Adjusting Skillset Cohesion in Online Labor Markets: Reputation Gains and Opportunity Losses

Abstract

In online labor markets, contractors' ability to charge for their services largely depends on their skills. To keep up with shifting labor market needs, contractors often expand their skills with new skills. When the new skills are similar to the contractors' current skills, they often increase skillset cohesion (i.e., the average similarity of skills in a skillset). However, when the new skills have little similarity with contractors' current skills, skillset cohesion decreases. How do such adjustments of skillset cohesion affect contractor value in digital workplaces for short-term work? We argue that skillset adjustments affect market value through changes in the contractor's perceived reputation on the new skills and the additional job opportunities that new skills create. We hypothesize that compared with skills that decrease cohesion, skills that increase cohesion result in reputation gains and opportunity losses. Analysis of a panel data set of 47,638 tasks illustrates that for hourly wages, reputation gains are smaller than opportunity losses; hence, all else being equal, increasing skillset cohesion has a relatively negative effect on wages. However, for hiring rates, the opposite is true: Increasing skillset cohesion increases contractor hireability.