What’s Wrong With The Gig Economy?

The gig economy has been hailed as the future of work. But there is a darker side to this form of engagement, as VICTORIA MACLENNAN discovers.

With the early morning sun pouring into my sunny office kitchen, it’s hard not to love working here!

We have all read headlines on the gig economy – described recently by the BBC as ‘a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs’.

The challenge for many people who have embraced the gig engagement model is they are often forced into accepting predatory working practises, compromising their safety, and the resulting compensation can equate to less than minimum wage.

Reluctant participation is highlighted in McKinsey’s latest report on the gig economy which found the majority of those engaged this way do so out of necessity, either as their primary or as a supplementary income source. An estimated 14 percent, or 23 million, do so reluctantly and a further 16 percent, or 26 million, do so because they are financially strapped.

How does it work?

In broad terms ‘gig economy’ can refer to both freelancers and gig workers. In both of these instances – instead of, or as well as, a permanent job (full or part-time) or instead of holding a long term contract for work – individuals undertake a ‘job’ or ‘gig’ for a fixed fee at a set time.

These jobs or gigs can be very short (minutes) or longer (days). A person can be carrying out many jobs or gigs on behalf of different companies on the same day.

Freelance work has existed for a long time. Photographers, graphic designers and accountants are often engaged via this model, doing a set piece of work, for a rate with terms agreed by both parties.

Where the gig model differs is the size, frequency and engagement. Many gigs are offered via a technology platform, can be bid on or for a set price set by the technology firm. The terms are set by the technology company with no ability to negotiate.

So it’s the terms of engagement, ability to set rate and duration that differs.

So why so much bad press?

This is a complex issue which boils down to two primary issues facing both individuals and nations – the gig economy often disempowers the worker, exposing opportunities for exploitative employment practices; and has created tax avoidance/tax shifting opportunities for the global players involved.

The media attention is primarily aimed at high profile Silicon Valley unicorns who have built platforms for ride sharing, food delivery, cleaning on demand and so many other services where the work itself is carried out under a gig based engagement model. The general feeling from reports is you cannot make a living as a gig economy worker without working excessive hours.

These businesses are not necessarily paying proportionate taxes in the countries where services are procured, which is of increasing concern for nations.

To be clear, not everyone fitting that description is behaving badly. I have read great things about TaskRabbit for instance, who enable gig workers to select their own rates (and take a 30 percent margin) among other friendlier terms.

There are other secondary issues created due to the workers essentially being self-employed, including vehicle safety, worker safety, insurance and hours worked, to name a few.  

Employment practices  

Uber, one of the central characters in the gig economy model, have dominated the news recently with examples of worker exploitation. An article by Dustin McKissen, founder and CEO of McKissen + Company, titled ‘Is Uber an example of innovation, or just another way to pay workers less’, provides a great description of Uber’s business model:

“Uber uses technology to drive down the cost of labor by replacing a regulated, protected class of worker (in this case, taxi drivers) with a non-protected worker (in this case, anyone with a driver’s license and decent car).”

There are strong parallels with Uber-like models and various labour movements of old which led to the industrial revolution. Closer to home in Australia – and NZ – the Waterside Workers’ Union was formed due to systems of hiring which severely disadvantaged the workers. This from Wikipedia: “From about 1900 to the 1940s, work on Melbourne wharves was obtained through the bull system of labour hire where workers would be hired on a daily basis at a pick-up point, and which was prone to corruption. In Sydney, workers would walk from wharf to wharf in search of a job, often failing to find one.”

At an event recently I got into a healthy discussion on what’s wrong with the gig economy – which to be fair is what prompted me to investigate further. Carl, one of the main proponents of fair working conditions, followed up with an email reminding me: “We know from history that inequitable and exploitative systems like that do not last… dressing it up in digital clothes and calling it a hip name do not automatically make it ‘right’.”

How is this different to Zero Hour contracts?

Gig-based engagements and zero hour contracts are similar in their nature. Here in NZ we got rid of the latter recently, creating a fairer deal for employees and increased penalties for exploitative employers. The changes are explained nicely by Rainey Collins: “‘Zero Hour contracts in the past required employees to be available for work offered, without compensation for being available, and without some guaranteed hours.”

This isn’t the case everywhere, with Zero Hour contracts used in the UK, Canada and Ireland, for instance.

How the gig based engagement model differs from zero hour contracts is in the terms and conditions. Zero hour contractors are still employees, so have statutory rights to holiday pay, sick pay, maternity and paternity rights.

Gig based engagements usually involve signing up to the terms and conditions of the service provider.

Is this just a fad?

Many commentators have been predicting we will all be freelance workers in the future of work, engaged for our specialist capabilities by many organisations. One article predicts the majority of the US workforce will be freelance by 2027.

Freelancing as a model will provide employers with specialised capabilities when they need them and employees with flexibility and variety – so should be seen as a win for both.

The more exploitative practices associated with the gig economy, however, need to go and only the market or legislators can dictate that level of change.

I personally choose not to use Uber and in researching this article found many gig workers choose not to be engaged by them. As with any disruptive era the market can rectify and regulate the model, encouraging positive engagement with fair terms and conditions for all parties.

Personally I choose to undertake a blend of paid and pro-bono work which I love. It provides variety and flexibility for me while clarifying how much of my time I can afford to donate annually. Currently that’s 50 percent, which is awesome.

The upshot is that there are gig and freelance models that can work without exploitation. We need to encourage and embrace these and accept that the gig economy is here to stay.

Victoria MacLennan is passionate about many things including growing great companies, raising digital literacy, growing New Zealand’s economy and equality for women. Her day jobs include Managing Director of data and information specialists OptimalBI, investor in start-ups and numerous mentoring, advisory and board appointments. Victoria’s community contributions include co-Chair of NZRise, Chair of the Digital Skills Forum, and Chair of Code Club Aotearoa.