The Gig Economy

A gig economy has been defined as “an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.” (*1)

The phrase “gig economy” was coined in early 2009, when the unemployed made a living by gigging, or working several part-time jobs, wherever they could.(*2)

It is predicted that by 2020, 40 percent of American workers will be independent contractors. As a result of the digital age, workers are increasingly mobile and cab work can from anywhere. As a result “freelancers can select among temporary jobs and projects around the world, while employers can select the best individuals for specific projects from a larger pool than that available in any given area.” (*3)

The gig economy is also spawning a host of new commercial activity. Individuals and small companies sell every product imaginable online. It is capitalism in its original form and has commented as follows:

This explosion of small-scale entrepreneurship might make one wonder whether we are returning to the economy of the 18th century, described by the economist Adam Smith in his book An Inquiry Into the Nature and Causes of the Wealth of Nations. The economy Smith described was a genuine market economy of individuals engaging in commerce with one another. Over the following two centuries, however, the emergence of mass production and distribution yielded modern corporations. The entrepreneurs of Smith’s time gave way to the salaried employees of the 20th century. (*4)

In addition to direct online selling of services and products, freelancers also utilize peer to peer exchange platforms. The rise of companies such as Uber and Airbnb has meant more and more people have started to work in the gig economy. Students with a car can utilize the Uber platform to make money in between classes. Retired person can occasionally let out spare rooms on the Airbnb platform. Prior to computers, GPS enabled smartphones and tablets, such activity was likely not to take place. Providers to the gig economy don’t have to commit to full days of work. A mom can pick up her kids from school (and then switch to being an Uber driver). In the gig economy, the lines between personal and professional become increasingly blurred.

The dark side of the gig economy is that the same issues faced by traditional temporary employees continues to exist. Workers do not get health benefits, paid vacation time, pensions or other safety net provisions such as unemployment insurance.

This past year has also seen some actions against the gig economy. Uber faces a class action lawsuit in California by its drivers. The complaint alleges that Uber misclassified drivers as independent contractors, failed to pay overtime wages and compensation, owes expense reimbursement, and didn’t turn over gratuities. (*5) Some technology companies are starting to convert their work forces from contractors to full-time employees. Others companies are offering gig workers more perks. Lyft offers a retirement savings programme for drivers with retirement benefits provider Honest Dollar. Oliver Hsiang, Lyft’s Vice President of Partnerships, said in a press release, “We’re excited to partner with Honest Dollar to help drivers achieve these goals. This first-of-its-kind product is designed to meet the unique needs of independent contractors through access to financial planning and investment tools.”(*6)

The line between gigs and fixed salary “real jobs” is getting increasingly blurred.

Endnotes

(*1) http:/ http://whatis.techtarget.com/definition/gig-economy

(*2) http:/ft.com – Leslie Hook, December 29, 2015

(*3) Ibid

(*4) http://www.theguardian.com/commentisfree/2015/jul/26/will-we-get-by-gig-economy

(*5) The determination of whether an individual is a dependent or independent contractor has a number of legal ramifications. See the Fernandes Hearn LLP newsletter article on this topic – November 2015.

(*6) http://www.businesswire.com/news/home/20151119006638/en/Honest-Dollar-Delivers-1099-Savings-Plan-Lyft