Regardless of your industry, chances are you have come across a mention of the growth of the ‘gig economy’ or the rise in ‘freelance’ or ‘independent workers.’ So, what exactly does this mean for the future of our workforce and economy?
According to research by McKinsey & Company, “Millions of the self-employed, freelancers, and temporary workers—as well as individuals renting out rooms on Airbnb, driving for Uber, or selling goods on eBay—are part of a significant trend that we call independent work.” In this blog we will discuss the major drivers behind the growth of the gig economy, the benefits and challenges associated, and the current state of independent workers.
What is Driving the Growth of the Gig Economy?
The gig economy seems to be fueled by heightened consumer expectations and demands: the need to get what you want, when you want, how you want it. Today, more jobs require specialized skills or training than ever before. Employers expect a certain level of expertise from their workers while also demanding a unique set of skills. This means that employers are now casting a greater net to find the best-fit workers. Unlike the traditional concept of employment, today you need to be skilled on a variety of tasks rather than an expert on one. The gig economy demands a wide variety of skilled individuals that are already trained in their craft.
As technology continues to emerge that helps to bring teams together across buildings, and even borders, it has become more realistic to conduct business with workers that are spread outside of your four walls. As communication and collaboration platforms continue to evolve, companies are able to successfully complete the most complex jobs with the assistance from technology. The gig economy would not survive without technology—independent workers are often times spread across the globe and require a tool that enables long distance communication or consult.
As competition continues to grow in our global economic market, the more options consumers have when looking for products or services. As more individuals and companies begin to take on short-term work or contracting, it has become clear that we are inundated with information, skills, and workers. As more businesses enter the market from across the globe, it becomes easier for consumers to find the service or product they are looking for simply due to the sheer number of companies on the market.
Four Types of Workers in the Gig Economy
1. 30% Free Agents
Primary income is derived from independent work. e.g. Private contractor
2. 40% Casual Earners
Typically includes hobbiest, crafters, someone who works on their passion project after hours. e.g. Artists sells jewelry on Etsy outside of full time job
3. 14% Reluctants
Independent workers who would prefer a longer-term, more stable career. e.g. Independent marketing consultant who would rather work full-time at an agency.
4. 16% Financially Strapped
Workers who have take gig projects out of necessity. e.g. Struggling actor signs on to do ad-hoc voice over projects on the weekends to pay rent.
Four Reasons Technology is Driving the Gig Economy
Independent work is rapidly evolving as digital platforms create large-scale, efficient marketplaces where workers connect with buyers of services. Digital platforms that create marketplaces for labor services further amplify the benefit of the internet reducing costs. Markets for independent work could be transformed in several ways
Larger scale.Digital matching platforms establish huge webs of connected users and create transparent markets in which buys and sellers find each other with a few clicks.
Faster and better matches from real-time information.Digital platforms accelerate matching. Efficient search algorithms combined with real time information allows for more seamless coordination between two parties.
Richer information signals and ancillary servicesDigital platforms enable works and clients to share profile data and endorsements; often the platform itself collects data that help provide credibility for both independent workers and their customers before and after the transaction. Buyers and sellers can build trust immediately because ratings and reviews are aggregated from past interactions.
Near-zero marginal costsThe cost of adding more participants is negligible for the platforms themselves, and the barriers to entry for new workers to join can be similarly low. Benefits Associated with Independent Work Independent work has three defining features High degree of autonomy Payment by task, assignment, sales Short-term relationship between worker and client More satisfied employees!
Benefits Associated with Independent Work
- High degree of autonomy
- Payment by task, assignment, sales
- Short-term relationship between worker and client
Challenges Associated with Independent Work:
- Sense of security with career
- Lack of medical benefits
- Need a Knack for Technology to thrive
- Managers need to re-learn best practices
- New business models emerging with new challenges
- New forms of education required for skill specialization.
Don't expect the growth of the gig economy and the prevalence of independent workers to let up anytime soon. Prepare yourself for a new economic landscape before it's too late.