Freelance economy, sharing economy, digital platform economy, crowdsourcing or gig economy
The sharing economy, the collaborative economy, crowdsourcing or the digital platform economy; all names for what is more popularly known as the gig economy. It has grown from a niche way of earning money to providing income for over a third of workers (36%) in the United States. In fact, according to figures by Statista Research Department (May 2021), it is projected that in 2027, 86.5 million people will be freelancing in the United States. That’s 50.9 per cent of the total U.S. workforce! However, we see numerous uncomplimentary stories across the world’s media about the digital platform owners mistreating gig workers.
While the gig economy has been rightfully associated with some negative PR in recent times, there are a huge amount of positive ramifications from the most significant change to the way we work since the Industrial Revolution. So I’d like to highlight ten reasons why this way of working is only going to increase over the coming years.
What is the gig economy?
The table demonstrates there’s much more to the gig economy than the transportation-based services that have come under scrutiny.
10 reasons the gig economy is only going to get bigger
1. Growth of platform economy
This graph from Crunch Database in a 2021 report by the International Labour Organisation shows the number of gig economy platforms has multiplied over the past decade. While Marketwatch anticipates the market will “rise at a considerable rate” between 2021 and 2026.
2. Low barriers to entry
Typically, to enter traditional employment, a candidate may need a CV and participate in an interview, even for a low-paid, manual job. At the higher end, qualifications and experience are essential. At the same time, entry into traditional self-employment requires paying the costs of creating a business and developing a network of clients. It can also be constrained through licencing requirements. Gig economy platforms can reduce such barriers to work as they use alternatives to formal qualifications, such as reputation rating mechanisms. In addition, workers typically do not incur the cost of creating a business. Crowdsourcing creates more opportunities for individuals to work who may have had difficulty before the arrival of gig economy platforms, such as those with disabilities or health issues, migrants, the low-skilled, underemployed or unemployed.
3. Greater efficiency in matching workers with job opportunities
Unlike the traditional self-employed, who make an income by generating their own sales, the gig worker has the earning opportunities presented to them through the platform. The ongoing development of platform technologies and their associated algorithms means that it is even more efficient for a worker to match a client.
4. Borderless markets
A designer, writer, or software engineer in Indonesia can quickly start working with clients in Dublin through a range of professional service providers like Upwork and Fiverr. A family in South Africa can rent their property to an Australian client for a week, and a Peruvian jewellery designer can provide the perfect gift for a spouse in Chicago.
5. Increased work autonomy
Covid-19 forced many organisations to allow their staff to work from home, which blurred the lines with the benefits of being an independent worker. However, the opportunity to choose how much work you take on, when you do it and where you do it is the main attraction of freelance work. Online printing company Vistaprint did a survey in 2018 that found three in five (62%) respondents want to be their own boss. While an attraction to total flexibility was highlighted in a Statista survey: 71% of American independent workers stated ‘flexibility in my schedule’ was the leading reason for doing freelance work. Gig work also provides more opportunities for students and caregivers to earn some money around their irregular commitments.
6. Greater work satisfaction
We all take a sense of pride in something we completed individually; it might be a DIY project or completing a course. So when it comes to completing a project for a client they’re happy with or watching an income grow from nothing, it’s easy to understand a sense of fulfilment. A McKinsey study in 2016 found that individuals who chose independent work as their primary source of income reported greater satisfaction with their output than traditional workers.
7. Better hiring options for the employer
Organisations can look beyond the traditional employment contract and outsource work through alternative arrangements involving independent contractors, freelancers, gig workers and crowd workers. According to Deloitte, gig economy platforms managed over US$2 billion in outsourced activity in 2019, employing hundreds of millions of people in every geography of the world. The crowdsourcing can be used to find niche specialists for a specific project.
8. Recruitment cost reduction
The process of engaging with a gig economy platform is quicker than the traditional route through a talent agency. Organisations can set up the tasks and requirements, and the platforms match these to a global pool of workers who can complete the tasks within the specified time. The services include screening and short-listing workers with specific skills and competencies, thus speeding up the recruitment process. Researchers at the Oxford Internet Institute surveyed nine Fortune 500 companies who said they lowered their hiring costs by up to 30%.
9. Increased innovation
Open source and competitive programming platforms provide opportunities for innovation that are beneficial to both organisations and workers. Many leading IT companies collaborate closely with open-source platforms on innovation, research and development, seeking solutions to specific problems. For example, Microsoft collaborates with the Apache Software Foundation, an open-source volunteer community of developers. Businesses also access innovation by using competitive programming platforms that organise challenges for programmers, developers and coders in various technology domains. Competitive programming platforms such as Topcoder have leveraged the crowdsourcing model to find solutions to some of the world’s most complex and sophisticated problems.
10. Improvement in working conditions and welfare
Now let’s address the elephant in the room. The gig economy has its issues, mainly that being categorised as an independent worker precludes that person from access to many workplace protections and entitlements that a permanent employee can avail of. While labour laws are changing in some countries to give contractors more rights, the gig worker has been exploited in a number of the roles on offer. It’s been well documented that transportation gig platforms consider the people who deliver their services independent workers and not employees, so they’re not entitled to any employment rights. Yet, the platform’s algorithms restrict that very independence. Similarly, the International Labour Organisation has found that workers from developing countries often face additional barriers due to exclusion by platforms.
However, things are changing for the better. For example, Uber V Región Trade Union is the first formally registered trade union of app-based drivers. In the EU, France, Italy, Germany, and Spain allow some degree of collective bargaining by dependent self-employed workers. In Canada, food couriers can bargain collectively, and there are provisions in Australia and Japan. While in Argentina, there is no prohibition on self-employed workers organising themselves to improve their working conditions.
According to the International Labour Organisation, in cases where the platforms do not wish to participate in dialogue, gig platform workers are increasingly engaging in dispute actions such as strikes, demonstrations, and litigation. Since 2015 there has been an increasing number of such activities worldwide. There have been at least 1,253 occurring in 57 countries between January 2017 and July 2020. Argentina, China, India, the United Kingdom and the United States each had over 100 protests.
One of the most significant cases was in February 2021 when the UK Supreme Court upheld a ruling that UBER’s drivers are workers, not independent contractors. This decision will have sent shockwaves throughout the gig platform owners.
Challenges for organisations
The pace of change and growth in the gig economy means that organisations need to be increasingly vigilant when engaging this talent category. A 2019 survey conducted by Deloitte highlighted that organisations “either managed alternative workers inconsistently or had few or no processes for managing them at all”. This leaves those companies open to serious compliance issues.
Are the gig workers’ business entities and corresponding bank accounts on your payroll compliant? Are you sure your IP is fully protected through up-to-date NDAs signed? Can you be confident that you don’t have any misclassifications of your gig workers?
Fortunately, here at CXC, managing contingent worker risk is our forte. If you’d like to hear more about how we manage the compliance of gig workers organisations worldwide, get in touch with me.
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