Gig economy as new state of labour market

Author: Vsevolod Klivak

                Today we experience an alteration in many parts of the economic system, for the labour market they are pretty drastic. Although main principals of labour won’t change, a way of addressing issues, like market inequality, failures and sufficiency wages is already different. In this paper terms like “gig economy”, “independent contractor” and “withdrawal benefits” will be overlooked with approaches from digital and innovative economies point of view.

                At first, it’s expedient to work at the validation of this process. For example, there are numerous platforms for small jobs or some errands, where job seekers may find a nice proposal. Then let’s take a look at the statistics. According to Statista number of gig workers now is 57.3 m, median weekly income of male gig freelancer is 653 US dollars. Paul Oyer estimated that freelancers earn 6% less for a year, but 15% more per hour. Nearly 3-in-10 American workers earn some form of income through independent work and gig opportunities like Uber and Airbnb. There are plenty other overwhelming facts like next ones:

• ·         Nearly eight in ten (77%) freelancers said the best days of the freelance job market are still ahead.
• ·         More than half (53%) began freelancing by choice, not a necessity.
• ·         The two most common reasons for going freelance were “to earn extra money” (68%) and to “have flexibility in [their] schedule” (42%).
• ·         53 million Americans — 34 percent of the U.S. workforce — are working as freelancers.
• ·         Nearly half (43%) of freelancers said they expect their income to increase in the coming year.

                At first, I want to describe what this “market” means? In the past, it was in the newspapers, but now it came in new digital form, and it’s even in a much more advanced way that LinkedIn could give to the table. “Upwork” and “TaskRabbit” are reshaping approach to finding a one-time job and making much easier for independent contractors to find a project. As the matter of fact, these platforms could be distinguished by “friction”. It means how often employer is engaged with the temporary worker. For instance Uber is low friction platform, your ride, which every driver provides is an only small time of engagement and services like UpWork are high friction. For example, a web designer has to work approximately one week for the project, it means higher frequency with the customer. Now let’s look at some statistics and term “independent contractor” from the other perspective. An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare. The payer must correctly classify each payee as either an independent contractor or an employee. Another term for an independent contractor is a freelancer. Terms like freelance, temp jobs and sharing economy jobs may be used together in the umbrella term “gig job”.

                Also worth noticing the way of estimation of the population in gig world, although it was observed mostly in the USA, the main approaches may be applicable to the EU. So they are next: Observation from consultant agencies, most prominent are McKinsey and EY, some goverment sources are already gathering information specifically about freelancers, but still data may be bit dubious. Companies like Uber and AirBnB also gather data. Albeit to find data source itselt not an issue, but quality of data can be quite tricky. Firstly there is a big distiction between full-time gig workers and people, who just want to augment their main income. Also frequency of the workers could be pretty different. People, who giving a ride once per mounth and once per day are uncomparable. All of that small miscalculation or misgrooping could significantly beguile the researcher.  Therefore it's vital to choose the metrics wisely.

           New labour approach is better or just different? That’s indeed a tricky question. Let’s take a glance at benefits at first, they're quite a few for firms and jobseekers. Efficiency wage works here by other rules, that’s why for people easier to find a job and for employees, it’s more efficient, in the sense that they could find cheaper workforce and evade the social taxation and securities, threats will be discussed afterwards. Also worth mentioning, that workers may get much wider flexibility, not only with time but also with the possibility to choose clients.  What about “withdrawal benefits”?     
        Quite vital will be a discussion of threats or better to write: undersigned alternatives for the classical “social safety net”, which is provided by long-term employment. At first gig economy type of employment shall be accepted as different from others. It could be done in two ways. First one more commercial, the insurance and senior funds. Another way to make it government way of treatment independent contractors as normal workers. But where to find the money for that expenses? For fairness, it shall be said, that some tax should be introduced for that kind of workers. Although taxation is a pretty heavy topic for debates, it will be a feasible solution for making a social find for freelancers. That will probably will make at least some “safety net”. Now issues, which different freelancers encounter are overrun the funds, mini depth situation and using help from the spouses.

                For the conclusion, next may be induced. We are facing drastic changes in the labour market and other vital parts of the economic system. Rise of “gig economy” is hard not to see, because it is seemingly expedient alternative for classical type of employment in the Information Era, but like with other new wave things government and system in general just not prepared for drastic alteration and quite a few crucial things have to be considered to regulate some dubious parts of freelance. Some will say, that the rise of independent contractors won’t bring any significant benefits and want to slow it down, others praise new job platforms, as a fresh solution in the contemporary situation. The truth however somewhere in between. One thing is true though.  Art of self-employment has change and everyone has to coup with that.

References

https://whatis.techtarget.com/definition/gig-economy

https://www.investopedia.com/terms/s/statutory-employee.asp

https://www.youtube.com/watch?v=Qb4SR-uoeUM

https://www.investopedia.com/terms/e/exempt-employee.asp

https://en.wikipedia.org/wiki/Personnel_economics

https://www.investopedia.com/terms/i/independent-contractor.asp

https://www.investopedia.com/terms/g/gig-economy.asp

https://www.investopedia.com/terms/w/withdrawal-benefits.asp

https://en.wikipedia.org/wiki/Efficiency_wage

Gig economy in the U.S. Dossier from Statista

 https://www.forbes.com/sites/gregoryferenstein/2015/12/12/the-gig-economy-appears-to-be-growing-heres-why/#d9bb985288bf

https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm#pros-and-cons-of-gig-work

http://www.pewinternet.org/2016/11/17/gig-work-online-selling-and-home-sharing/

http://www.pewresearch.org/fact-tank/2016/11/18/why-join-the-gig-economy-for-many-the-answer-is-for-fun/

http://fu-web-storage-prod.s3.amazonaws.com/content/filer_public/c2/06/c2065a8a-7f00-46db-915a-2122965df7d9/fu_freelancinginamericareport_v3-rgb.pdf

https://smallbiztrends.com/2016/07/20-surprising-stats-freelance-economy.html

https://www.fastcompany.com/3066905/the-future-of-work/how-the-gig-economy-will-change-in-2017

http://www.usnews.com/news/articles/2016-10-11/1-in-3-workers-employed-in-gig-economy-but-not-all-by-choice

https://nation1099.com/gig-economy-data-freelancer-study/