The term “gig” is typically dated back to the jazz culture in the 1920s with bands visiting different cities to perform one-night engagements or “gigs.” The term gig became more commonly used across industries to refer to one time, part-time or contract work. Around the time of the U.S. economic downturn in 2009, a new derivation emerged to represent the growing number of contract or part-time workers working whatever temp jobs they could find to make ends meet, hence the “gig economy.”
Alternatively known as the “shared economy” the emergence of technology companies and platforms that have made it incredibly easy and convenient to connect people to the products and services that they want has undoubtedly driven the growth of gig economy jobs. Other than your parents or grandparents who have not used at least one of the following: Uber, Airbnb, InstaCart, Lyft, DoorDash, Care.com, GrubHub, LegalZoom, or Drizlyvjust to name a few. (SIDE NOTE: for those of us shuttering in place during this pandemic, it is worth noting that Drizly is an alcohol delivery service. You are welcome.)
The pay, flexibility, culture, and opportunity for growth vary depending on the company and the service offered. Still, there are some significant benefits to workers and employers alike in the new economy. On the other side of the coin, there are downsides and discouraging trends that are making the gig culture an important one to understand its short and long term effects on our workforce and economy.
What Are Its Benefits?
For employers, its quite simple—deliver the same product or service for a fraction of the workforce cost. For companies shifting from a traditional workforce to a higher percentage of contract labor, they can avoid paying benefits, including healthcare, paid vacation, and sick leave or retirement contributions. For companies entering the market place where the majority of their workforce is a gig, then they can rapidly outcompete more traditional business.
Employers often bring in temp workers for small tasks or menial labor that require minimal qualifications, experience, and training, and ultimately the job can handle a few mistakes being made along the way. Taking online surveys, handing out advertisements, or telemarketing and call help centers are typical temp or contract positions.
Traditionally higher skill-level positions and services are now seeing an increasing number of gig economy competition. In the legal space, you see companies like LegalZoom and Rocket Lawyer connecting consumers directly to lawyers for judicial review and guidance on everything from lease agreements to filing patents. Need a logo for your business or some graphic design help? Why not crowdsource it 99designs or DesignCrowd, who instantly connects your project to hundreds of independent designers? If a company knows how to review experts and is okay with a lack of continuity and moving talent in and out of projects, the gig economy works here.
So, why would employees with high skill level forego the traditional employment structure for the hustle and uncertainty of short-term gigs? Maybe they do not need or want a full-time job and are just looking for the occasional side gig and some extra money? Perhaps they need full-time income but need the flexibility to create their schedule. For gig employees, it is all about the flexibility and control they have over when and how much they work. But are gig employees empowered or exploited?
What Are the Pitfalls?
One way or another, Uncle Sam is going to get his share. While taxes do need to be calculated on the work done, most gig jobs leave tax duties to the employee. In the United States, this is often known as independent contractors or 1099 employment.
The most significant point about 1099 employment is that taxes are not withheld. For many workers, this sometimes means a hefty tax owed when tax season comes around as opposed to paying a smaller amount per paycheck.
The major problem with the increasing movement towards a gig economy–especially for lower-skilled labor–is that it can create a somewhat cruel market place that cares even less about the worker because they are not an employee. The modern gig economy emerged during the global economic recession in 2009, and a lot of desperate workers flocked to gig jobs to make ends meet.
As more people learned about the gig job market and flocked to those positions, something predictably happens—increased competition for limited positions: supply and demand. In the first gig markets, there are usually more jobs or opportunities than labor available, giving the leverage on price and schedule to the worker. But as the labor side increases with the awareness of the new company or platform, the advantage tilts in favor of the company who can reduce compensation being offered and dictate schedules, thereby removing the flexibility that was so attractive in the first place.
For employers, the risk is always getting inadequate or inconsistent talent that underdelivers in terms of the product or service, thereby risking tarnishing the brand and reputation of the company and losing paying customers. For many industries and businesses, there is no substitute for experience, consistency, and reputation, and they are willing to pay their employees to ensure customer satisfaction and return business.
The pros and cons are different for every industry, and there are risks for both employers and employees in this new gig ecosystem. Still, for like any ecosystem to remain healthy, it must stay in balance. If companies try to take advantage of the gig workforce by lowering compensation and removing flexibility of schedule, then they will find their pool dry up. Similarly, temp workers who consistently underdeliver when hired for gigs because they are not fully engaged or invested in the relationship will find their opportunities dry up. The nearly ubiquitous use of detailed employer and employee profiles, search and match algorithms, and mutual review and scoring features help ensure that everyone plays nicely… or they don’t get to play at all!
In an interview in 2018 with On Point, Cornell professor of Industrial and Labor Relations Louis Hyman posed this question:
“The gig economy was created by choice, not by accident. The question we face now is a moral one: Can American capitalism create a working world where we’ve got both flexibility and economic security?”
In a world that is still dealing with COVID-19, its incredible impact on healthcare systems, and the broader global economy, the question becomes what industries have become fundamentally altered where their products and services will need to be delivered at a distance and by an increasingly gig workforce? As the entire economic ecosystem is disturbed to its core in this pandemic… where will we find the new workforce equilibrium between traditional and gig jobs in our new reality?