Online Marketplaces – the Pros and the Cons

2012-06-18T17:54:37Z

With the recent economy forcing employers worldwide to get more stringent with their resources, several industries have seen increases in the outsourcing of work to in-country as well as international freelance workers. This trend has allowed for the expansion of international online freelance recruiting marketplaces (such as Odesk, Elance, and Guru), which promise speedy access to freelancers all over the world, as well as the possibility of getting work projects and assignments completed quickly.

In theory, the existence of an open, Internet-based global freelance marketplace such as the ones previously mentioned should be mutually beneficial. International employers, project managers, and individuals in need of various services, from web development to writing, design, translation, data analysis and more, can gain instant access to a broad range of workers who will enthusiastically vie for the chance to complete the required tasks. Ostensibly, this system should benefit international freelance workers as well, as, 1) it provides them with a platform within which they can instantly search through dozens of ‘valid’ posted freelance jobs, and, ii) it encourages free competition between such freelancers, in which case the most qualified candidate would theoretically get the job.

In actuality, however, such online freelance recruiting marketplaces offer a mixed bag of benefits and drawbacks. They benefit the employers, groups, and individuals who use such marketplaces to find labor to fit their needs, since such employers gain instant access to hundreds of eager applicants willing to do their work. If we look at such freelance workers as commodities within the international freelance world, it is definitely a ‘buyer's market’. For the freelancers themselves, however, the situation quickly becomes less rosy. The competition soon becomes not one in which the most qualified worker with a reasonable rate wins, but one in which the qualified worker who is most willing to drive down his or her wages gets the task.

These online freelance marketplaces allow freelancers to set their desired hourly, as well as per-project, rates, but since the available jobs are auctioned off in a lower-rate-wins bidding system, many freelancers abandon their reasonable rates (such as, let's say, the US Department of Labor's minimum hourly wage of 7.25 USD/hr., not to mention the higher rates that more skilled workers may wish to charge), and projects can close for as little as 4.25 USD/hr. One is to assume that the employers have selected with reasonable care, and the employee, who, for example, agrees to do the work for 4.25 USD/hr. is adequately equipped to perform the freelance service; this worker, however, is now doing so for a rate that is on the low side of – or below – the average compensation standard of his industry. This reduced rate will be further diminished by any service fees paid to the online mediators.

Consequently, online freelance marketplaces undoubtedly favor the employer – books may get written for as little as 50 USD and entire complex websites developed for 300 USD. Moreover, in countries where the relative minimum wage is lower than that in the US, and less strictly enforced, workers may find themselves driving down their wages even further and accepting even lower rates.

The overall effects of such marketplaces are similar to those of outsourcing: substandard wages for remote employees in exchange for a standard quality and scope of work.

Conversely, agencies recruiting for physical work (for example, construction work, nursing) may offer freelance workers a much better situation – at least where the minimum wage is enforced; workers (including, of course, legal foreign contractors working on location) are guaranteed a minimum earning standard, and can reasonably expect the rates they set for their skills to be honored by companies looking to hire them.

While the idea of online freelance marketplaces with an international reach may be initially appealing to freelancers as well as employers, upon closer analysis one must consider the serious drawbacks and overall economic consequences that such platforms may have, not only for individual freelance workers themselves, but for the state of entire industries (such as, for instance, web development and graphic design) within specific nations and abroad. However, there are ways in which the online freelance marketplaces can improve the situation, including, first and foremost, agreeing not to feature employers or employees willing to go below reasonable industry rates for the proposed jobs. If one believes in the integrity of human labor, as well as the importance of preserving the economic worth of industries both nationally and abroad, one might choose to utilize such marketplaces sparingly, if at all.

The overall effects of such marketplaces are similar to those of outsourcing: substandard wages for remote employees in exchange for a standard quality and scope of work. More importantly, since such marketplaces host local/national as well as international workers, when local workers drive their wages down they have the unsettling effect of bringing the negative qualities of outsourcing into not commonly outsourced-to countries, as if commonly-outsourced-to areas of the world have suddenly been replaced by local soil. Nico, I really think we should cut this section - do you agree? It is a sort of repetition and I can’t quite see why it’s MORE worrying if it happens to Americans than anyone else…

(Photo © DR)

(Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.)

theglobaljournal.net: Latest articles of Elza Tamazashvili

Online Marketplaces – the Pros and the Cons