The Gig Economy Problem

If people want the gig economy to succeed, we have to create infrastructure that actually supports it

Being employed today is a pretty good deal if you can swing it. At least in the U.S., it generally means getting paid predictably, some sort of benefits (including the all important health care coverage), and a semblance of stability. For most people, it involves one job. It’s fuel for our economy. I think it’s a good thing.

Over the last decade in particular, the gig economy has taken hold. In its best case, the arrangement is simple and benefits everyone. Instead of pseudo-permanent employment, you work in and out of organizations as needed. You set your rate as you need and the work is negotiated. At the end of the project, you go along your way or maybe there’s something new and you can continue working together.

At its worse, it exploits workers and takes advantage of legal gray areas, increasing regulatory burden, taxes, and critical costs like health insurance, placing it onto the laps of vulnerable individuals. Choosing to venture into the gig economy on your own volition and being placed into it by circumstance will probably dictate your feelings on it.

In the U.S., people in the workforce used to be pretty strictly divided up into employees and business owners/entrepreneurs. The gig economy—a sort of gun for hire—was rare and for the privileged. Household employees and workers, often paid under the table, could be considered some of the earliest gig workers. Independent business consultants could be another one.

Now, sites like TaskRabbit help bring the gig economy to almost anyone—buying or selling. Craigslist has done the same informally for years. And of course, apps like Uber package the sharing economy into a familiar package for buyers.

There are a lot of advantages and disadvantages of this change. I’m not in a position to do a full piece on ways it can work and ways that it doesn’t but I it’s not going away. If you really want to get into it, a recent piece by The New Yorker can give you a long glimpse into this world.

What I worry about is that we are setting up gig workers for failure.

Our economy and regulatory system is built for the paradigm of either a legitimate employer with a business or employees who get paid by those employers. If we want a gig economy, we should do it in a way that doesn’t further marginalize vulnerable workers and shrink the middle class.

Health care costs

The biggest burden for those in the gig economy is often finding affordable health care. For older workers, it can easily clear $1,000 a month. A cool grand before you make a dime is a tough pill to swallow.

Complain about the Affordable Care Act all you want but at least it was trying to address this issue, even though it was toothless to ultimately tamp down costs. Whatever reversal Congressional Republicans and President Trump are seeking will not fix this. In fact, any health care reform that doesn’t result in more accessible and affordable options should be a non-starter for anyone who supports the gig economy.

Taxation

Again, our entire system of taxation was created for businesses and individuals working for them so guess what isn’t so great when you work in the gig economy? No shock, gig workers get raked over the coals—even if they end up not technically overpaying. Most overpay or end up missing something and getting audited down the road.

When you think of reducing corporate tax rates, you probably think of companies like Apple or Exxon that don’t really need a tax break. But taxation in this country is incredibly complicated and it hasn’t caught up with the gig economy. When you make an Uber driver pay a higher tax rate than an oil giant, there’s a big problem with that.

Regulation

One of the ways companies that are building apps and business models around the gig economy, somewhat ironically with regular salaried workers instead of gig employees, is by finding regulatory white space. Great for the gig companies but they aren’t often the ones who end up paying if that regulatory white space gets inked.

In fact, Uber fighting worker misclassification is a rarity. More often, gig workers end up paying when their work bumps up against regulations.

We don’t need to feel bad about the regulatory burden we place on huge organizations but we have to be more thoughtful about the way that trickles down into the gig economy if we’re going to support it.

Technology

Ten percent of people in the U.S. lack access to basic broadband internet. The divide is to the extreme in rural and poorer areas of the country, where it is almost or essential to be connected in a gig economy.

As the FCC moves to dismantle net neutrality, it doesn’t bode well for this divide. The lack of choice coupled with little incentive to develop in areas most needed will certainly mean that people will continue to live with either more expensive wireless options or with little option at all.

Education

Maybe most importantly, as we look to the future, we have to ask how you prepare the kids growing up to work in a gig economy? For the last 70 years, our education system has been oriented toward producing job-ready workers for employers.

As we look at opportunities like reviving trade schools, we should also remember that the people that have been able to sustainably succeed in the gig economy are people that have a diversity of skills and interests. Increased specialization can actually lead to less opportunities in the future if you don’t continue to learn and pursue new skills and pay attention.

That’s an entirely different skill set than the one that predates the gig economy.

Maybe the gig economy will make us better. Maybe it won’t. If you’re a proponent of it, you can’t advocate for structural changes to regulations and costs that also actively do harm to the people doing the work in the gig economy. We need to make investments in our infrastructure and initiate changes to the way we take care of people and pay the government’s bills.

It’s probably too much to ask to do this before it really takes off, but at the very least, we should try to be responsive to these changes. So far, we’re not there yet.