The Effect of a Declining Minimum Billable Unit on Wages

Here’s an article from the Economist about the rise of technology that match people needing work with people who need the work done, in close to real-time. The idea behind this is one of efficiency – there are lots of people to do work, and with today’s communication platforms, we can match them when and where we need work done.

All the householder needs is a credit card and a phone equipped with Handy’s app, and everything from spring cleaning to flat-pack-furniture assembly gets taken care of by “service pros” who earn an average of $18 an hour. […] Handy is one of a large number of startups built around systems which match jobs with independent contractors on the fly, and thus supply labour and services on demand.

This has me wondering what percentage of the aggregate labor in this country is made up of people waiting to do work – the labor of the gaps. And if we eliminate these “paid gaps” who benefits? (Hint: it ain’t the employee…)

Think about it – if a company employed full-time “flat pack furniture assemblers,” then it would pay them full-time, eight hours a day, whether or not they were putting together furniture. Their “minimum billable unit” (MBU) would be eight hours, or perhaps even a pay period. Travel time to clients’ houses, time sitting around waiting for work, bathroom breaks, etc. would all be covered by their salary.

But with a real-time economy, this stuff isn’t covered, If an eight-hour shift only results in six hours of actual work, the brave new economy attempts to only pay for those six hours because we’re trying to drive MBUs down to fit into small gaps.

On the one hand, this is fair…right? On the other hand, it upends a fairly significant aspect of the worker model. Workers sell their work by the day, and therefore their pay covers the gaps when they legitimately not working. If we drill the MBU down to the hour, then unpaid time bubbles up through the gaps now.

Take it to an absurd extreme and say your MBU is a minute – how many minutes a day would you lose? Don’t stop to chat at the water-cooler. Don’t text your wife. Don’t go to the bathroom.

From the article:

What sort of world will this on-demand model create? Pessimists worry that everyone will be reduced to the status of 19th-century dockers crowded on the quayside at dawn waiting to be hired by a contractor. Boosters maintain that it will usher in a world where everybody can control their own lives, doing the work they want when they want it.

One of the things we’ve accepted from our current employers is that we get paid for large chunks of time – days or weeks – that we work. Some of this time, we are idle, which is a cost the employer absorbs.

As our MBU is sliced thinner and thinner, and technologies arise that allow employers access to information granular enough to know exactly when an employee works and when they’re idle, the employer will seek to eliminate in efficiencies by stop-start pay schemes.

Yes, in all fairness, perhaps this is the right way to do it. But the net result will be a driving down of effective wages.