New world of work: digital marketplace reshapes casual labour

Dmitry Melnichenko’s wife had doubts about his plan to quit his stable, nine-to-five job to work from home as a freelance web developer; there was the uncertain income stream, the lack of interaction with colleagues and their young daughter to think about.

But not only has Mr Melnichenko earned more since going solo than his wife expected, now Mrs Melnichenko, a financial controller with a large Ukrainian agricultural company, is also quitting her job and training as a coder — joining more than 120,000 Ukrainian freelancers pitching for work on online platforms like Upwork.

“Previously I was working with one of the biggest outsourcing companies on supply chain management. But now I can work from home and I have my own clients, so I have much more freedom,” says Mr Melnichenko.

Ukraine’s army of freelancers, the fourth-largest in Upwork’s global network, earned $61m in 2014. For the mainly western companies that dole out jobs on the website, Ukrainian web and mobile developers are cheap, responsive and easily assessed based on verified reviews by previous clients.

Digital platforms like Upwork, which act as marketplaces matching freelancers with work, are bringing new opportunities to many people who were once on the fringes of the global workforce. But they are also becoming a hot political potato on both sides of the Atlantic.

Thanks largely to the backlash against ride-hailing service Uber, the type of work they are creating has come under intense scrutiny — in particular, the impact they are having on more traditional jobs that have come with secure pay and benefits.

Freelancers have long accounted for a significant share of the work in some professions. But platforms like Uber and Upwork — a US-based company formed from the merger of Elance and Odesk — represent a new way to break jobs into piecemeal tasks and reach many more workers, potentially affecting a far wider range of work.

Along with marketplaces for drivers and professionals, companies jumping on this bandwagon include those providing so-called “on-demand” services, from Instacart (grocery shopping) to Handy (home cleaning) and Task Rabbit (for an almost limitless range of small errands).

In Europe, “these platforms aren’t yet at the scale of the US, they are only just emerging — but we estimate the same trends” will follow, says Jacques Bughin, a partner at McKinsey in Brussels.

For the Melnichenkos and others, the rapid expansion of a digital marketplace for casual labour has offered greater flexibility and opportunities they wouldn’t otherwise have had. Mr Melnichenko says the arrival of online freelance platforms has meant he doesn’t have to move to Kiev from his home town of Zaporizhia.

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New World of Work

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In the first three months of 2015 alone, 16,000 Ukrainian freelancers registered with Upwork; many thousands of them fresh school or university graduates, attracted by the promise of high earnings and flexible conditions. Mobile and web developers are the most highly sought workers but graphic designers and translators are also pitching for jobs.

“All of a sudden, someone with a particular profile — a talent, or work availability — can be matched with a need,” says James Manyika, a partner at McKinsey. That pulls more people into the workforce who were marginalised before, either because they couldn’t find a job or were working fewer hours than they wanted. “This is often lost in the debate,” he says.

The emergence of new digital platforms will add 2.5 per cent to European employment numbers by 2025, with some countries like Spain potentially seeing twice that growth, according to McKinsey — though the higher numbers are partly the result of making work previously done in the informal “grey economy” visible by pulling it on to online marketplaces.

The overall effect is “greater participation” — a factor that could lift the GDP of the UK and Germany by nearly 1 percentage point over the next decades, consultants say.

In the US, digital platforms already provide a material source of income for many, according to Mary Meeker, a partner at venture capital firm Kleiner Perkins Caufield & Byers. The average professional finding work on Thumbtack earns $8,000 a year, with Airbnb users making $7,700 and eBay sellers pull in $3,000, she says — meaningful given most see these as supplemental forms of income. Companies like Uber also argue that many of their workers rely on several different platforms to make a living, making it unfair to judge them on the basis of their earnings from a single marketplace.

But by opening up work to people who were unable to compete easily in a global market for talent, digital marketplaces have already produced some clear winners. Dennis Vorobyov, a web developer whose company, GBKSOFT, also bids for jobs on Upwork, says his mother, a doctor with over 25 years experience, earns less in one month than many of his web developer friends can earn from US clients in one day.

“People are now dreaming of becoming programmers, we have more and more schools offering courses in programming,” he says. “This is a big change in psychology; young Ukrainians these days are brave; they aren’t scared to register online and start freelancing. It’s a different attitude to life and money.”

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The series	Caught in a trap?	Risk and opportunity
Read the rest of our series on changes facing Europe’s workforce	Are temporary jobs a trap or a stepping stone to a secure future?	‘Gig’ economy signals the end of lifetime career