Welcome to the “Gig Economy”
By Jock Finlayson
The rise of the “gig” or “sharing” economy is one of the most consequential trends shaping the contemporary labour market. “Gig” jobs are an example of what economists describe as “contingent” work. Such work can be contrasted with a traditional job, in which a person has a durable and structured employment relationship with a specific employer that maintains a permanent (or long-term) workforce.
Today, more people than ever before are generating income via contracting, free-lancing, temporary assignments, and various kinds of on-call arrangements. All of these forms of non-traditional work are part of the “gig economy.”
Non-standard Work on the Rise
How prevalent is gig work? Estimates vary, but there is compelling evidence that it’s on the rise. American economists Larry Katz and Alan Krueger, in cooperation with the Rand Corporation, recently launched a survey to track non-standard work. Their principal finding: 16 per cent of the American labour force is made up of contingent workers, up from less than 10 pe rcent a decade ago. Their research also suggests that almost all of the increase in U.S. employment since 2005 is due to the growth of non-traditional work.
Another survey, by the U.S. Federal Reserve Board, paints a similar picture. It reports that more than one-third of America’s adult population has undertaken informal paid work, either as a substitute for or a complement to traditional employment. Unlike the Katz/Kruger study, this estimate includes individuals who hold a traditional job, but earn extra income through gig work.
The advent of firms such as Uber, TaskRabbit, Lyft, etc. has undoubtedly played a role in the growth of non-traditional employment. Internet-based technological platforms are changing the way some people find and engage in work, while also allowing other individuals to “monetize” their non-labour assets (homes, cars) to produce income. According to the Katz/Krueger survey, the biggest increase in contingent work in the United States in last decade was among those who contract their services to another company (e.g., Uber).
How is the spread of gig jobs affecting the economic well-being of workers and households? Start with earnings; the Katz/Krueger survey indicates that a surprisingly large number of those engaged in contingent work are clustered in the upper two quintiles of the earnings distribution. This is especially true of independent contractors and consultants. On the other hand, contingent work that involves on-call and temporary-help jobs is associated with significantly lower levels of pay.
Supplemental Economies and Flexibility
For many people, gig work is a way to earn extra money that enables them to supplement income from regular employment or other sources (e.g., pensions). For example, a student or someone with a modest-paying retail or production job may boost their income by doing yard work or selling items on an on-line platform. The enhanced flexibility and real-time connectivity afforded by new technology-based platforms are yielding substantial economic benefits for service providers and consumers alike. Moreover, by lowering the barriers to workforce entry, these innovative technologies could increase the labour force participation rate at a time when population aging will be tending to push it lower.
However, it must be remembered that many of those earning income through contingent work do so because they can’t find a traditional job—or because of requirements laid down by their employer. Gig work is often a necessity, not a choice.
“Non-employers” of Choice Grow
A key feature of the gig economy is the presence of “non-employer” firms that contract for labour instead of developing an in-house workforce. Uber is the best-known example, but there are now millions of “non-employer” businesses operating in North America.
The proliferation of such firms raises issues around the employment standards and working conditions that apply to non-traditional work. There is a public policy concern that the business models of non-employer firms shift costs and risks to individuals, even though the people supplying the labour may be under the control of the organizations which procure their services.
In California and some other states, workers have filed class-action suits against Uber and other non-employer firms, arguing that they should be classified as employees rather than contractors—and thus gain access to the benefits and legal protections that attach to the employer-employee relationship.
It is too soon to know how the jurisprudence in this area will evolve—but it’s a safe bet that when B.C.’s Employment Standards Act is next opened up for review, the issue of gig work will be a prominent topic of discussion.
Jock Finlayson is executive vice-president of the Business Council of BC.
(PeopleTalk Winter 2016)