Welcome to the gig economy
Welcome to the world of "economic disruptors," where a company, technology or way of operation is so different that it forces businesses, governments or individuals to change the way they operate.
Welcome to the world of "economic disruptors," where a company, technology or way of operation is so different that it forces businesses, governments or individuals to change the way they operate.
One of the major disruptors is the so-called gig economy. As with any transformational activity, though, all that glitters is not gold and some will benefit while others fall behind.
What is the gig economy? The term borrows from musicians, who play individual "gigs." That is, they usually, but not always, move from one place to another to perform. This is nothing new, as consultants have been part of the gig economy for decades. However, they were usually employees of consulting firms.
What makes it different now is that many individuals are freelancing and - maybe more critically - firms are depending heavily on freelancers for their workforce. Consider Uber, whose employees essentially choose their working hours. This is a large company with a variable, almost random, workforce.
Being part of the gig economy, though, doesn't require being employed by a gig employer. Individuals can work on projects for traditional firms. These gigs could be as short as a few hours or last months or years. Though I was on a year-to-year contract, my stint as chief economist for Commerce Bank lasted nearly a decade. Because I didn't work exclusively for the bank, I was part of the gig economy.
That flexibility is what often makes the gig economy so appealing to workers. You can determine the hours you work and whom you work for. As I like to say, "I only work for people I want to work for." Of course, that can be challenging when you need to make a living.
Being a gig worker also provides the opportunity to do work on a variety of projects, for different companies in diverse industries.
But flexibility, independence, and variety come at a cost. While gig companies often provide some benefits, not all companies do, especially if the purpose of hiring gig workers is to control labor costs. The lack of health care and retirement programs is a major concern not only for workers, but also for society itself. The lack of those benefits often creates costs borne not just by the gig worker, but by everyone. And, if you don't work, you don't get paid. Vacations and sick leave are concepts, not realities, for many gig workers.
Finally, not all of the workforce change is occurring because employees want to be part of the emerging gig economy. Firms are looking for flexibility in their employees, whether workers want that option or not. That is one reason so many people have part-time jobs but say they want full-time positions.
Both the U.S. Bureau of Labor Statistics and Commerce Department have numbers that provide insights into the importance of gig workers in the economy. BLS calls them contingent workers, defined as those who don't have "an implicit or explicit contract for long-term employment."
Commerce develops its numbers from IRS data for 1099 workers and calls the series "nonemployer" statistics. For the U.S. as a whole, total nonemployer workers totaled about 23.8 million in 2014. That was about 16.3 percent of all those employed. In the Philadelphia region, there were about 334,000 nonemployer workers out of roughly 2.8 million workers, or about 12 percent. These numbers are in the general range of 10 percent to 20 percent of all workers estimated for the national economy. It is forecasted that the share of all workers who will be part of the gig economy could grow to between 30 percent and 40 percent within a decade.
As the gig economy expands, the traditional relationship between labor and management will become much less clear. Movement between firms will accelerate, as both the employer and employee look for nonemployer workers.
In a world of multiple and changing employers and employees, what happens to benefits, worker and employer rights, and responsibilities? How will the law evolve? When you break down the straightforward employer-employee contract, you remove decades of common practices that guided the workforce. The social, political, and economic disruptions will be great.