Labor Welfare in On-Demand Service Platforms

Speaker Saif Benjaafar, University of Minnesota
Date: 4/23/2019
Time: 10 a.m.
Location: 303 Transportation Building
Sponsor: ISE Grad Seminar
Event Type: Seminar/Symposium

There has been rapid growth in platforms that connect workers, acting as free agents, with customers who require a time-sensitive service. This growth has not been without controversy and some observers argue that the expansion of these platforms has come at the expense of workers. One controversial aspect of this growth, and the focus of this talk, is the effort of platforms, such as Uber, to aggressively recruit more workers (presumably to support growth in demand and to improve quality of service to customers by reducing delay in responding to service requests). The growth in the labor pool size is potentially harmful to workers if it depresses wages and dilutes the fraction of demand allocated to each worker, making them less busy. In this talk, taking, taking an operations perspective, we shed light on this debate. Using an equilibrium model that accounts for the interaction between labor supply and demand, we identify two regimes, depending on the level of congestion in the system, one in which an expansion of labor supply improves labor welfare and makes agents busier and one in which an expansion of labor supply harms labor welfare and makes agents less busy. We compare these results to those obtained in a setting where customers are not sensitive to delay and to settings where agents must commit to working a specified amount time and are compensated at a fixed wage rate.  We discuss implications for regulation, including regulations involving capping the worker pool or imposing wage floors.

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