The Gig Economy: A Disruption or a Revolution?

– By Shereen Bindroo

Understanding the Gig Economy

The freelancer economy, often called the gig economy, is a labor market characterized by short-term contracts or freelance work. Gig workers may work for any number of companies or clients they choose, according to their time, location, or even mood. But is that the full story? Is it all merry with the flexibility benefits for the workers, or is that a farce? Is the impact on the economy as a whole a boon or a bane? There are a lot of questions, and we will try to delve into their answers.

Status Quo Shifts Big to Gig

The earliest written evidence for ‘freelance’ comes from Sir Walter Scott’s Ivanhoe, in which a lord refers to his paid army of ‘free lances’. When the word, freelance, first came into English in the early 1800s, it referred to the hired soldier who would fight for whoever paid them the most.

Freelancing is not new to the economy, but the rapid shift to the gig economy is a relatively recent and swift transformation. This shift is attributed to several factors. The workforce is becoming increasingly mobile, and remote work facilitated by digital platforms is on the rise. This dissociation of job and location allows freelancers to access jobs globally, while employers can choose from a large pool of talent for specific projects.

Aided by the recently adopted work-from-home culture, companies tend to hire freelancers for specialized tasks to save costs and increase efficiency.

Revolutionizing the Workforce

The rise of online platforms, like Uber and Lyft, that connect workers with consumers has enabled individuals to monetize their skills, offering them greater control over their work schedule and location. According to a survey of freelancers in six countries, conducted by McKinsey in 2016, it was found that those who freelance by choice—70% of respondents—were happier than people in traditional jobs, specifically regarding independence and flexibility.

The gig economy has expanded employment opportunities to a broader spectrum of individuals, including those with limited traditional work experience, those seeking to supplement their income, and those pursuing entrepreneurial ventures, leading to a more diverse workforce. According to Upwork, the number of gig workers worldwide is expected to reach 86.5 million by 2027, representing 43% of the global workforce.

Moving on to the ideals of a free market, the gig economy operates on the pure basis of demand and supply. This might be considered the most efficient way, or it might be seen as inconsiderate to the communities exploited.

Disrupting Traditional Employment Models

Companies hire independent workers for short-term commitments, with temporary positions being common. But what about legal bindings regarding worker protections and job security? Gig workers lack access to benefits such as health insurance, paid time off, and retirement savings, making them more vulnerable to financial hardship. 

In India, these provisions play a big role in ensuring the well-being of the workforce and the economy. Although the Code on Social Security, 2020, contains provisions for gig workers, the rules are yet to be framed by the States and not much has moved in terms of instituting the Board. These should thus be taken up expeditiously by the government. The UK, on the other hand, has instituted a model by categorizing gig workers as “workers,” which is a category between employees and the self-employed. This secures them a minimum wage, paid holidays, retirement benefit plans, and health insurance.

Uber, a popular digital platform connecting gig drivers to their consumers, gives workers the freedom to decide when to work but not how to. The driver may accept or reject a ride but is not given the choice to pick his route. The compulsions of ratings take away the sense of freedom from the gig worker, who may end up earning less than the traditional alternative job. About a third of what passengers pay goes to Uber in fees and commissions. According to the Economic Policy Institute, the income drivers get after deducting Uber fees and vehicle expenses averages $11.77 an hour, substantially less than the $32.06 average hourly compensation of private-sector gig drivers. Most contracts don’t make the earnings very clear as the hourly payments may not consider the expenses incurred for the work.

Therefore, the debate between a free economy and a regulated one re-emerges, not in its true form but in an evolved form.

Way Forward

The gig economy, being a complex and evolving phenomenon, presents both opportunities and challenges. Is it the correct direction to move in? The answer is not clear, but even if it were, it wouldn’t matter. Living in a dynamic world, changes are constant, so it is important to brace ourselves for this wave of revolution and disruption.

The present laws in economies work along the lines of the traditional workforce, whereas the workforce, being ever-evolving, demands ever-evolving rules. This may involve establishing minimum wage standards and implementing clear guidelines for worker classification. Gig platforms also have a responsibility to ensure fair and equitable treatment of their workers, including providing transparent pay structures, offering training opportunities, and establishing mechanisms for resolving disputes. Labor unions, or “gig unions,” may organize gig workers to advocate for their rights, including collective bargaining for better pay and benefits and raising awareness about worker exploitation.

Conclusion

The gig economy has revolutionized the way the economy works, offering autonomy, flexibility, and more employment opportunities. But, it has also disrupted traditional employment models, raising concerns about fair compensation, worker protections, and job security.

As the gig economy continues to evolve, it is essential to address these challenges and ensure that it operates in a manner that benefits both workers and businesses. By striking a balance between flexibility and security, the gig economy can continue to offer valuable opportunities while upholding the rights and well-being of workers.

Citations

Editors of Merriam-Webster. (2016). The surprising history of ‘Freelance’ https://www.merriam-webster.com/wordplay/freelance-origin-meaning#:~:text=Our%20earliest%20written%20evidence%20for,person%20paid%20them%20the%20most. 

Jain, G. (2023, July 17). The Gig Economy Revolution: Reshaping Work in the 21st Century | GAEE India https://india.gaee.org/2023/07/17/the-gig-economy-revolution-reshaping-work-in-the-21st-century/#:~:text=The%20rise%20of%20digital%20platforms,of%20benefits%2C%20and%20job%20insecurity.

McKinsey & Company. (2016). INDEPENDENT WORK: CHOICE, NECESSITY, AND THE GIG ECONOMY https://www.mckinsey.com/~/media/mckinsey/featured%20insights/employment%20and%20growth/independent%20work%20choice%20necessity%20and%20the%20gig%20economy/independent-work-choice-necessity-and-the-gig-economy-executive-summary.pdf