Thanks to the spread of the Internet, the traditional workforce has already undergone significant changes. Things like e-mail and telecommunications have made work more flexible and brought people together, even if they’re geographically far apart. It has also enabled the rise of the gig economy.
Today, people have more flexibility in their employment models; they no longer have to rely on classic work 9 to 5 to provide for themselves. Instead, they can embrace a more creative and efficient work life, taking on short-term work at will or need. This is known as the gig economy.
But why does the gig economy have such a great impact on the future of work, and what opportunities does it present for both businesses and workers?
What is the gig economy?
Have you ever used an app to call a freelance taxi driver, book a vacation rental, order food, or buy some homemade goods? These are all examples of a gig economy. Many roles can be classified as a part of this model, including:
- Independent contractors and professionals
- Temps (temporary contract workers), etc.
In general, the gig economy is about exchanging labor for money between individuals or companies through digital platforms that directly connect suppliers and customers on a short-term basis and are pay-as-you-go.
The gig economy has ballooned in recent years as different gig economy apps arrive to tackle nearly every facet of the service industry. The changes introduced by the coronavirus pandemic have only accelerated the gig economy’s growth, as people staying home and minimizing contact opt for personal home deliveries for many of their daily chores and consumer necessities. According to a report by Mastercard, global transactions associated with the gig economy will grow by 17% per year to about $455 billion by 2023.
Of course, as the gig economy expands and more companies functioning on the model are found, the challenge for politicians and officials becomes to balance innovation that creates jobs, and the need to ensure that companies offer workers a fair deal. For instance, the U.K. government claimed that independence and flexibility are the key aspects that people working in the gig industry are often satisfied with. The gig economy has also gradually become an excellent source of income and job opportunities for students, working parents, and people who are otherwise occupied with home care work.
Identify skills gaps in your team
Learn strategies for identifying and analyzing skills gaps, creating a transparent skills landscape, and building a workforce ready for the future.
Examples of a gig economy
The most striking example of the gig economy is freelancing. The Internet and big data have allowed the gig economy to exist and scale up into services people can actually use. Today, connecting to the Internet is all it takes to make a deal or conduct a transaction.
Many companies like TaskRabbit, Fiverr, and Handy use the gig economy. Specifically, they prefer to use a ratings-based marketplace with secure payment systems, usually formatted as a custom or bespoke app. Meanwhile, cloud platforms have made all this easier by making it easy to bring together independent workers, employees, and customers.
- Some apps that can help a gig worker organize their work life are: Upwork (freelance services), Airtasker (create the to-do list).
- Examples of gig economy apps: Fiverr (freelance services), TaskRabbit (home improvement projects), Uber (transport).
Micha Kaufman, founder, and CEO of Fiverr, once said that gig economy platforms are becoming a personal brand and the professional identity of the worker employed by them. Good gig economy platforms reward good work and excellent results with reliable feedback that boosts trust and encourages more business.
How does the gig economy fit into the future of the work?
Thanks to a new wave of online platforms, gig employees taking part in short-term “digital work” or “gigs” usually receive money after each task. According to a recent Manulife Investment Sentiment Index (MISI) survey, 31% of professionals do so, at least part-time.
Gone are the days when freelancers had to spend an incredible amount of time building professional reputations before getting their first cent. Today, this is taken care of by the digital platforms that form the basis of the gig economy. By providing transparent customer assessment tools, simple dispute resolution mechanisms, and rigorous verification processes, these platforms ease user concerns and thus help reduce barriers to entry into large sectors of the economy.
The success of Uber shows the gig economy really works and fits the future of work. Many companies view temporary contracts with freelancers with unique skills as a more viable long-term strategy to keep up with changing market demands than constantly retraining permanent employees.
According to The New York Times columnist Thomas Friedman: “What can be done will be done.” In this age of technological acceleration, no one can afford to rest on their laurels. Market needs are constantly changing due to accelerating technological progress. This means that traditional career growth can be much more challenging – especially for gig workers. Without a structured career path, their achievements on one platform are typically not respected by another – but it does help them keep their skills up to date.
Tools like Skype and WhatsApp have reduced the cost of international communication. Prestigious universities now offer thousands of free, world-class courses on websites that anyone can access. Thousands of articles and megabytes of data are available at the touch of a button. This means that the gig economy may soon be associated not with the comparatively low-skill jobs of the service industry, but with highly-skilled, independent workers.
The movement of ideas, goods, money, and people stimulates the growth of the world economy. The gig economy serves as one way to lubricate that movement. As for employers, they’ve never had so much free access to the talents needed to improve their business, nor have they had the communication tools to easily reach out to potential workers, customers, and partners around the world.
Pros & Cons of the gig economy for organizations
It’s pretty challenging to determine exactly how many working adults are involved in the gig economy. According to the Bureau of Labor Statistics (BLS), 1.6 million people benefit from the additional income provided by gig economy work. In fact, many gig economy workers only use the model as a supplement to their main, or full-time, jobs.
For gig workers
The main benefits of the gig economy for workers are as follows:
- Higher salaries, dependent on the performance
- Flexible working schedule – pick up and earn
- Location-independent opportunities
- A large variety of gig platforms in different industries.
Apart from the benefits, there are also some disadvantages:
- Lack of traditional employee benefits such as health insurance or paid leave
- Isolation and lack of cultural identification with a company.
Employers can also benefit from the gig economy:
- Cost savings due to innovative new employment models
- Cost reduction in recruitment, hiring, and interviews
- Access to a wide range of talent.
However, there are some pitfalls you should pay attention to:
- Tight regulations on contractor status in some jurisdictions
- Lower corporate loyalty from workers.
The lack of labor capacity in skilled workers and the rise of the gig economy suggest one core constant: that the nature of work is changing, and businesses need to be prepared to support that change.
According to Peter Miscovich, Managing Director of Strategy + Innovation at JLL Consulting in New York, the gig economy will account for half of the workforce by 2030.
Soon, most corporate entities will be based on the latest “Hollywood” model of work, where agile and rare-knowledge workers will be in demand on a project-to-project basis.
Stay up to date with our newsletter
Every month, we’ll send you a curated newsletter with our updates and the latest industry news.