The Gig Economy
So let’s talk about the Gig Economy.
Much has been said about the Gig Economy or 1099 economy in the past decade. Uber, Airbnb, Instacart and Lyft are the key startups who have made this concept famous and changed the societal norms for the better. As you go through this article, I will highlight how the gig economy has and will continue to change a generation of people. What I will not be doing is going gung-ho about a particular startup or justify some of the outrageous valuations a few startups have achieved. I will try to point in a direction in which I believe this industry is headed.
Gig Economy isn’t exactly a new concept. Let’s talk about history for a moment, before the industrial age, over 45% of the American working class were self-employed. With industrialization, ‘9 to 5’ jobs became a trend, organizations started employing strategies to lure people into an institutionalized lifestyle through healthcare programs and pension plans. This led to a drop in self-employment, according to the U.S. Bureau of Labour only 6% of the population fell into the self-employed category by 2005. The gig economy is just a repackaged version of the model that existed before the industrial age.
So how big is this industry right now? Well, one the best indicators to answer this question would to be know how many people currently work in this industry but there isn’t an accurate statistic as of today. The government, which would have been the most reliable source, has not been keeping track of these people. Department of Labour plans to start measuring and reporting these numbers by May 2017. Various other organizations like McKinsey, Intuit and Freelancers Union have conducted independent surveys to calculate these numbers. McKinsey in their research provided a broad definition of ‘independent workers’ which highlights the different types of workers in this industry.
The independent workforce consists of 4 key segments :-
Free Agents 30%: Derive their primary income from independent work and actively prefer this working style.
Casual Earners 40% : Pursue this work on a part-time basis to supplement their income. They have traditional jobs and do it by choice.
Reluctants 14% : Short term temporary workers who would prefer traditional jobs.
Financially Strapped 16%: Do independent work to supplement their income but would prefer not to do it.
Free agents, who I will be focusing my attention on, are people who treat the gig economy as their primary source of income. These are artists and designers; animators, videographers and technicians; teachers, Q&A professionals; doctors and healthcare professionals and pretty soon will include a wide array of professionals in various industries. These people, according to a recent report by Freelancers Union, contribute $715 Billion to the economy. This number is only expected to grow considering the recent survey conducted by LinkedIn which indicates that 43% of the workforce will be made up of workers who freelance by 2020.
“43% of the workers will freelance by 2020”
Previously, freelancers and independent contractors have had a very limited scope to grow their business. Word of mouth, personal websites, and social media pages were the key instruments used to market their services but startups like Moonlighting, Fiverr, Thumbstack and Shiftgig have created a disruption in this industry through digital platforms that cater exclusively to these professionals. A platform like this helps these professionals to come up with targeted marketing strategies to not just grow their business but also rely on it to create an income stable environment for themselves. Though young, the growth in this industry is showing positive signs which will encourage people in the future to consider freelancing a viable career option.
There’s has been a steady support system that has been developing for the gig economy. Wework, which started with a simple concept of creating coworking spaces for artists, entrepreneurs and freelancers has now expanded to over 150 locations in 15 countries. It recently raised $4 billion investment from Softbank, making its valuation higher than Snapchat. Another startup making all the right noises is Checkr. Founded in 2014, it quickly developed an effective solution for the gig economy providing background checks a lot faster than the traditional methods. Today it boasts of top gig economy clients like Uber, Postmates, Instacart and Grubhub. Lystable, founded in 2015, is helping the other end of the spectrum. It is helping organizations easily onboard and manage their external workers. They raised $ 11 million in funding last June. We can expect more startups to come up with innovative solutions to solve the bottlenecks and improve this industry in the future.
Nothing is perfect and this industry has its own set of problems. Critics have been rightly voicing their concerns about the exploitation of workers, bare minimum wages, and no benefits. Although this is a legitimate concern for the lower level jobs, like Uber and Instacart, but this doesn’t apply to freelancers and independent contractors. These are highly skilled professionals and are paid the top dollar for their services. This does not mean I’m discounting the lower level jobs. People much smarter than me are sitting and trying to solve these problems. An interesting example is Vault, founded by a J.P. Morgan Financial advisor, an investment management tool to help self-employed individuals with retirement plans who do not have access to US 401(k).
“81% of the people will continue to work in the gig economy”
What does this mean for the future?
I’m a firm believer in numbers but they can’t quantify human emotions, at least not in today’s world. One day, freelancing could become a trillion-dollar economy in itself but what it would highlight is an underlying workforce with passionate individuals with work life balance, higher job satisfaction and delivering great value to their clients. This is the main reason why a recent survey reported that 81% of people said that they would continue to work in the gig economy while 41% intend to increase their hours in the future. Technology can be considered a key factor driving growth in this sector but one cannot discount these other factors that work at a physiological level. It may be too early to say that gig economy is the future but it sure is time that we start paying attention.
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