Learning to adapt to the quickly growing gig economy

The rise of the gig or sharing economy is one of the most visible trends shaping the contemporary labour market.

Most gig jobs fall into the category of contingent work. Such work can be contrasted with a traditional job, in which a person has a durable and structured employment relationship with a specific employer. Today, more people are garnering income via contracting, freelancing, temporary assignments and various kinds of on-call arrangements. All of these are part of the broader gig economy.

How prevalent is gig work? Estimates vary, but it appears to be on the rise. In 2016, U.S. economists Larry Katz and Alan Krueger, in co-operation with the RAND Corp., launched a survey to track non-standard work. Their principal finding: 16 per cent of America’s labour force is made up of contingent workers.

A more recent survey, by the U.S. Bureau of Labor Statistics, reports that 10.1 per cent of American workers are engaged in “alternative work arrangements.” However, this survey only captures individuals whose main source of income comes from gig work. Other research suggests that up to three in 10 U.S. workers are generating at least some income via the gig economy.

The advent of firms such as Uber, TaskRabbit, Lyft, etc., has played a role in the expansion of non-traditional employment. Internet-based platforms are changing the way some people find and engage in work, while allowing other individuals to monetize their non-labour assets (homes, cars) to produce income. According to the Katz/ Krueger survey, the biggest jump in contingent work has been among those who contract their services to another company (e.g., Uber).

How is the spread of gig jobs affecting the well-being of workers and households?

Start with earnings. Surprisingly, the Katz/Krueger survey indicates that many of those engaged in contingent work are clustered in the upper 40 per cent of the earnings distribution. This is especially true of independent contractors, consultants and self-employed professionals. On the other hand, contingent work that involves on-call and temporary-help jobs is associated with significantly lower levels of pay.

For many people, gig work is a means to earn extra money to supplement income from regular employment or other sources (e.g., pensions). The flexibility and realtime connectivity afforded by new technology-based platforms are yielding substantial economic benefits for service providers and consumers alike.

But some of those engaged in contingent work choose this option because they can’t find a traditional job — or because of requirements laid down by their employer. Gig work is often a necessity, not a choice.

A key feature of the gig economy is the presence of non-employer businesses that contract for labour instead of developing an in-house workforce. Uber is the bestknown example, but there are now vast numbers of non-employer businesses operating in North America.

The proliferation of such firms raises issues around the working conditions that apply to non-traditional work. There’s a legitimate public policy concern that the business models of non-employer firms shift costs and risks to individuals, even though some of the people supplying their labour may be under the control of the organizations that procure their services.

In several U.S. states, workers have filed class-action suits against non-employer firms, arguing that they should be classified as employees rather than contractors — and thus gain access to the benefits and legal protections that attach to the employer-employee relationship.

Law and policy around these issues are evolving in Canada as well. Some provinces have recently updated their employment standards legislation, in part to account for the growth of gig work.

As technology steadily advances and more people turn to Internet-based platforms to sell their labour and offer other services in exchange for income, the legal frameworks that apply to employer-employee relations will remain under scrutiny.

The gig economy is here to stay. In the labour market context, it facilitates the efficient matching of skills and tasks and gives people more options to earn income.

But it also raises questions about social protection and workers’ access to nonwage benefits.

As the gig economy continues to expand, governments will be under pressure to fine-tune the rules.