Are we destined to be techno-serfs serving a ruling elite of information oligopolies?
In the brave new world envisioned by pundits, we will all be micro-entrepreneurs with personal brands -- each of us controlling our own destiny, selling our services into digitally enabled markets. Traditional employers and wage slavery will be extinct.
Unfortunately, the companies of this new economy aren't philanthropic do-gooders. They are profit-maximizing corporations, with incentives (and increasingly, the market power) to pay their personnel (AKA independent contractors, euphemistically called micro-entrepreneurs) as little as possible. This could lead to a future with a small affluent elite, and the rest of us reduced to techno-serfism.
Economists (see, David Autor and David Dorn (2013); Maarten Goos, Alan Manning, and Anna Salomons (2014)) have noted a long-term hollowing out and polarization of our labor markets due to offshoring and automation. The result is: rapidly increasing demand and productivity for high-skilled "knowledge" workers (e.g., software developers); some increased demand for certain types of low-skilled service workers with jobs difficult to automate or offshore (e.g., home health care workers, waitressing); and collapsing demand for middle-skilled workers with jobs easily automated or offshored (e.g., assembly line workers in manufacturing). All of which helps explain the increasing levels of income inequality we have been experiencing in the U.S. (see, Wojciech Kopczuk, Emmanuel Saez and Jae Song (2010)).
Further, the companies of the Digital Economy (e.g., Airbnb, Amazon, Apple, Google, Facebook, Uber) tend to be oligopolies (which gives them huge negotiating power with smaller businesses, workers and micro-entrepreneurs) due to:
- Network effects - Consider Uber, as one example. Uber drivers are micro-entrepreneurs, not employees. Drivers want to sell their services into whichever market has the most people looking to purchase a ride. Riders want to use the market with the most drivers looking to sell their services. This tendency for both parties to flock to the most liquid market, typically results in oligopolies or monopolies.
In their pursuit of profit, Digital Economy oligopolies have every incentive to use their increasing power to commodify everyone they buy from -- and, this process will potentially impact more and more of the economy.
For example, Amazon (which now controls about half the U.S. book market) negotiates aggressively with publishers and has used its market power to punish non-cooperative companies (e.g., Hachette books were difficult to buy on Amazon during their dispute).
Amazon has also been criticized for its treatment of its warehouse workers (most of whom aren't Amazon employees, but temps hired via agencies). If Amazon manages to drive all publishers out of business and deals directly with independent writers and editors, Amazon will have the incentive and market power to also turn writers and editors into low paid commodity content providers.
On the consumer side, in a world where Uber is a quasi-monopoly in car service transport (or Amazon has driven most of America's publishers and booksellers out of business), these companies will also have considerable pricing power when dealing with their customers.
So, we have a plausible future where profits, information and political power (the leading companies of the Digital Economy already invest heavily in politics) increasingly accrue to a small group of technology-driven oligopolies. And the rest of us are reduced to commoditized micro-entrepreneurship (i.e., techno-serf) roles, paid the minimum the Amazons of the world calculate as necessary (given our lack of alternative employers) -- but paying the maximum these oligopolistic powerhouses can charge.
Welcome to our potential future -- is wage slavery starting to look good?
Steven Strauss is the John L. Weinberg/Goldman Sachs & Co. Visiting Professor at Princeton University's Woodrow Wilson School and an Adjunct Lecturer in Public Policy at the Harvard Kennedy School.