Around the world, the gig economy is on the rise at a staggering rate. At a glance, this popular trend seems to bring nothing but benefits to employment opportunities, with increased mobility and freedom for job seekers. However, like most major societal shifts, it’s a double-edged sword. Everything comes at a cost, and this newly carved out world of freelancing, exempt of traditional workplace restrictions, is no different. In this case, the price is paid by undereducated workers, fighting for work in an increasingly deregulated sector.
While the gig economy has always been around, it looks much different than it did, say twenty years ago. The freedom of information combined with the utilization of increasing technology mold the modern-day gig economy. Gone are the days where you specialize in one skill for your entire life, replaced with having access to the information at your fingertips to learn practically anything. Combine this ease of information access with reduced entry barriers provided by gig work, such as physical location, and you have a completely mobile highly skilled workforce.
A study by Contingent Worker Supplement conducted in 2005 administered by the Bureau Labor of Statistics concluded: “10.1 percent of workers rely on alternative arrangements for their main job, including temp agency work, on-call work, contracted work, and freelancing.” A similar study was conducted in 2015 by Lawrence Kats and Alan Kruegerand, estimating that “15.8 percent of workers relied on alternative arrangements as their main job,” showing a rise of over five percent in just ten years.
This stark increase aligns with the popularity of sites such a Flexjobs, Upwork, ProBlogger, Fiverr, and many others. On the ground, co-working spaces are also creating space for this gig economy to thrive around the world. The foundation built from these resources demonstrates we are well past the early adopter phase of this new type of work, as it has fully taken hold as a rising trend.
The Criticism Behind the Siren’s Song
As stated, the Gig Economy is something out of a utopian dream for skilled workers. Throwing away traditional restrictions such as your soul-sucking two-hour commute, replacing it with the ability to travel from country to country while still being employed.
However, what about unskilled employment? The world can only hold so many app developers and business analysts. What about the rest of the working population participating in the gig economy?
When you take an abundant supply of unskilled labor and apply it to a sector with few regulations put in place, it is the nature of organizations to take advantage of said labor. Simple supply and demand law dictates wages will drop when supply outweighs demand, and without a sound regulatory body to enforce wage floors, the salary will continue to fall further until meeting an equilibrium.
This exact scenario happened when America outsourced manufacturing to less regulated countries through free trade agreements such as NAFTA and CAFTA. The supply of labor in those countries was extremely high, and there were few regulatory bodies enforcing labor laws in the sector. This combination of factors produces what is now commonly referred to as sweatshops — tragedies of underpaid poverty-ridden workers in unsafe working environments manufacturing goods for large textile and production companies.
In America, we don’t have sweatshops, but what we do have is Uber. The other side of the gig economy is the mass employment happening through these tech companies, such as ride-sharing, and delivery apps. While the freelancer travel life sounds glamorous, this I can assure you is quite the opposite.
According to an article on Vox quoting a report released by the Federal Reserve in May 2019, the average gig economy worker has a tougher time making ends meet, oppose to regular workers. A staggering statistic supports this, stating that workers employed in the gig economy are twenty percent more likely to be unable to afford a minor $400 bill than an average employee.
When it comes to the freedom of the gig economy, corporation heads and immoral business structures are the real winners. With roughly 50% of all workers in the gig economy having only a high school education or less, this deregulated system is doing more harm than good in the overall workforce by taking advantage of underskilled work.
Improvements Through Ugly Failures
There is an awkward upside to the poor working standards set by gig economy employers. The workforces of Uber, Lyft, and other major ride-sharing apps have made this inequality well-known, and because it is happening in our backyard, people are listening.
The protests of underpaid work have displayed there need to be stronger regulations in the gig economy sector, which we are beginning to see. In January, New York-raised its ride-hailing minimum wage to 17.22, creating ripples in the industry. The most significant ripple happened when Uber’s IPO was below its valuation, with a quote from Lee Sherman in a Bloomberg article saying,
“The market has reacted negatively to a shared reality that both Lyft and Uber are struggling with a fundamentally broken business model. Uber has lost more money faster than any startup in history, with no clear path to profitability.”
According to the same report, Uber’s losses totaled 3.04 billion this year, with 11.3 billion in total revenue. The article continued to highlight Uber’s whole operating loses being over 10 billion collectively.
This financial performance of Uber points to the apparent fact, underpaid business models of gig economy work are failing. It’s failing because while built on unregulated cheap contract work, it cannot continue indefinitely. In either case, Uber and other tech employment apps will have to change for the better to stay relevant. The question now is if they will swim and somehow financially adjust, or sink?