I thought this article was going to be about the controversial theory of crowdsourcing in the wider sense--not just design. With these deceiving headlines, you attract a lot of people like me who rain on your parade and unfortunately, think your article is a snooze.
My take on this debate (would love to get a hole or several punched through this reasoning, so please give it your best):
* People being concerned about the prevalence of crowd-sourced or spec work are right to speak loud and clear about their concerns, and campaign against it wherever they get the chance.
* People not sharing those concerns are right to set up or participate in competitions/spec work if they want to, and draw their own conclusions from their experience.
But are there any objective reasoning to apply beyond the subjective concerns? At no-spec.com people campaigning against spec work have had years and years to formulate their reasoning, their FAQ probably lay down the facts best: http://www.no-spec.com/faq/
The entire FAQ, although verbose, basically boils down to two assertations:
A. Spec work often gives out false promises about further, "real", employment opportunities once the competition is won.
B. If you give out spec work, you can expect inferior results because proper care will not be spent on research prior to carrying out the work.
There is also the conclusion that as a designer you should always try to retain the rights to the work, but that seems to apply to all projects and not only spec work.
To sum up, the conclusion I draw from the No-spec campaign FAQ is: It is ok to arrange spec work competitions as long as you don't give out false pretentions about the rewards going to the winner, and you find the risk of inferior results acceptable.
I actively hate Crowdsourcing of this nature ... but we shouldn't demonize people for asking for something ... especially when lucid adults respond favorably to their requests. This are just good old market forces at work ... and the market is trying to commoditize a product (the service of design).
What needs to happen is, the industry has resist that push.
Figure out how to make sure the people providing services in this industry understand their worth, how the effect of their participation in these competitions cheapens the industry, and heightens the expectations of customers to ridiculous levels (Show me a lawyer that'll participate in a crowdsourcing contest for their services)
I suspect that since that is a much harder task than flaming people who choose to crowdsource logos and website design though, that we'll just have more of the later.
It's relevant because one of the methods for reducing unemployment was encouraging entrepreneurship. Considering the small chances of startup success, isn't the relationship between Crowdspring client / designers exactly the same as Venture Capitalist / startup founder? Most of the designs are losers, just like most startups. You could even extend this logic to social media participation - lots of people make YouTube videos, a few get huge and earn a share of the advertising dollars, same with blogging.
When there's an oversupply of skilled labor, you can switch to a contest model instead of an employment or contractor model, driving down the costs even more. This problem affects young, relatively well-educated Westerners, and as the Business Week article points out, this is the root of the current political violence in Egypt. Companies trying to find new ways to grow will demand tax cuts, governments will cut benefits to give it to them because they want to see improved unemployment numbers, and this will further enrage the struggling unemployed. If this trend continues, it's a downward spiral that could bring increased political violence in the West.