.png)
Background Study
Although the concept of the gig economy has been gaining popularity since the early 21st century, primarily for its current form which is driven mostly by technology, it has roots in historical economic models. In brief, the gig economy is a labor market characterized by short-term contracts and freelance work. Historically, freelance work, contractual work and part time employment have been part of the economy. For instance, in the 19th century, skill based workers like carpenters used to travel from town to town, offering their services on a temporary basis. They would complete a certain client's task and then move on, referring a work arrangement that shares similarities with today's gig economy. The evolution of this concept is the result of many factors, including economical instability, job losses, and inflexible job arrangements. Finally, in the late 1990s and early 2000s, the gig economy began to take its current shape, breaking the stigma of tight conventional job arrangements.
Introduction
The gig economy is a technology driven economic system composed of short-term contractual work or freelance work that is significantly reshaping the world labor market. Nowadays, it's becoming increasingly popular as employees seek more flexible work arrangements allowing greater time and freedom. The gig economy primarily includes the service sector because of the intangible and inseparable nature of services. Most of the work in this industry can be done remotely in a contract basis. Initially, the gig economy focused on services like ride-sharing, food delivery, freelance writing, graphic design and home services. However, with the advancement of technology, it now encompasses entertainment and education sectors as well. Core elements of the gig economy are its work arrangements, which have both positive economic contribution and potential risks.
The Rise of The Gig Economy
The gig economy is not a concept that emerged overnight. An Increasing demand for an alternative work arrangement has been a trend for many years, which has become true with the evaluation of technology. Several factors have contributed in the rise of gig economy, including:
Technological advancement: Modern technology has made it possible to work from home and providing services without physical presence. Technological advancement is also generating new jobs and new ways to perform existing jobs. It is facilitating the creation of platforms where service providers and clients can get connected. Additionally, with the help of technology, service providers can advertise their service online which reduces the need of physical business centers.
Economic globalization: Countries are now operating in an open trade economy which refers free trade among countries. As a result, job markets among the countries are now interconnected, providing workers with access to remote jobs and freelancing. On the other hand, employers also have acces to a wide range of employee offering diverse skill sets.
Economic downturns: We have witnessed many economies struggling with recession in recent times. Employees lost their jobs and confidence on conventional job arrangements, leading them to focus on becoming self-employed to mitigate the impacts of these downturns.
Key Elements of The Gig Economy
The gig economy is based on some key elements that are necessary to shift the traditional job landscape. These are:
Connectivity: Connectivity is the core element of the gig economy because it defines the present nature of the gig economy. Gig workers and clients from all around the world are connected today in digital platforms like Fiverr and Upwork. Connectivity makes it possible for both employers and gig workers to access the world labor market and worldwide jobs, enabling freelance-based work arrangements.
Freelance and short-term work: The gig economy offers an alternative work arrangement where workers have more flexibility. Here, work is more like playing a music gig at a venue, with no guarantee of continuing work, and workers also enjoy the opportunity to choose the next job.
Flexible hours: Since workers are mostly self-employed and working as independent contractors, they have control over their schedule, making jobs more flexible than traditional ones.
Impact and contribution
Statistics shows that the world labor market is evolving and workers are preferring to present themselves as gig workers. Alongside, employers are also getting different workers with different skill sets to get their tasks done. Data from the World Bank shows that the gig economy accounts for upto 12% of the global labor market. In 2023, approximately 37% of the US workers were involved in some forms of freelance work. Considering previous data on the turnover from the gig economy, approximately $500 billion to $700 billion dollars is expected revenue from the global gig economy.
The Gig economy has significant impact on many underdeveloped and developing countries toward their economical development. It's giving the employees from low-end countries to access the world job market which enables a scope to reduce unemployment to a great extent. Besides, job holders now have the opportunity to share part of their job, which reduces their pressure.
Impact on workers
Flexibility & autonomy: In the gig economy model, workers enjoy flexibility and autonomy as they work on a contract basis. They become their own boss and enjoy the freedom of choosing projects. Workers are not strictly bound to time in this work arrangement and enjoy more flexible schedule. This attracts Gen Y ( Millennials) and Gen Z because they are more concerned about work-life balance and reluctant to work constantly for a longer period.
Job insecurity & income instability: Because of the temporary nature of freelance work, the gig worker faces job insecurity and fluctuation in earnings although they have freedom and flexibility. Their earnings are uncertain untill they are assigned a new project. Since the job arrangement is favourable for this generation, competition in this sector is very high, which causes temporary unemployment for the gig workers.
Lack of benefits: Gig workers are mostly independent contractors who are not under any organization. As a result, they lack multiple benefits they used to have when working in an conventional work arrangement. Workers' insurance, healthcare and retirement plans are not available in the gig economy but a large portion of gig workers are working under agencies that offers some of these benefits.
Impact on businesses
Cost reduction: Businesses are now partially free from the burden of hiring employees on a permanent basis. Instead, they can assign jobs to gig workers as needed which led to a cost reduction. Also they can now negotiate for each project and enter into efficient deals.
Access to talents: Earlier, businesses used to depend on the workers in a certain geographical area because it was tough to hire someone from a remote area. In the gig economy, the landscape is totally new, allowing businesses access the talents from global labor market and can assign job s to the best people for the budget.
Risk & Challenges
Like other revolutions in the history, the gig economy also comes with some pros and cons. Although it is beneficial for both the workers and employers, it faces some challenges too. Gig workers face difficulties in securing fair compensation for their freelance work due to massive competition and lack of legal protection. In many countries, legal protection for the full-time workers, such as working hours, conditions, salary package and working benefits is not available for gig workers. Sometimes, workers even face fraudulent regarding payments and find no actionable steps to take.
The formal economy sometimes faces challenges in accounting for the value of gig economy because it is difficult to determine the revenue from the gig economy due to lack in direct government control on gig workers' income streams. As a result, governments are failing to collect taxes.
Conclusion
The gig economy is the result of long-cherished demands from workers around the world. Finally, connectivity had made it possible to work in an alternative, more flexible arrangement. The concept of the gig economy is a complex and rapidly evolving phenomenon with both positive and negative implications. The gig economy can be compared to an idiom " when it rains, it pours" because workers from the current generation demand flexible work arrangements, and the gig economy concept is the perfect match for their needs. As the gig economy comes with some risks and challenges, countries should design policies that can protect gig workers' rights and fulfill their needs. Organizations should also accept this change and break stigmas about work arrangements to get the best out of the gig economy.
Reference:
Woodcock, J. (n.d.-b). The Impact of the Gig Economy | OpenMind. OpenMind. https://www.bbvaopenmind.com/en/articles/the-impact-of-the-gig-economy/
Comments