and information”. Economicsofinformationsociety.com.

Phuah Eng Chye (7 October 2017) “The sharing economy: Macroeconomic overview”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/the-sharing-economy-macroeconomic-overview/

Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.



[1] Phuah Eng Chye “Future of work: Re-defining work (Part 5: The economic paradigm of participation)”.

[2] Phuah Eng Chye Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.

[3] Phuah Eng Chye “Organisation of households: Shrinking households, labour market frictions and societal cultures”; “The sharing economy: Sharing, social media and information”.

[4] For example, welfare beneficiaries now have money to buy food or see a doctor rather than depend on the family or volunteers for services.

[5] Phuah Eng Chye “Future of work: Re-defining work (Part 3: Bad jobs, good jobs and what governments could do about it)”.

[6] Phuah Eng Chye “The sharing economy: Sharing, social media and information”.

[7] Phuah Eng Chye “Future of work: Re-defining work (Part 4: Creating jobs from information and its ecosystem)”.

[8] Phuah Eng Chye “Future of work: Other information effects – polarisation and transience.”

[9] Phuah Eng Chye “The sharing economy: Macroeconomic overview”.

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