The Gig Economy: Distraction from a Real Problem or Disruption to the System?

The Gig Economy: Distraction from a Real Problem or Disruption to the System?

Uber. Airbnb. TaskRabbit. Fiverr. These companies and many others like them have been recent harbingers of change in the business world. Known as the “gig economy,” this new way of working that allows people—with the click of an app—to earn a little money on the side, when and where they want, appears to be here to stay. In fact, a recent study showed the number of Americans benefiting from alternative work arrangements rose by nearly 10 million between 2005 and 2015.

That study revealed something else, which for “gig economy” naysayers was telling: The online, “app-driven” workforce accounted for less than one percent of the gig economy workforce in 2015. The majority of these “alternative work arrangements” were not digitally focused and app-driven, which is what most media reporting on the gig economy tends to focus on.

So, who are these workers? According to the report, they are on-call workers, temporary help agency workers, contract workers, and independent contractors or freelancers. Among them, the fastest growing group is contracted workers. And that’s a little scary. Where does that leave today’s job seekers? Are the halcyon days of company loyalty, full benefits, and long-term employment prospects over?

Has the Gig Economy Hurt the Workforce? 

However you slice it, the gig economy has definitely hurt the workforce. In 2014, the U.S. Department of Labor’s David Weil coined the term “the fissured workplace.” He also published a book of the same name and found there’s been a seismic change in the way companies do business, shifting from focusing on employee-worker relations to placing priority on “building a devoted customer base and delivering value to investors.”

The results haven’t been pretty, and they go a long way toward accounting for those high numbers of people I mentioned above—those engaged in the “non-digital” side of the gig economy. As Weil writes in his book “The Fissured Workplace,” “…large corporations have shed their role as direct employers of the people responsible for their products, in favor of outsourcing work to small companies that compete fiercely with one another. The result has been declining wages, eroding benefits, inadequate health and safety conditions, and ever-widening income inequality.”

Ironically, Apple, the very company that has been at the forefront of the rapid technological changes that have allowed this work splintering to occur, is one of the worst, employing fewer than 10 percent of the more than one million workers around the world who design, make, and sell their products.

This doesn’t bode well for new graduates entering the workforce. Nearly a decade after the last Great Recession, most Americans are still anxious about their futures, economic and otherwise.

The Impact of the Gig Economy

Economists tend to be our “canaries in the coal mine,” if you will, and many of them feel the gig economy and the resultant instability in the workforce due to increased outsourcing will have a huge impact on our economy in years to come.

“The general suppression of peoples’ ability to earn a good wage is part of what is leading to slower overall growth, what some people call secular stagnation… [and] it contributes to the ornery politics that we have now,” said Lawrence Mishel, president of the Washington-based Economic Policy Institute, in a recent Bloomberg article.

And while the U.S. jobless rate of around five percent looks good on paper, that number masks the fact that wage growth has stagnated, and a higher number of people than ever are working part time due to the overall decrease in full-time opportunities. If people can’t earn, they can’t buy. Nor can they invest in retirement and/or health care benefits for their families, nor help their kids with the costs of higher education.

Are We All Doomed?

No, of course not. The tech-driven gig economy has brought many new jobs to the table, and offers the opportunity to work remotely to people who can’t access more traditional 9-to-5 office jobs due to location or transportation issues. In fact, of the nearly nine-million-plus new jobs created in America since 2005, nearly all of them have been “gig economy” style employment. And job growth of any type is always good news.

There are, however, very real issues we have to face to avoid feeling doomed. The tidal wave of change in the way companies run their businesses is not going to stop. And this “flexible” work world we’ve created, with all its pluses and minuses, is not going away. There is an urgent need for corporations, governments, and society as a whole to adjust to these changes so workers don’t get left behind. As entire industries are transformed by the gig economy, and new “gigs” are created due to rapid technological advancement, people with the skill sets to fill those gigs will be needed.

Today’s flexible work structure has the power to fundamentally disrupt our place in the world. The next five years will reveal unprecedented upheaval for business. It’s up to us, as a society, to proactively get our arms around these changes and modernize training programs, regulatory policies, and employment laws so both businesses and workers benefit from the gig economy—truly the fourth industrial revolution, whether we like it or not.

Photo Credit: Flickr via Compfight cc