Building the Nasdaq for Labor
How we could re-engineer labor to mirror the best of the stock market
There’s plenty of talk about AI and how it will change and/or eliminate jobs. However, what’s very underdiscussed is how we could and should update the structure of the labor market itself, regardless of the nature of the jobs that exist within it.
Let’s go back to Econ 101.
The characteristics of perfectly competitive markets include having lots of buyers and sellers, identical products, easy entry and exit, perfect information between parties, prices set where supply equals demand, and zero transaction costs.
Markets with rational actors can and will occasionally fail, so it’s on the part of an external entity (usually government) to set up market structures that correct externalities, enforce rules, and protect the market from itself.
The job market is nowhere near perfect competition.
There are a few powerful buyers (employers) who largely set the prices (wages), products (employees) are not identical, transaction costs (time, money, and resources spent on searching, recruiting, screening, hiring, onboarding, managing, and retention for both employers and employees) make entry and exit cumbersome, and most importantly, there is a lot of information asymmetry between parties (employers and employees usually don’t know or trust each other).
The stock market, on the other hand, is much more efficient for three key reasons:
Ownership - it’s easy to prove who owns how much of what asset, and it’s backed by a strong legal system
Transparency - the SEC has robust disclosure requirements, as well as regulations to keep markets fair
Liquidity - virtually anyone can buy or sell any stock at any time, often nearly instantly, and with little to no transaction costs
What if the labor market worked this way?
Imagine Uber, but for every sector: retail, logistics, manufacturing, trades, agriculture, hospitality, transportation, security, healthcare, and caregiving.
Employees would have a portable record of their performance that follows them for life and gives them leverage in all future labor negotiations. Employers would have full visibility into this history and the ability to compete for talent. The timespan of frictional unemployment would plummet, if not disappear altogether, because employees and employers can quickly and cheaply find their next partnerships.
Long-term employment contracts would become obsolete. Fractional employment enables maximum flexibility for employers and employees, de-risking job arrangements for both parties, while still ensuring supply and demand-driven price equilibrium across the entire labor market. Benefits and worker protections are portable, taxes are streamlined, and the market cleans out bad actors on either side on its own. Instead of resumes being anchored by stints of time blocked by employer and title, employees would have a portfolio anchored by performance data across every job they’ve ever had.
Employees don’t need to put their entire lives in the hands of one employer they hope will promote them, give them raises, and not lay them off, and single employers don’t need to take on the full responsibility for people’s livelihoods when it’s not sustainable for them and/or the employee.
It works for millions of people in ridesharing, food and package delivery, travel nursing, and union-run hiring halls; why can’t it work for the rest of us?
Let’s put aside everything that would have to be true for a system like this to be possible, functional, and trustworthy (I’m building on the Open Work concept to wade through all of that complexity and welcome others to join me).
There are at least 3 types of challenges this model doesn’t have a good answer for (yet).
Gig work has been far from perfect so far.
Whether you blame the individual leaders themselves, or say it was inevitable given the ruthless nature of scaling a VC-backed turned publicly traded technology platform, the companies that enable gig work do not have stellar reputations as employers who do right by their employees. In fact, they do everything to not even acknowledge them as their own workers, and so far, the law has sided with the platforms in the 1099 vs W2 debate. What some frame as work flexibility others experience as financial precarity.
For many people, work serves as their primary social institution, especially with the decline of third spaces like unions and church. The pandemic taught us that people don’t do well without real interactions and relationships with other people, and it’s not that gig workers haven’t found alternative ways to create community, but it won’t look the same as it once did.
When fractional employment is done right today, freelancers are happy and fulfilled by the agency and autonomy they have, but it’s reasonable to be skeptical about what percentage currently and would share that sentiment and reality.
Slowing down displacement doesn’t stop it from ultimately happening.
Virtually eliminating frictional unemployment would be a huge contribution to GDP and savings to government budgets, but it still doesn’t address structural or cyclical unemployment. Even if the labor market itself runs perfectly, it doesn’t automatically mean that there’s enough demand everywhere there’s supply. Unlike stocks, people can’t quickly, easily, cheaply, and frequently pack up and move to wherever the jobs are, and even if they could, I doubt most would want to. Then again, military families do it all the time.
If and when AI really does eliminate jobs, this system can’t bring them back on its own, but it can delay permanent displacement and bring opportunity to those who wouldn’t have it without this system.
That still leaves the vulnerability of recessions, but perhaps with this system, the government could have better data to target and time expansionary and contractionary policies than they do right now.
No market is truly perfect, and for labor, that’s a good thing.
It might do more harm than good for some people’s performance records to follow them to every future job. The best analogy might be something like bankruptcy where it rolls off your credit after a certain amount of time, but the worst parallel would be criminal records for which it’s very hard for the most rehabilitated of people to get out from under.
When a stock dips below a certain level, it gets delisted. The stock market only works if we don’t try and save the losers from their fate, but that won’t work when we’re talking about human beings.
Minimum wage laws and sticky wage dynamics prevent “delisting” from happening at scale for employees, but those systems were set up for traditional employment. We already have versions of a “penny stock” labor market for lower paying, lower quality, and un-regulated sectors that I doubt we’re proud of and would want to knowingly send more people into.
A new labor market structure should not only promote the benefits of being at the top of the food chain, but also have a good answer for what options exist for people near the bottom. That’s not a lesson we can learn from the stock market.
Perhaps if the government runs the platform, as Wingham Rowan proposes, we could get all the upside of the technology without all the downside of the exploitation of workers for profit.
If it’s a company, would a PBC do the trick?
A quasi-nonprofit structure like OpenAI?
Would every country want to house their own data for national security reasons?
Time will tell.
Please reach out if you’re interested in tackling these challenges with me.