By Jacob Silverman, Work.
It goes by many names: the gig economy, the sharing economy, the pop-up economy and the on-demand economy. It’s made up of some of the world’s biggest start-ups, which call on millions of far-flung workers through smartphones and slickly designed pieces of software. In many cases, it involves people doing one small task or project — whether that’s filling out a survey on Amazon’s Mechanical Turk or providing legal services through the aptly named UpCounsel — and then moving on, never to deal with their “employer” again.
But more than new companies or technologies, more than Uber drivers ferrying passengers around or TaskRabbits assembling furniture for strangers, the gig economy reflects a dramatic shift in labour relations; one that, depending on who you talk to, offers a dynamic new marketplace for workers and employers alike, or leaves workers to compete for meagre rewards while platform owners reap fees from every transaction.
A Challenge to Lawmakers and Regulators
Around the world, regulators and lawmakers are waking up to a new set of challenges against a backdrop of employment legislation that is largely based on the traditional employer-employee relationship. Courts from California to Catalonia are being asked to determine whether those providing services through these software platforms are employees or independent contractors or, perhaps, some other class entirely, with the answer having implications for issues ranging from legal liability to sick pay and pension payments.
These companies have tried all manner of clever obfuscation and argument to prove that their workers are not employees. Many embed highly specific language in their user agreements, claiming that they are merely facilitating, or providing a venue for, interactions between third parties. Uber, for instance, has referred to itself as a technology rather than a transportation company. Critics, in turn, have pointed out that anything could be a “technology company”. Forks are a technology as surely as drones or smartphones or pharmaceuticals. At the same time, many of the user agreements workers agree to lay out terms and conditions for how they are supposed to go about their job, and rating systems, data collection and other forms of monitoring to help guide worker behaviour.
Various courts and government agencies in the US use different criteria when deciding on the obligations these companies have towards their workers, which has led to a host of competing decisions. In California, a labour commission ruled that a ride-share driver was an employee, the Seattle City Council passed a bill allowing them to unionise and the Florida Department of Economic Opportunity found that drivers are independent contractors. A number of other regulatory appeals and lawsuits are still to be sorted out.
In Italy, some lawmakers proposed that car-hailing apps act like temporary work agencies and should be classified accordingly. In Belgium, government analysis found drivers should be considered self-employed, independent contractors. In a lawsuit, British Uber drivers are requesting they be described as “workers”, an employment status that would give them rights such as the minimum wage and paid holiday. Other European nations are still considering the question, while the European Court of Justice is expected to issue a ruling on what type of service Uber provides — software or transportation.
These matters remain unsettled in part because gig economy firms have expanded so quickly and aggressively. That has, in turn, earned them a lot of press and some impressive economies of scale, as well as forced shutdowns, costly tussles with government agencies and public discontent in some countries. For example, in Germany, companies are expected to conduct themselves with more modesty (and legal rectitude) than you often observe in Silicon Valley start-ups flush with venture-capital cash and libertarian rhetoric about changing the world. And in the long-term, as contingent labour relationships increasingly become the norm, workers can be expected to lobby for more rights, including more control over the terms of their employment. As gig economy companies grow, they can expect their legal budgets to do the same.
Thirst for Mobility
The on-demand economy long predates the current wave of enthusiasm for start-ups like Uber. Over the last few decades, the rise of telecommuting, advances in communication technologies and the decline of lifetime employment have combined to make workers more mobile and less likely to stick with one job long term. The economic crises of the last 10 years saw millions of workers lose their jobs worldwide, many of whom never returned to full-time work, swelling the ranks of the un- and under-employed. Economists and social commentators now speak of a state of “precarity”, defined by periodic crisis, unstable job markets and growing income inequality.
Meanwhile, wages have stagnated and, as urban neighbourhoods in major metropolises undergo renewal, locals find themselves priced out, forced to move to cheaper areas or new cities. Smartphones, digital platforms and other mobile technologies offer new income streams that appeal to unsettled urbanites or the precariously employed. The result is most evident in cities like San Francisco, New York and London, where high-paying industries — such as technology, finance and law — attract well-heeled professionals who work long hours and hire locals through smartphone apps and web platforms to drive them around, deliver meals and take care of their pets.
Over all of this looms the spectre of automation, with advances in robotics and software expected to add to an already insecure labour market. A recent report from Deloitte found that 35% of existing UK jobs are “at high risk of replacement” over the next two decades. A similar report estimated that half of all jobs in Switzerland might be automated. That includes obvious targets like transportation (Apple, Google and Mercedes are just three of the many companies working on self-driving cars), medicine, education and other forms of “knowledge work”.
Platforms for Agile Talent
The gig economy is both a product of changing labour conditions and an indication of where the larger economy may be headed: while workers — in some sectors at least — increasingly become free agents pulling down cheques from multiple employers, in the aftermath of the global financial crisis, businesses find themselves pressured to trim costs and keep cash on hand. In the US alone, reports the New York Times, corporations are collectively sitting on $1.9 trillion.
Enter online talent platforms, which promise to reduce some of the friction between, say, a medium-sized business trying to find someone to redesign a logo and a graphic designer looking for a new gig. The possibility of tapping talent on-demand is alluring. Organisations are considering new ways of doing business, using online platforms such as the Upwork network of freelancers as virtual hiring halls, scaling up and down for projects as needed.
According to a recent McKinsey report, “Connecting talent with opportunity in the digital age”, online talent platforms, including websites like Monster.com and LinkedIn, as well as the gig economy, could generate significant benefits for economies and for individuals. Realising that potential, the authors concede, will require improvements to broadband access, updated labour market regulations and clearer data-ownership and privacy rules. But the prospective benefits are significant: $2.7 trillion, or 2%, could be added to global GDP by 2025, while 72 million full-time-equivalent positions could be created — with countries such as Greece, Spain and South Africa, where there is persistently high unemployment, having the most to gain.
“The globalisation of talent and technology frees up companies to experiment with new ways of filling critical skills gaps while staying lean. We call this phenomenon agile talent,” say Jon Younger, managing partner of the Agile Talent Collaborative, and Norm Smallwood, co-founder of The RBL Group, in a recent Harvard Business Review article.
Currently, few companies are shifting to agile talent as a total workforce strategy, but more than half of the line managers and HR executives who took part in a series of workshops described their organisations as moving toward employing agile talent to extend their capabilities in fast-moving strategic areas — the authors citing “Apple in design, Rolls-Royce Aerospace in engineering and Workday in system implementation”.
But if the cloud resourcing model is to truly scale, governments, businesses and workers need to rethink their relationships with one another. The question remains whether the industry can adapt the Uber model to more specialised, and higher-paying, fields such as consulting, engineering, IT and design.
This is Part 1 of the article “150 Jobs in One Career, Meet the Face of the Gig Economy”, first published in the Spring 2016 issue of CIPD’s Work. magazine. Read the concluding second part here.