Managing digital transformations of labour markets

Studies on labour mediated by online platforms have informed senior European Union policymakers on how best to manage the impacts of digitalisation on labour markets and the economy more generally. 

Research by Professor Vili Lehdonvirta and his team has shaped policy recommendations that have led to European legislation on Platform to Business trading practices.

Professor Lehdonvirta's work for, and with, the European Commission has also fed into legislative proposals for a Digital Services Package put before the European Parliament in December 2020.


Labour markets are in the midst of a dramatic transformation, with standard employment increasingly supplemented by temporary “gig work” mediated by online platforms, ranging from food delivery to software development.

The research of Professor Lehdonvirta, Professor of Economic Sociology and Digital Social Research and Associate Member of the Department of Sociology, together with his team within the Oxford Internet Institute, looks at the challenges faced by gig workers, and the economy as a whole, by this development. 

Studies by the team found that online labour platforms promote labour market inclusion because the barrier to entry for workers is low. Platforms act as a signalling environment that allows workers to inform foreign clients of their quality, allowing those from emerging economies to partly overcome the effects of negative country stereotypes.

While urban areas would typically pull in job-seekers, widening the gap with rural areas, Professor Lehdonvirta and team's research showed that rural workers in the US had begun to make disproportionate use of online labour markets, countering this trend. 

Further research showed that algorithmic control (such as the automated ranking of workers based on reputation data) is central to the operation of online labour platforms. While this offers workers high levels of flexibility, autonomy and task variety, algorithmic control can also result in low pay, social isolation, unsocial and irregular hours, overwork and exhaustion.

Poor working conditions are in part a consequence of online gig workers’ weak bargaining power and dependence on platform companies. Labour platforms create new forms of worker dependency through monopolistic market structures, such as reputation data lock-in, and by platforms withholding client data from workers, thus preventing them from leaving the platform.

Professor Lehdonvirta was consulted by the European Commission regarding new EU rules aimed at promoting fairness and transparency for business users of online intermediation services, widely known as the online Platform to Business (P2B) regulation. 

His research highlighted the need to address the power imbalance between platforms and businesses/workers. The final regulation, which became European law in July 2019, contains several provisions on this issue, covering algorithmic control, reputation data lock-in, and the withholding of client data from workers.

2019 research by Professor Lehdonvirta and Dr Alex J. Wood argues that while platform workers are often legitimately considered as self-employed contractors by their clients, platform companies should understand them to be in a dependent relationship; and therefore workers should not be denied the right to collective representation.

Self-employed workers are also considered by EU competition law not to be employees but businesses, and therefore collective bargaining by such workers may be prevented by EU competition rules.

As part of the European Commission's High-Level Expert Group on the Impact of the Digital Transformation on EU Labour Markets, Professor Lehdonvirta recommended access to social protection and collective representation for platform workers.

Following the Expert Group report, in June 2020 the European Commission launched a process to address the issue of collective bargaining for the self-employed which involved a public consultation and close engagement with trade unions and employers’ organisations.

In 2021, the Commission proposed new measures to ensure that people working on digital labour platforms can enjoy the labour rights and social benefits they are entitled to.  

One difficulty faced by policy makers and regulators is that conventional labour market statistics and economic indicators are ill-suited to measuring online gig work, making the size of the gig economy hard to assess.

To address this, Professor Lehdonvirta and Dr Otto Kässi developed the Online Labour Index, an economic indicator that approximates conventional labour market statistics. By tracking the supply of work on online gig platforms in near-real time, it measures online labour across countries and occupations, and publishes it in an interactive online visualisation.

The Online Labour Index is now managed by the International Labour Organisation, providing information that is used by researchers and internationl organsations across the world.