Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market

Source: Alan Benson, Aaron Sojourner and Akhmed Umyarov, Institute for the Study of Labor, Discussion Paper Series, IZA DP No. 9501, November 2015

From the abstract:
In two experiments, we examine the effects of employer reputation in an online labor market (Amazon Mechanical Turk) in which employers may decline to pay workers while keeping their work product. First, in an audit study of employers by a blinded worker, we find that working only for good employers yields 40% higher wages. Second, in an experiment that varied reputation, we find that good-reputation employers attract work of the same quality but at twice the rate as bad-reputation employers. This is the first clean, field evidence on the value of employer reputation. It can serve as collateral against opportunism in the absence of contract enforcement.

From the blog post:
Uber, Airbnb, TaskRabbit, and other online platforms have drastically reduced the price of micro-contracting and grown a “gig” economy, where workers must more frequently decide which potential employers to trust. Traditionally, workers have used labor unions and professional associations as a venue for exchanging information about working conditions and coordinating collective withdrawal of trade in order to discipline employers.

The rise of new institutions that facilitate information sharing may take up some of this role, a recent IZA discussion paper by Alan Benson, Aaron Sojourner and Akhmed Umyarov (all University of Minnesota) suggests. In two experiments in an online labor market (Amazon’s Mechanical Turk or M-Turk), the authors show that a public, employer-reputation system has value for:
1. workers who use it to screen potential employers on otherwise unobservable differences, and
2. employers who can benefit when a better reputation makes it easier to attract more workers of any given quality, basically shifting out the labor supply curve they face…..

…..What relevance does this have for labor markets broadly? All workers strive to distinguish which employers will treat them well or ill. Two prospective employers that offer identical employment contracts may actually differ widely in the criteria they apply for raises, promotions, terminations, scheduling, bonuses, task assignment, and many other working and payment conditions. In contingent, undocumented, and low-wage labor markets, concerns are as basic as whether employers will pay for all hours worked or pay at all.

Workers have always made decisions with partial information about employer quality and, so, these forces have always shaped labor markets. Falling communications costs have made it easier for workers to share information and several websites now enable this exchange, including Glassdoor, Turkopticon, Contratados, Kununu, JobeeHive, TheJobCrowd, and the Freelancers Union’s Client Scorecard. Attention to the worker’s information problem suggests innovative directions for policy and institution-building…..