This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Whether they are driven by economic necessity or a desire for greater control over their careers, a growing number of workers are turning to online gig-work platforms to supplement their income with freelance projects like coding or website design. These digital labor platforms sometimes introduce new systems aimed at helping workers stand out in an increasingly competitive gig economy, but a new study by a Penn State researcher and collaborators suggests that these systems may not always be as helpful as intended.
According to study co-author Chenhui "Julian" Guo, assistant professor of supply chain and information systems at Penn State's Smeal College of Business, the research is rooted in "signaling theory," which examines how parties try to resolve information gaps. In the context of hiring, "signals" like reviews or higher education degrees can provide valuable information about a job candidate to an employer. But when labor platforms introduce new, untested signals, like verified statuses or special guarantees, the effects can be unpredictable—and, in some cases, actively detrimental to the potential employees who opt to use them.
The researchers analyzed anonymized proprietary data from a large online labor platform to understand the impact of a novel worker-offered guarantee on prospective employees who opted to use the new system. The study was published in the journal Information Systems Research. In the following Q&A, Guo discusses the study and its findings, as well as the broader value of signals in the growing gig economy and how employers, freelancers and labor platforms should exercise caution when deciding how to use and interpret new signals.
Hiring someone online can feel like betting on a stranger. Employers often have to decide between many freelancers they have never met, sometimes from different countries, and they cannot directly observe how skilled, reliable or easy to work with those freelancers really are. That is why signals matter.
Ratings, reviews, certifications, work history and platform badges all help employers make a judgment before hiring. Platforms keep adding new signals because they want to make the market feel safer and help good workers stand out. But our study shows a twist: A signal only works if people trust what it means.
The platform introduced a feature that let freelancers attach a financial guarantee to their bids. In theory, this guarantee is the worker's way of saying, "I am confident enough in my work that I am willing to put some of my own money on the line." The platform suggested a deposit equal to 10% of the bid amount. If the worker was not hired, or if the job was completed successfully, the money was returned.
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