To Make New York More Affordable the Next Mayor Should Ban “Surveillance” Pay and Price Setting

As Mayor-elect Mamdani works to make New York a city we can afford, one way he can promote higher pay and lower consumer prices is by halting the rapid growth of individualized “surveillance” wage and price setting. Burgeoning access to personal data is enabling corporations to exploit new technologies to low-ball pay for desperate workers and jack up prices on consumers who lack options. App-based companies such as Uber are leading the charge, and experts warn the practice is spreading, including to retailing and services where corporations are beginning to use personalized data to target prices toward individual consumers. Senator Ruben Gallego recently introduced federal legislation to ban surveillance pricing. But efforts in the states to ban these abuses have been blocked or watered down after a lobbying blitz by big tech. This year New York State took a modest first step by requiring retailers to inform consumers when surveillance pricing is in effect. But disclosure alone is not enough. The next mayor and city council should build on this state law by banning these practices altogether.

What is surveillance wage-setting?

A booming ecosystem of tech tools enables businesses to easily acquire and use extensive personal and behavioral data to shape the workplace. Businesses can now use vast surveillance data and automated decision-making tools—algorithmic hidden bosses—to decide in real time who gets work, how workers are evaluated and disciplined, and how much they will earn. These AI-type tools are causing harm to workers, necessitating bold solutions. A good place to start rolling back big tech’s latest assault on workers would be the implementation of policies that ban dynamic, unpredictable, and individualized pay practices known as surveillance wage setting.

Businesses can feed “amassed datasets on workers’ lives into machine learning systems” to make a range of decisions about the terms and conditions of work. That means corporations such as Uber can set individualized pay rates based on real-time data: pay varies from trip to trip, hour to hour, and from one driver to another for the same job. Pay can be calculated “perhaps for as little as the system determines the workers may be willing to accept.” These tools might also be used to set individualized pay based on a workers’ vulnerabilities, or their “desperation index.”

Yet algorithmic decision-making systems and the surveillance data they rely on are hidden from the workers impacted by them, making workers scramble to chase hidden metrics in real time. Workers compare this unpredictability to gambling; they are lured to work more quickly or for longer hours in hopes of winning a reward without knowing the odds—in a race against each other and the clock. As a recent large-scale survey of Uber drivers reveals, seven in ten workers report pressure to accept lower pay or stay on the road for longer. And driver pay has decreased as Uber exploits its opaque algorithms to take a larger cut of each trip.

Ridehail drivers are just the canaries in the coal mine. Surveillance wage setting is spreading, threatening to degrade work in a range of other industries. Nurses working through apps including Clipboard Health and ShiftKey report personalized, variable pay set by reverse auctions on the lowest wage bid. And some vendors of AI labor management technology sell human resources platforms that can not only adjust pay in real time, “but also steer how pay tiers and bonus structures are set over time.”

No one should have their work subject to the whims of an inscrutable algorithm or live on low and unpredictable wages that fluctuate by the hour, much less those that can be manipulated downward based on personal worker data unrelated to the job. Workers should earn equal pay for equal work, and fair, transparent, and predictable wages. Surveillance wage setting atomizes workers and degrades working conditions, transferring wealth and power to big tech at the expense of working people.

New York City’s workers need strong, enforceable guarantees of predictable, living wages. Banning surveillance wage setting, as states such as Georgia, Illinois, and Colorado have proposed, is a necessary first step. Such bans should also prohibit corporations from using real-time data to automate compensation, and from paying workers differently for identical work—related practices that might juice corporate profits, but only by suppressing wages and fostering wage discrimination.

What is surveillance price-setting?

This same technology is also increasingly used to extract more profit from consumers by setting variable, personalized prices. Delta Air Lines last year told investors it was using AI to  reengineer its pricing to determine each airfare “on that flight, on that time, to you, the individual.” Target and Kroger have been accused of similar practices. While we don’t know exactly how ubiquitous these practices are, research from the Federal Trade Commission suggests that the technology exists for them to be implemented widely. “Initial staff findings show that retailers frequently use people’s personal information to set targeted, tailored prices for goods and services—from a person’s location and demographics, down to their mouse movements on a webpage,” said then-FTC Chair Lina Khan.

The FTC found surveillance pricing tools are being used across a host of sellers, including grocery stores, hardware stores, health and beauty retailers, and general retailers, and posited that, for example, a consumer profiled as a new parent based on their data trail could be shown higher prices for baby thermometers, or someone profiled as a first-time car buyer would be presented with more predatory buying or financing options.

The goal of these surveillance pricing tools is to find the consumers’ “pain point” and optimize for their “willingness to pay,” thereby extracting the maximum revenue from every transaction—which the consumer generally experiences as higher prices.

This causes several concrete harms. First, the ability to target individuals with personally-tailored prices—or to mix surveillance pricing tools with other potentially abusive pricing practices, such as dynamic or surge pricing—renders comparison shopping, a foundational piece of market-based capitalism, functionally impossible. In such circumstances, a buyer cannot reliably assume that the price they see will remain somewhat constant or that it is based on economic forces, as opposed to distinguishing characteristics that will follow them as an individual across the web. Another person looking for the same product at the exact same moment may see an entirely different price, while supposed competitors may coalesce around certain prices for certain individuals based on their data profiles.

Second, these pricing tactics also make budgeting significantly harder, as prices shift in real time, undermining the ability of consumers to make predictable expenditures at regular intervals. Household budgets rely on prices being tethered to some regular level over an extended period, a stability directly undermined by individualized, ever-changing prices. For leaders who want to champion affordability, returning predictability to the consumer experience is key.

Finally, surveillance pricing tactics undermine innovation and entrepreneurship, as large, consolidated corporations spend time and effort not on improving products, becoming more efficient, or improving service to win market share, but on advanced surveillance and data collection tactics that are channeled into new ways to gouge individual customers. These tactics also harm smaller, local businesses, which lack access to the deep well of data that large corporations weaponize against consumers. If data is power, as the saying goes, all power under a surveillance pricing-based economy will accumulate within large firms.

Through its innovative Department of Consumer and Worker Protection, New York City is well positioned to provide the policy leadership the nation needs to fight these abuses and help make our city one where people can afford to live and thrive.

New York can now implement its new disclosure law, which has survived a legal challenge, and may provide insight into consumers attitudes about surveillance pricing. But a disclosure regime does not substitute for more meaningful action to protect consumers and workers. In an increasingly monopolized economy, it’s unclear what action such disclosures can even elicit from consumers. New York has a unique opportunity to build on state law and lead the way with action to properly ban surveillance pricing and pay setting and to enforce that prohibition.

At a time when big tech is wielding its political muscle to stifle needed regulation at the federal and state levels, major cities such as New York must act on behalf of their large populations of vulnerable workers and consumers. Through its innovative Department of Consumer and Worker Protection, New York City is well positioned to provide the policy leadership the nation needs to fight these abuses and help make our city one where people can afford to live and thrive.

Sally Dworak-Fisher is a Senior Staff Attorney, Dan Ocampo is a Staff Attorney, and Paul Sonn is State Policy Program Director at the National Employment Law Project. Pat Garofalo is the Director of State and Local Policy at the American Economic Liberties Project.