The Collaborative Economy is NOT Big.

PART 7. Co-working Spaces & the Gig-Economy.

Access Economy: Co-working

Co-working spaces are popping up everywhere and have created a unicorn; WeWork. They have allowed a lower cost entry point into office space. Renting a desk at a co-working space instead of signing a five-year lease when you may only need it for five months is an irresistible value proposition for freelancers and small businesses.

Co-Working spaces also provide a place where entrepreneurs can connect, exchange ideas, and create projects together. They are great place for early stage startups.

The nature of work is changing because of digital movements like the collaborative economy and related economic trends. The cultural framework of what constitutes a job is transforming.

The economic downturn and the real estate slump made property owners more flexible. It also pushed people away from the traditional employment because it became harder to find stability there. The collaborative economy is moving people towards sharing economy activities like Airbnb because it makes economic sense.

Adam Neuman CEO of WeWorks said they see themselves as a physical social network. The way people connect and exchange ideas on social media platforms, is happening with people in co-working spaces when they collaborate face to face.

Co-working spaces allow people to access office space, expertise, and markets without needing the infrastructure of a traditional bricks and mortar store. Co-working spaces are part of the sharing economy because they are access vs. ownership and they are collaborative employment.

Impact:

It’s been shown that people who choose to go to co-working spaces find that, their productivity goes up. If that wasn’t enough they expand their business networks, find more work opportunities, become more creative and happier. In other words, compared to working at home or working inside a corporate structure it’s better in every way because people thrive in these environments.

I’m co-working right now and it’s one of the best decisions I’ve ever made. My contacts have expanded, and I’ve signed on several clients for my writing and marketing service.

There is a strong correlation between the amount of control you have over your circumstances and your levels of satisfaction. Co-working spaces, with their 24/7 working hours allow for high degrees of flexibility and people thrive in these environments. It facilitates a lifestyle that the participant has complete control over. What’s clear is that the overwhelming majority of people who try it love it.

Cities like Santa Cruz have realized that instead of going after a 200 person business to relocate there it makes more sense to have a co-working space with 200 people in it. This creates deeper ties to the local economy and some of these people will likely grow into fully fledged local companies.

Corporations are also joining the co-working movement. Some snatch up desk space at co-working spaces so that they can catch startups at an early stage. Menlo Innovations, a software development firm, set up a co-working space in their own office to diversify ideas and increase productivity.

Future:

There is the problem of high fixed costs that are difficult to offset against variable and flexible payments from customers. So co-working spaces are trying new differentiators, like a women’s only and industry specific co-working space to hack stickiness. They’re also bundling services, like housing and group discounts for the same reason. They’re also offering professional services, food, dry cleaning, travel & visa services and consulting services for corporations that want to start co-working initiatives.

In 2015 the mobile worker population was 1.3 billion. In 2012 Independents contributed about $1,000,000,000,000 to the U.S. Economy.

Between the crowdfunding, and 1099 work on platforms like Uber, and Freelancer, the collaborative economy is creating more entrepreneurs, freelancers and micro entrepreneurs. From this larger group many will be absorbed by co-working space.

Gig Economy: Gig Economy

More than 25% of the workforce is part of the gig economy. A report from Spera noted that 54 million Americans participated in some some kind of independent work in 2015. That’s more than a third of the population and this trend is growing globally. This group of people is young, millennials are the largest age group in the gig economy.

The democratization of computing power through cloud services, the networks created by social network, and the use of smartphones are accelerating this movement.

There is a massive shift happening where more and more people are moving to the gig economy. Most people, 70% of those who offered a service, said their experience of the gig economy was positive.

Despite the fact that most people like the sharing economy, it’s making it difficult for regulators to keep up. Should Postmate couriers be employees or contract workers? Is Airbnb a software or accommodation business? How should insurance work?

Local legislative responses vary. Some give sharing economy companies carte blanche while Austin Texas banned Uber. Seattle allowed sharing economy workers to unionize, while Utah requires companies to register with the state.

Site like TaskRabbit, Upwork, Uber create opportunities for micro-entrepreneurs. Etsy, Amazon and Ebay have millions of entrepreneurs operating on their platforms and they’re not all small businesses. Some are multi-million dollar operations.

The sharing economy can also work for employers. A full time position can now be broken down into a series of tasks that can be outsourced to freelancers on sites like Upwork and 99Designs and Fiverr.

Sharing economy workers do not get benefits or insurance. But as the gig economy grows we are going to see companies fill this gap by offering some version of benefits packaged specifically for this market.

It’s important to note that most of the gig economy is not ‘app’ based. The largest segment in this market is temporary work, temp agencies and self- employment.

Impact:

According to the Spera Freedom Economy Report in the next five years up to half of the United States population could be self-employed. Independent work is on the rise in the states and globally.

Uganda is ranked first for entrepreneurship because they have 28% of their workforce classified as self-employed.

In 2014 Amazon had 2 million merchants while eBay houses 25 million sellers. Compare that to the largest employers in America, the United States Department of Defense which employs 3.2 million people followed by Walmart with 2.1 million people.

The number of opportunities for those who want more freedom and want to gig has exploded. All net new work since 2005 is in ‘alternative arrangements’ according to a study this year by Lawrence Katz and Alan Krueger of Harvard and Princeton universities.

Uber settled a class action law suit and will pay 100 million dollars to retain the right to classify drivers as contractors. This is an important battle for them because if they are forced to classify their drivers as employees it would kill their business model.

These types of lawsuits are at the very center of the struggle between sharing economy startups and regulators. Companies like Taskrabbit are creating massive value in the marketplace, but legislators are having a hard time putting them into boxes that were created in the industrial age. By the time any legislative framework is settled, the sharing economy would have moved on to an even newer form of operation. Finding the balance between creating a social net for employees and the free market will be a challenge in this space for the foreseeable future.

Future:

The enterprise is going to use more labor on demand as the technologies that facilitate this increase in number and scope. And more of this is going to happen on mobile.

The gig economy population is going to be more diverse than the traditional employment market ever was. Gig economy workers may get their own employment classification because neither full time employee nor 1099 freelancers them correctly.

It is only going to get easier for people to make a living without a job. The platforms are multiplying. By 2020 gig economy workers are likely to double to 7.6 million people according to Intiuit.

There’s a two-way affect. Workers are enjoying more freedom through the gig economy. But companies are also enjoying cost savings by forgoing insurance and benefits and the need for always on employment. For companies it’s access vs ownership, or labor as a service.

The nature of work is changing to something that is more flexible than it’s ever been.

Specialist HR companies have already popped up that deal specifically with gig workers.

All of the economic, technological and cultural forces along with things like just-in-time scheduling, automation, robots and artificial intelligence, are going to impact the labor market. We can make educated guesses about some of these changes, but others are going to take us by surprise.

Data Darwinism is going to have to be dealt with. A gig-economy worker on a platform is entirely dependent on their digital reputation. There is the possibility that a worker might get a bad review they didn’t deserve and this would adversely affect their income. When platforms start getting complaints from thousands of workers, class action law suits follow and legislation that is detrimental to the platforms business models may be enacted. That’s why it’s best that these platforms take a pro-active stance on this issues.

Candidate Clinton made a comment on her campaign that she wants to ‘crack down’ on the gig economy. What exactly she means and what she will do is if she wins the presidency is unknown. What we do know is that at very least the gig economy is going to get more legislative attention. I would guess that some basic protections will be given to all workers and the classifications will be re-evaluated.