Research Note—Are Online Labor Markets Spot Markets for Tasks? A Field Experiment on the Behavioral Response to Wage Cuts

Abstract

I n some online labor markets, workers are paid by the task, choose what tasks to work on, and have little or no interaction with their (usually anonymous) buyer/employer. These markets look like true spot markets for tasks rather than markets for employment. Despite appearances, we find via a field experiment that workers act more like parties to an employment contract: workers quickly form wage reference points and react negatively to proposed wage cuts by quitting. However, they can be mollified with "reasonable" justifications for why wages are being cut, highlighting the importance of fairness considerations in their decision making. We find some evidence that "unreasonable" justifications for wage cuts reduce subsequent work quality. We also find that not explicitly presenting the worker with a decision about continuing to work eliminates "quits," with no apparent reduction in work quality. One interpretation for this finding is that workers have a strong expectation that they are party to a quasi-employment relationship where terms are not changed, and the default behavior is to continue working.

Wage delegation in the field

“…In the context of good working conditions (overall job satisfaction: mean = 6.450 on a seven‐point Likert scale; satisfaction with employment conditions: mean = 6.447), workers indeed claim to have a certain understanding for employers who do not trust their new employees enough to delegate the wage choice (mean = 5.971 on a seven‐point scale with seven indicating complete agreement). This would also be in line with findings from a field experiment (Chen & Horton, ) suggesting that workers react negatively to wage cuts but that these can be mollified with reasonable justification for these cuts. All these facts together might form an explanation why workers' performance does not collapse after being informed about the discrimination taking place in this short‐run employment relationship.

Result 6: Informing employees that coworkers were allowed to set their own wage (while they were not) has no impact on performance.

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Introduction—Platforms and Infrastructures in the Digital Age

“…In recent years, new digital technologies have facilitated the shift from permanent employment to needbased outsourcing, and from local labor markets to global, online labor platforms (Chen and Horton 2016). The online labor industry, dominated by three major platforms-Upwork, Freelancer, and Zhubajie/ Witmart-was estimated to account for $1.9 billion in gross service revenue in 2013, with 48 million registered workers (Kuek et al 2015).…”

“…The online labor industry, dominated by three major platforms-Upwork, Freelancer, and Zhubajie/ Witmart-was estimated to account for $1.9 billion in gross service revenue in 2013, with 48 million registered workers (Kuek et al 2015). Beyond their size, online labor platforms are worthy of research attention because of the ease with which research can be conducted (see Horton et al 2011), but also because they can serve as a testing ground for new applications of human and machine intelligence (e.g., the case of Amazon's Mechanical Turk) (Chen and Horton 2016).…”

Tastes for Desert and Placation: A Reference Point-Dependent Model of Social Preferences

“…To give a sense of the stakes, in experiments involving data entry of the text image (Chen 2016;Chen and Horton 2016), a paragraph takes about 100 seconds to enter so a payment of $0.10 per paragraph is equivalent to $86.40 per day. The current federal minimum wage in the Unites States is $58/day.…”