Is it time we ditched annual salaries in favour of ‘surge wages'?

Independent

3 days ago

Just as we've reluctantly accepted dynamic pricing in various corners of our lives – from smart energy metering to Oasis gig tickets – now, it seems, artificial intelligence is coming for your salary. 'Surge wages' could be coming soon to a payslip near you.
Consider how dynamic pricing might work in the City: instead of being offered a set annual salary – one based on the requirements of the job and a candidate's expertise and experience – an algorithm could come up with an ever-changing daily pay rate, one based on your productivity and dedication to the task, perhaps, or your perceived value and committment to the business as a whole. The more all-round competent and irreplaceable an employee, the more they're paid. Those who are underperforming in a sector with other candidates keen on the role can have their date-rate downgraded until they get the message…
Surge wages – a new macroeconomic buzzword, also known as 'dynamic wages' – is a high-concept that's already in use in the gig economy: your cab driver or food delivery rider has an option to accept or reject work whose fee is based on multiple factors, including time of day, day of the week, traffic flow, arrival time and distance. In theory, this improves the efficiency of the customer service and benefits the worker as well as the company, who get paid more for working at busy times.
Critics, however, argue that it also leads to gig economy companies bearing down on pay by using AI to squeeze rates at less busy times. In Britain, at least, the minimum wage does apply to this sort of work, providing gig workers with some level of protection.
But let's run a thought experiment. What happens if you extend this to other businesses? What happens if AI-set pay becomes the norm? To many, the very idea probably sounds dystopian. Many firms already offer bonuses based on production – in theory. We know it doesn't always work out that way in practice, because favouritism and unconscious biases interfere.
Women, for example, receive much less than their male counterparts. The bonus gap at Deutsche Numis, part of Deutsche Bank, shows that the median (middle) average awarded to women was just 81.9 per cent of what was paid to men in its 2023/24 pay gap report. The mean average was even lower: 77.7 per cent. Similar numbers can be found across the City. This isn't new.
So what if bonuses were set by AI, instead of old-school bosses? Could that narrow, or even eliminate, the gap and correct an injustice in the process? If the banking industry's noisy rainmakers were willing to put up with it, of course. I'm not sure they would be.
Sill horrified? Think on this. Would AI making an unbiased assessment of production and value added have been wiling to award Elon Musk the $29bn he was paid by the compliant board at Tesla? Perhaps his Grok AI should be delegated to set the boss's pay in future. That would certainly be fun to watch.
But let's get serious. AI wages could also benefit other groups of currently underpaid workers. One of the things campaigners for disabled people often like to point out is that these workers are highly productive. That might seem counter-intuitive. Those of us with disabilities (myself included) have health issues to contend with, right? But wait, if you're disabled, and you have a job, you are going to do your damndest to keep hold of it given. As disability charity Scope points out, there are a million disabled people out there who want to to work but can't find it.
AI could eliminate those 'unconscious biases' we keep hearing about – and chances are you'll work your tail off to protect the job you have. An algorithm would recognise that. Bosses? Maybe not.
This brings us to the question of younger workers, who are currently in a jam thanks to one of the less beneficial impacts of AI. Tech has already been busy eliminating entry-level positions from a host of sectors, including, but not limited to, the City of London.
Their plight might be about to get worse, if deputy prime minister Angela Rayner pushes ahead with plans to increase the minimum wage for younger workers to parity with everyone else. Her intentions are good – but we all know what road to hell is paved with.
If younger workers are finding it hard now, when they are cheap, just imagine what the effect will be when that discount is forcibly removed. Employers already prefer more experienced staff who don't suffer from the curse of Generation Covid: unthethered exam grading, a blank CV, less chance of work experience in an era of hybrid working, and myriad lockdown-induced problems with socialising. This will simply exacerbate the problem.
Surge wages could be the thing that helps get the feet of younger workers on the ladder and out of the NEET's (not in employment, education or training) slough of despond.
Confession time: This is a thought experiment. Letting AI run wild is something that has me chewing on my nails as much as anyone. Employers using AI to squeeze wages at every level is something that worries people, and it should. It is a real risk – a dystopian fiction made real.
It almost cries out for regulation, which may well follow as AI related controversy grows. I don't need a bot to tell me that. Age and experience do the job just fine.
It would be politically popular, but bad regulation could strip any potential benefits that may emerge from AI (which is probably already at work in an HR sandbox before being unleashed).
But benefits do exist, if this is handled right. Of course, I do realise that 'if' is doing a lot of work there.