The Rise of the Gig Economy

Today, American employment undergoes a disassembling, pitting workers who were once cogs against each other as machines of their own.

 

The gig economy (the sharing economy), consisting of short-term, part-time and contract work, makes up an ever-growing portion of the overall economy. The gig economy is not exactly new though, even as it has gained wider press attention with the emergence of apps sidestepping traditional modes of transportation (e.g., Uber and Lyft), handiwork (e.g.,TaskRabbit and Handy), and lodging (e.g., AirBnB). Working for less than or up to three months, less than thirty-five hours per week, or as a self-employed individual are all opportunities for work that were available in the past. The gig economy has grown because it also subsumes internet-connected, self-employed individuals setting competitive prices for on-demand services. Intuit has predicted that there will be 60 million contract workers in 2020, up from 15 million in 2015.  

 

Intuit, which also holds Turbotax, also recently estimated that 34 percent of the workforce is part of the gig economy today, totaling around 51.5 million Americans. By 2020, it is expected that 43 percent of the workforce will travel from gig to gig. The Bureau of Labor Statistics aims to survey the gig economy by 2018 to take a read on the changing nature of American work, but the difficulty in examining this growing part of the economy is its transience. Freelancers work on a short-term basis. The real number of participants is probably even greater than the Intuit figure suggests.

 

The internet has fostered an interdependence in which the gig economy has flourished. its services are on on-demand, offering unparalleled convenience for customers. Individuals working through an app like TaskRabbit are at hands reach to customers. Many of these apps cut out the administrative slag of the traditional business model. Texting or calling a service provider is available on many of these apps. In a matter of minutes, those boxes that needed moving could be on their way to a storage unit. When you’re ready, they’re ready.

 

But convenience is not reason enough for customers who increasingly rely on the gig economy, or why the gig economy has grown so large. The principal advantage of the gig economy — and these apps in out-competing industry predecessors — is its low price of labor translating into a low price of product.

 

When a tip is accounted for in taxi fares (and even sometimes when it is not), Uber is cheaper than taxis in almost all major U.S. cities. The same is true for Lyft. A complete cost analysis has not compared TaskRabbit and Handy to more traditional services, but if people working on there are to remain competitive, then they need to offer competitive prices. For a general computer tune-up, it’s cheaper to use a gig economy service.

 

Why would you pay $140 for Geek Squad for a computer tune-up when $120 to a Tasker would suffice? For relatively menial tasks with a limited quality difference in the service (as a taxi and a normal ride-sharing car will take you from point A to B similarly, and as a handyman and a Tasker will both fix your freezer) the gig economy depends upon its cheap cost of labor to remain competitive. A self-employed individual delegating a specific time to work needs to make money in that time, so cutting prices to get the most business in the interim they have is in their interest. (AirBnB, on the other hand, has more salient alternatives in quality. Whether or not you want to stay in a $600 per night loft through AirBnB or at a Red Roof Inn for $60 per night figures into your decision. Staying at a ritzy hotel is a different experience than staying at a lavish apartment.)

 

The fast-food industry, which runs on all things convenient and cheap, has been a longstanding source of gig employment. Its low prices demand no less than even lower costs, which means that hiring employees as part-time workers save franchises the burden of shouldering benefits like healthcare and paid leave, even as some fast-food places have discovered that full-time employees have helped, not hurt, their business. (Also, in spite of popular belief, Obamacare’s mandate to businesses with 50+ employees having to cover ≥ 30 hrs/wk workers health coverage did not prompt an increase in 25-29 hour/wk workers. An inordinate increase would have reflected businesses sidestepping that full-time worker healthcare mandate.)

 

Whether or not minimum wage hikes hurt employees by compelling businesses to cut some workers to save costs and prompts businesses to abandon labor in the long-term or actually helps out low-skilled employees and businesses too, has long been the subject of policy-based evidence-making and all-around partisan obfuscation. Does increasing minimum wage hurt or help workers, particularly in this environment of gigging?

 

The truth is that minimum wage hikes, as all increases in labor costs, depend upon the rate of increase relative to other costs in the place where they are occurring. So when the gig economy drives down the costs of work, it is the lowest-skilled workers who are left behind, at least temporarily. The short-term trade off of productivity for low labor costs can boost future standards of living for those workers.  

 

But with the growing preponderance of gig work as the only work, low-skilled workers, who are already facing challenges from automation and weak bargaining power with employers, face an even greater challenge in securing dependable work in the future. The impetus for a minimum wage, then, is stalled by businesses’ claim that low-skilled jobs are temporary, and that since they are temporary, it is not in the interest of businesses to raise prices to support their workers.

 

The type of undependable employment found in the fast-food businesses will also take root in low- and medium-skilled jobs as the gig economy develops across industries.  

 

Without health coverage and other benefits because of their status as a self-employed person (contractee) or part-time or short-term worker, as well as fickle schedules hindering gig workers from budgeting their time to pursue other jobs through more schooling, other skills-training, or landing interviews, the gig economy hampers workers from seeking better opportunities. Which, in turn, is one of the reasons that low-skilled workers are more likely than thirty years ago to remain low-skilled. The gig economy compounds that stagnation by deinstitutionalizing training, making it the personal business of individuals to learn trade skills. The fall of unions, rise in gig work, and a general decline in apprenticeships together reflect the individualization of work such that becoming skilled has become the responsibility, more and more, of the low-skilled. Businesses have traditionally served to build the best business by training their workers to be the most skilled. Handymen could learn to be handy by working for other handymen. Apprenticeships guided the current economy into the future. But businesses have discovered the profitability of the gig economy — and the opposite labor costs — in the age of the internet.

 

For people living in disadvantaged areas of the nation, the gig economy’s ascendance widens the existing gulf in skill.

 

Given, it does not take that much skill to drive a car, but it still costs as much as $550 to begin driving for Uber in some cities. AirBnB hosts need to own listable property and provide amenities. And they do it on the side, most often. Handiwork skills can be picked up, but that takes time and money. Trade school tuition averages vary by state, but median tuition states cost between $8,000 and $10,000. The growing gig economy requires that its workers have skills which are increasingly difficult to acquire in a dodgy environment. For low- to medium-skilled workers living in the nation’s most disadvantaged areas, the gig economy deepens inaccessibility to better jobs while entrenching those vulnerable workers, who are often without health care, paid leave, and other benefits, in already-unreliable ones.

Levi Mikel