Wages in Second Life going up?

Last Monday Manpower celebrated its first anniversary in Second Life with a virtual conference about The Virtual Workforce. Archives and links for this event can be found at on this site. It made me wonder about the state of the virtual labor market, all the more so because Chairman Philip Rosedale of Linden Lab said that the price of labor in Second Life seems to move upwards.

So, what supply and demand factors determine prices on the virtual labor market? I use a number of elements of the Manpower conference, adding my own observations and thoughts.

A number of observations seem to make it at least a plausible hypothesis that people accept lower wages, fees and prices in a virtual environment compared to similar activities outside these environments. In other words, there is an increased supply of virtual labor, just because people consider it to be fun, even so much fun that it is hardly considered as labor:

• People work (producing scripts, building virtual constructions, performing services such as greeting and guiding others) in exchange not for US dollar or other official currencies, but for Linden dollars, which are a fictional currency (as stated by the Terms of Service), even though exchangeable in US dollars (but this is just a 'product feature').
• Even making abstraction of the fictional nature of the Linden dollar (the exchange rate is rather stable) the amounts paid for work seem to be consistently lower compared to the prices paid in a physical environment for similar skills and hours of work.
• Fees for attending courses, seminars and conferences are also lower or nil in a virtual environments, even though the content provided in terms of knowledge, interaction and the quality of speakers and instructors is as high as in the physical world.

During the Manpower conference, various participants made some very interesting remarks about the evolution of the virtual labor market:

• Philip Rosedale, founder and chairman of Linden Lab (the company owning Second Life) pointed out that daily transactions in Second Life, involving goods and services, amount to one million US dollar.
• Rosedale confirmed that people tend to charge less in Second Life. He suggested this is because the new tools of this new medium are fun to use, at least after the initial learning curve. He claimed something similar happened for graphical work in early desktop publishing.
• This would mean that after this initial "fun-phase", people would tend to charge more for their work once they get more used to working with the new tools. Just as graphical work in desktop publishing is more expensive now, Rosedale sees anecdotical evidence of prices rising gently in Second Life as people get more accustomed to working full time in virtual worlds.
• Senior Vice President of Global Workforce Strategy for Manpower Tammy Johns referred to yet other aspects: the fact that about 50 different nationalities live and work together in Second Life, people coming from nations with very different levels of prices and wages. However, as skills get scarce around the world, the prices for those skills in virtual worlds such as Second Life could very well align more closely. There is also an issue of transparency involved here, how easy is it for the participants in the virtual labor market to get information about wages, fees etc? Companies such as Manpower can play a role here.
• It is not only the novelty of the tools which make the initial prices and wages lower, but also the fact that virtual environments allow for more individual flexibility and for practices such as home-working, which is taken into account by individuals when they try to determine acceptable prices for their work.
• The flexibility-issue also means the supply of labor can be increased thanks to the integration of groups hirtherto excluded from the labor market (or at least experiencing lots of obstacles to participate) such as people with disabilities. Manpower underlines social responsibility issues, such as giving labor opportunities to people with disabilities, but also to younger people who have great difficulties accepting traditional corporate structures.
• Yet another flexibility aspect is the possibility to exploit timezone-differences. Suppose you want a software-project being completed fast. There is the possibility to let people work night and day, or you can ask teams where for instance a group writes code during daytime in Europe and another group of team members check and debug during daytime in California. Everyone works normal daytime hours but the team functions around the clock, at a lesser cost.

Considering the supply and demand of labor in virtual environments, there are a lot of elements to take into account when one tries to predict the evolution of virtual wages, elements often working in opposite directions.

Supply side:

- Labor supply increases, because of the integration of new groups, such as people with disabilities or other groups requiring or demanding greater flexibility. This could put downward pressure on the price of labor.

- Labor supply increases, because people consider work in a virtual environment as "fun", and hardly as "work". Downward pressure on the price of labor.

- People start considering their work in virtual environments as "work", feeling the pressure and the responsabilities associated with work in general, and re-adjust their allocation of time and effort. Prices for labor could go up as a consequence.

- People from other timezones and other countries all over the planet, often countries with cheap labor, get the opportunity to participate in virtual work. Prices for labor under pressure again.

What about the demand side?

- Increased demand for collaboration tools in virtual environment settings increases the demand for event organizers, builders, scripters, specialists in presentation tools.

- The increasing number of competing platforms for virtual environments (also for marketing purposes or for worlds for kids and teens) increases demand for skilled 3D-content creators.

In-world and beyond

Important: when we speak about supply and demand on the virtual market, we tend to consider services for in-world use, such as scripting for virtual corporate islands, virtual event organizing etc. However, I think this is far too narrow. Just as videoconferencing usually has not as its main topic "videoconferencing", one can expect to see more and more activities in virtual environments concerning non-virtual world stuff.

A gathering of international legal scholars in Second Life now often discusses stuff like Virtual Law, but a sure sign of mature virtual worlds use will be when such a gathering discusses in a virtual setting for instance "regulation of hedge funds" without any reference to Virtual Law.

Virtual Corporations could use virtual worlds offering services like translation, public relations, investment advice, legal advice, web developing etc, completely or largely unrelated to specific virtual worlds stuff.

Such a development could have an impact on virtual labor, increasing the price for such labor because of increased demand for virtual worlds specialists building and organizing virtual collaboration, but at the same time have an opposite impact on the labor market in general, putting downward pressure on services such as web developing, legal advice, translation etc because of increased supply of labor for such services.

Anyone having input about virtual labor markets (for instance offering quantitative data, or pointing out elements I simply forgot to take into account), please come forward!