Tech Bets for an Urban World
 
 
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Smart Recruiting for the Informal Economy

Platforms which connect individuals and employers with workers in the informal economy for one-off or short-term jobs, using matching algorithms to recommend the most suitable candidates for customers and providing additional protection and security for workers

Potential Market Size (by 2022):
0.5-2 Trillion USD; 0.8-1.2 Billion Users

 
 
 
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THE CHALLENGES

156 million or 37.7% of employed youth are in extreme or moderate poverty; a further 13% of youth are unemployed.*

 
 

The economy does not create enough formal employment.

Youth unemployment rates in developing countries are 15%, but most of these jobs are in the informal sector. For example, more than 1 million Kenyan youths enter the job-market annually, competing for less than 100 thousand formal jobs. In Mexico 60% of the working population participates in the informal economy, generating 25% of GDP.


People living in and near poverty lack safety nets.

870 million people in the developing world have no social assistance or alternative income options to fall back on if disaster strikes.  Without this support, families tend not to send their kids to school, can’t access basic nutrition, and the cycle of poverty deepens.


Job markets do not create equal opportunities.

Corruption and discrimination is commonplace in recruitment in both the formal and informal sectors in most emerging markets; one of the reasons that only half of women participate in the workforce (vs. 75% of men) globally.


It is hard to keep institutions accountable.

Less educated youth are usually destined for  informal sector jobs, where competition is high and any protections for informal workers are limited.

 
 
 

Source: “World Employment and Social Outlook 2016, Trends for Youth” International Labor Organization 2016; World Bank Open Data accessed 2017

 
 

THE NEEDS

With or without an education, jobs are hard to find and recruitment processes are rarely transparent or fair.


Across all levels of education, people are struggling to make ends meet. Even where there are jobs available, discrimination (particularly for women and older people) and nepotism play a big role in who gets picked.

 
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"Just because you get a degree doesn’t mean you will be able to get a job. I have a degree but work construction and manual labor jobs up to three times a week. Even those can be hard to find."
Isaac, 23, Nairobi

 
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"Older age is a problem. It’s really hard for anyone over the age of 40 to get hired. This can be true for young women and mothers as well."
Keisha, 21, Jakarta

Who you know matters. More established networks mean more opportunities.


People rely heavily on word of mouth recommendations when looking for work, especially in the informal economy. Many people are eager to cast a wider net which helps increase the chance of finding and securing an opportunity. Those who have tapped into online platforms are already reaping the reward.  

 
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"Women usually go door to door asking to clean houses - they would have to ‘get lucky’. The same is true for customers like me. You would have to find someone you could trust through word of mouth recommendations."
Alex, 33, Mexico City

 
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"You no longer have to go it alone here-why would you? You can make money doing a variety of things all on the Go-Jek platforms."
Nurul, 36, Jakarta

People want to be treated fairly (and it’s key to expanding growth).


As new and copycat recruiting platforms enter the market, workers have more flexibility to choose players that treat them fairly. Having the biggest workforce often means being able to offer the most efficient and reliable service, which is often more important than price. Reputation can also influence which platforms people use to find work or spend their money.

 
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"I help them and they help me. They listen to me if I have an issue with customers and don’t immediately assume it’s my fault if there’s a problem."
Anna, 50, Mexico City

 
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"After they kept cutting wages I decided to leave and start working on my own. People who still drive Uber are afraid to take risks, or don't think they have a better option."
Michael, 34, Nairobi

 
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GLOBAL MARKET POTENTIAL

Global emerging market revenue could reach 2 trillion

 
 

Potential Revenue
in Billions (USD)
addressable market

 
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Potential Users
in Millions
people

 
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Assumptions

Based on Jakarta market:

  • 40-60% of existing workforce

  • Earning 5-7.50 USD per hour

  • Utilization of 50% during working hours

  • Matching fee of 10-20%


Extrapolated to global, taking country populations and adjusting for:

  • Urban Population

  • GDP per capita (PPP)

  • Internet usage

 

Source: Dalberg analysis of World Bank data (urban population, GDP per capita - PPP), SAKERNAS (workforce size), Intuit (addressable workforce), Innovator websites and interviews (price and utilization data) Note: We do not include a third “extended” scenario for this use case, as it is already targeted at jobs at the base of the pyramid

 
 

WHEN IT WORKS

Smart recruiting technologies for the informal economy meet user needs when they:


Allow people the flexibility to work when and where it suits them.

 

Ensure workers are receiving fair wages and have fair working hours.

 

Incorporate processes, procedures, and tools for gathering workers feedback.


Help remove unnecessary barriers to employment (e.g. help people get jobs where they have the skills, but not necessary the certificate)

 

Encourage professional development (e.g. by offering subsidized training to access new types of work)

 
 
 
 
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INNOVATOR STORY

 

Aliada

Aliada was launched in Mexico City in 2014 by Rodolfo Corcuera and Ana Isabel Orvañanos, as a platform to connect households directly with domestic professionals.

Aliada saw an opportunity to better link people with cleaning and other services. Most of Mexico City’s 2.9 million domestic workers are employed through housekeeping agencies who largely determine work hours and location and take a larger cut of wages that Aliada.

“We focus on providing men and women with the right set of tools so they can thrive and generate more income for themselves and their families”
Ana, Co-Founder

Aliadas can determine their work hours and price and accept (or decline) opportunities depending on past reviews, location and other customer information. All are covered by a benefits package and social security.

Aliada recently launched a B2B option where they hire and manage staff to manage the running of offices for clients.


Founded: 2014
Based in: Mexico City
Employees: 20+ / ~1,500 domestic professionals
Users: ~50,000 services monthly
Total Investment: 1M USD (Seed) + Undisclosed (A)
Investment Stage: Seed + Series A
Business Model: B2C (residential) + B2B (commercial)

 
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LOCAL MARKET POTENTIAL

Jakarta has already seen investment of more than three billion dollars

 
 

The Customers

End User:
Adults seeking skills or certifications that qualify them for jobs or for advancement in their careers

Who pays?
Jobseekers pay or, in some cases, employers looking to upskill their employees


Investment to Date

USD 3 Billion

Raised to date across platforms we have engaged; largely driven by Go-Jek and Grab’s >$1B fundraising rounds

 

The Players

(estimated  total of 3-6, excl. foreign companies)


The Jakarta Market

Urban Addressable Market
Working in informal jobs that are likely to be delivered through smart-recruiting applications

2-3 Million workers


Directional Revenue Potential
Based on a 10-20% cut of a 5-7.50 USD fee per hour

1-5 Billion

 
 

Sources: Dalberg interviews, and analysis of investment press releases

 

USER STORY

 

Anna
Mexico City


Anna has three jobs to make ends meet. She currently cares for herself, and her extended family by running a small store near her home, working two days a week at a packaging facility, and with the remainder of her time she works on a flexible contract basis for Aliada.com, a home and business cleaning service that digitally connects her with clients. Anna says the technology and training Aliada has brought into her life has changed it in powerful ways including saving her from becoming destitute when an earthquake hit.

The number one thing Anna loves about working for Aliada is how steadily she can find work yet how flexible it is at the same time. “Always having the option to take on a job and earn income is what I like the most about the platform. It has really helped me.”

She also deeply values the training they provided around soft skills like customer relationships and guidance around safety while on the job. “The training was really important because so many people don’t know how to deal with customers and talk to them and how to make them feel safe with you.”

When an earthquake rocked Anna’s community, Aliada helped fill critical financial gaps. “I would be destitute right now if I didn’t work for Aliada. All the schools around here closed for many weeks, the kids are my main clients, and the store didn’t bring in money.”

Lastly, Anna deeply values the mutual respect and trust she feels Aliada has built into the company’s culture and digital tools. “I help them and they help me. They listen if I have an issue with customers and don’t immediately assume it’s my fault.”

Aliada is helping Anna succeed in other realms of her life too, awarding her a small business grant to expand her store and strengthen her dream of becoming a self-sufficient entrepreneur.


“The best thing about Aliada is I have steady work now. I can take jobs when it's good for me and it works for my schedule.”

 
 
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UNLOCKING GROWTH

To catalyze the market, global tech players could use their strengths to...

 
 

Champion better industry regulation. Advocate that industry and/or Governments agree to minimum benchmarks that balance the need for innovation with the need to protect informal workers. Without this, there could be a race to the bottom in the treatment of informal works on matching platforms.

Help build the evidence for matching in informal markets. The impact of smart recruiting on informal markets in emerging markets is not yet well understood, but likely to be very different from markets where these platforms have been around for a while and are further advanced.

Follow best practices. Follow best practices. In the race to capture this large and growing market, we believe the imperative is on large tech firms to lead the way in terms of following best practices in worker protection and empowerment.

Support best practice innovators. Matching services need to build their network fast, matching supply with demand. Integrating innovators that are good global citizens, into existing distribution channels would maintain their competitiveness.

Support innovators through tech transfer. Innovators can keep costs low if they don’t have to re-invent the wheel. Sharing best IP, practices and models would allow innovators to build out their brand and business model in local markets.

 
 

 

To unlock demand, local innovators need to develop products that...

 
 

Continue to broaden the skills people are able to offer. Local innovators would benefit from a larger user base if they considered how to bring in people with new skills onto their platforms.

Integrate with channels people are already using to find work. Word of mouth has moved online. People are cobbling together social media to find opportunities. Meet them where they are and assist them with the tools and resources they need to make connecting easier.

Help people upskill and learn new skills. Local innovators can help fine tune the skillsets agents possess or fill specific gaps in their knowledge as a value proposition to both agents and customers.

Be mindful about creating opportunities for women. Local innovators should identify services where women are more likely to be able to participate.

Reward and recognize exceptional performance. To retain workers local innovators need to explore truly compelling incentives for workers.

Be a leader in great labor practices. Commit to minimum standards for worker compensation and protections, because it is the right thing to do, but also because it will help attract skilled workers and customers.

 
 

 

To realize the potential of every child, UNICEF and partners could...

 
 

Help create global and local worker protection standards. UNICEF can convene and help Governments and industry develop standards which protect workers while allowing for innovation, bringing a perspective on the types of protections that are need for vulnerable youth and mothers in particular. Similarly, we could work together to create rules on data ownership that, by supporting job-seekers, help impactful platforms proliferate.

Raise consumer awareness of best practice innovators. UNICEF will, through its communication and partnership strategy, only support and work with innovators that are themselves supporting the interests of low-income workers.