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What’s wrong with the gig economy?

Victoria MacLennan, Guest Post. 26 March 2018, 5:35 am
What’s wrong with the gig economy?

We have all read headlines on the Gig Economy. There are tonnes of "gig economy" definitions out there so briefly for the purpose of this post I will use the one BBC described recently as "a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs".

The challenge for many people who have embraced the gig engagement model is they are often forced into accepting predatory working practises, compromise their safety and the resulting compensation can equate to less than minimum wage.

Reluctant participation is highlighted in McKinsey's latest report on the gig economywhich found the majority of those engaged this way do so out of necessity either as their primary or as a supplementary income source. An estimated 14% or 23 million do so reluctantly and a further 16% or 26 million because they are financially strapped.

How does it work?

In broad terms "gig economy" can refer to both freelancers and gig workers. In both of these instances - instead of / or as well as a permanent job (full or part-time) or instead of holding a long term contract for work - individuals undertake a "job" or "gig" for a fixed fee at a set time. These jobs or gigs can be very short (minutes) or longer (days). A person can be carrying out many jobs or gigs on behalf of different companies on the same day.

Freelance work has existed for a long time, photographers, graphic designers and accountants are often engaged via this model. Engaged to do a set piece of work, for a rate with terms agreed by both parties.

Where the gig model differs is the size, frequency and engagement. Many gigs are offered via a technology platform, can be bid on or for a set price set by the technology firm. The terms are set by the technology company with no ability to negotiate.

So it's the terms of engagement, ability to set rate and duration that differs.

So why so much bad press?

This is a complex issue which boils down to two primary issues facing both individuals and nations - the gig economy often disempowers the worker (exposing opportunities for exploitative employment practices); and has created tax avoidance / tax shifting opportunities for the global players involved.

The media attention is primarily aimed at high profile Silicon Valley unicorns who have built platforms for ride sharing, food delivery, cleaning on demand and so many other services where the work itself is carried out under a gig based engagement model. The general feeling from reports is you cannot make a living as a gig economy worker without working excessive hours.

These businesses are not necessarily paying proportionate taxes in the countries where services are procured which is of increasing concern for nations.

To be clear not everyone fitting that description is behaving badly, I have read great things about TaskRabbit for instance who enable the gig workers to select their own rates (and take a 30% margin) among other friendlier terms.

There are other secondary issues created due to the workers essentially being self employed - vehicle safety, worker safety, insurance, hours worked - to name a few.

Employment practices

Uber, one of the central characters in the gig economy model, have dominated the news recently with examples of worker exploitation. This article "Is Uber an example of innovation, or just another way to pay workers less" provides a great description of Uber's business model:

Uber uses technology to drive down the cost of labor by replacing a regulated, protected class of worker (in this case, taxi drivers) with a non-protected worker (in this case, anyone with a driver's license and decent car)

There are strong parallels with Uber like models and various labour movements of old which led to the industrial revolution. Closer to home in Australia (and New Zealand) the Waterside Workers Union was formed due to systems of hiring which severely disadvantaged the workers. This from wikipedia:

From about 1900 to the 1940s, work on Melbourne wharves was obtained through the bull system of labour hire where workers would be hired on a daily basis at a pick-up point, and which was prone to corruption. (See Wailing Wall.) In Sydney, workers would walk from wharf to wharf in search of a job, often failing to find one. (See The Hungry Mile.)

At an event last week I got into a healthy discussion on what's wrong with the gig economy - which to be fair is what prompted me to investigate further. Carl one of the main proponents of fair working conditions followed up with an email reminding me:

We know from history that inequitable and exploitative systems like that do not last… dressing it up in digital clothes and calling it a hip name do not automatically make it 'right'.

How is this different to Zero Hour Contracts?

Gig based engagements and zero hour contracts are kinda similar in their nature, here in NZ we got rid of the latter recently creating a fairer deal for employees and increased penalties for exploitative employers - the changes are explained here nicely by Rainey Collins:

"Zero hour" contracts in the past required employees to be available for work offered, without compensation for being available, and without some guaranteed hours.

This isn't the case everywhere with zero hour contracts used in the UK, Canada and Ireland for instance. How the gig based engagement model differs from zero hour contracts is in the terms and conditions, Zero Hour contractors are still employees so have statutory rights to holiday pay, sick pay, maternity and paternity rights etc. Gig based engagements usually involve signing up to the terms and conditions of the service provider (eg: UrbanSitter or Lyft).

Is this just a fad?

Many commentators have been predicting we will all be freelance workers in the future of work, engaged for our specialist capabilities by many organisations. This article predicts the majority of the US workforce will be Freelance by 2027 for instance. Freelancing as a model will provide employers with specialised capabilities when they need them and employees with flexibility and variety - so should be seen as a win for both.

The more exploitative practices associated with the gig economy however need to go and only the market or legislators can dictate that level of change. I personally choose not to use Uber and in researching this article found many gig workers choose not to be engaged by them. As with any disruptive era the market can rectify and regulate the model encouraging positive engagement with fair terms and conditions for all parties.

Personally I choose to undertake a blend of paid and pro-bono work which I love, it provides variety and flexibility for me while clarifying how much of my time I can afford to donate annually, currently 50% which is awesome.

Upshot from me - there are gig and freelance models that can work without exploitation we need to encourage and embrace these and accept the gig economy is here to stay.

Victoria is passionate about many things - growing great companies, raising digital literacy, growing New Zealands economy and equality for women. Her day jobs include Managing Director of data and information specialists OptimalBI, investor in start ups and numerous mentoring, advisory and board appointments. Victoria's community contributions include co-Chair of NZRise, Chair of the Digital Skills Forum, and Chair of Code Club Aotearoa. Reposted with kind permission.


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