Why The World’s Youngest Self Made Billionaires Just Slashed Workers’ Wages

Key Concepts

• AI Training Data: The raw material (text, audio, video) used to teach artificial intelligence systems.
• Contractors: Individuals hired for specific projects on a temporary basis, often without employee benefits.
• Valuation: The estimated worth of a company, often used in funding rounds.
• Hourly Rate: The amount paid to a worker for each hour of work.
• Minimum Wage: The lowest hourly wage an employer is legally allowed to pay.

Merkor's AI Training Project and Contractor Layoffs

This report details the abrupt cancellation of an AI training project by the startup Merkor, impacting thousands of contractors. Merkor, which recently secured $350 million in funding at a $10 billion valuation, leading to its co-founders becoming the world's youngest self-made billionaires, allegedly terminated a project involving video and audio review for Meta's Reels platform.

Project Details and Contractor Experience:

• Client: While not officially named by Merkor, contractors were informed the client was Meta.
• Task: The project involved reviewing video and audio content from Meta's Facebook and Instagram to train AI models to identify people and products in short-form videos.
• Scale: The contractor Slack group for this project at one point comprised over 5,000 individuals.
• Duration: Contractors had been working on the project for several months, with expectations of continued work until at least December, as communicated by Merkor managers in October.
• Initial Pay Rate: Merkor was paying these contractors $21 per hour.
• Preceding Issues: In the weeks leading up to the cancellation, contractors reported project pauses and reduced promised hours.

Abrupt Termination and Wage Reduction:

• Sudden Lockout: Contractors found themselves locked out of Slack, the primary communication platform for the project, last week.
• Cancellation Notification: An email was sent to contractors informing them of the project's cancellation.
• Rehiring Offer with Reduced Pay: Hours after the project was scrapped, Merkor allegedly offered to rehire some of these contractors for a new project, codenamed NOVA, at a significantly lower hourly rate of $16 per hour. This represents a 24% decrease from the previous $21 per hour.
• Below Minimum Wage: The new rate of $16 per hour is reportedly lower than the state minimum wage in several locations, including California, Washington, and Connecticut.

Contractor Reactions and Merkor's Justification:

• Disrespect and Lack of Consideration: Contractors expressed feelings of being disrespected and that their work was devalued, with one stating, "It felt like a slap in the face. It's very disrespectful to ask us to do more work for less money." Another emphasized, "It's contract work, but we are real people who deserve some notice or warning or some consideration."
• Merkor's Email to Contractors: Merkor's email regarding the new offer stated, "We've carefully reviewed contributor feedback regarding task availability, hour caps, and workload consistency. We've heard you, and we're committed to creating a more stable and predictable environment for everyone moving forward." The email also framed the new rate as offering "greater earning stability and consistent access to work rather than fluctuating opportunities."
• CEO's Statement: Following the initial report by Forbes, CEO Brendan Foody stated that the project was described as "temporary" in its job description and onboarding materials.

Context of Funding and Valuation:

• Recent Funding Round: Merkor's actions occurred just weeks after a $350 million funding round that propelled its valuation to $10 billion, a substantial increase from $2 billion just months prior.
• Youngest Self-Made Billionaires: This funding round also made Merkor's three 22-year-old co-founders the world's youngest self-made billionaires.

Conclusion

The case of Merkor highlights a stark contrast between a startup's rapid ascent in valuation and its treatment of contract workers. The abrupt cancellation of a significant AI training project and the subsequent offer of reemployment at a substantially reduced hourly rate, below minimum wage in some regions, has drawn criticism from affected contractors who feel undervalued and disregarded. Merkor's justification centers on providing stability, but the method of implementation has led to significant backlash.