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Is the rise of the ‘gig economy’ being overhyped?

The demise of full-time employment may be greatly exaggerated
Gig economy
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By Brian Kreissl

We’ve been hearing a lot lately about the rise of the so-called “gig economy,” including predictions about dramatic increases in the number of freelancers, contractors, consultants and self-employed contingent workers. Much of this is enabled by changes in technology and business practices, the ability to work remotely from just about anywhere and the advent of “gig-finding” sites like Freelancer.com, Fiverr.com, TaskRabbit and Mechanical Turk.

Some would also include “sharing economy” platforms such as Uber and Airbnb as examples of online marketplaces that allow people to sell their services on a short-term basis. Even e-commerce and online classified sites like eBay, Amazon, Kijiji, Craigslist and VarageSale are seen as platforms that enable people to set up their own virtual retail businesses.

Cost-cutting by employers

Many pundits predict that very few people will have full-time permanent jobs in the not-too-distant future as a result of these marketplaces and the fact that employers are looking to cut costs and downsize their complement of full-time workers. It is likely that many employers in the future will staff their organizations with a core of key full-time employees but make use of contingent workers for projects and to respond to fluctuations in business volumes due to seasonal variations, company growth, shifting consumer demand and business cycles.

It is also true that employers can save money on pensions and benefits by hiring fewer full-time employees. Many self-employed workers are in fact paid less than they would be if they were employees.

There are also worries about increasing automation, artificial intelligence and the rise of robots, resulting in less demand for human labour. Because of that, employers are more likely to turn to the contingent workforce when they do need certain skills or expertise only a human being can provide.

According to calculations by CNBC based on data from the Metropolitan Policy Program at the Brookings Institution, the number of gig economy workers in the United States has grown 27 per cent faster than the number of payroll workers over the past 20 years.

But the growth in the contingent workforce isn’t entirely positive, as one study by the Canadian Centre for Policy Alternatives found. One key finding, based on respondents providing services through online platforms in the Greater Toronto Area (GTA), was that 55 per cent of the workers in question participated in this type of work because they had no other options.

Nevertheless, from the perspective of individual workers, the gig economy isn’t all bad, as it allows people an opportunity to gain additional flexibility and work-life balance, showcase their skills, get some much-needed experience and supplement their incomes on a part-time basis. The gig economy also supports multiple income streams and portfolio or “slasher” careers in which people pursue more than one career simultaneously and find employment when they are unable to secure permanent jobs.

‘Gig economy’ still a small part of the workforce

Several experts are starting to question whether the gig economy is really all that significant. They point to the fact that, in spite of all of all of the press received by companies like Uber, such work still only represents a small portion of the labour market. According to figures from the Economic Policy Institute, the size of the gig economy actually shrank between 2014 and 2015.

Many people who perform freelance work do so to supplement their full-time employment. As journalist Shane Ferro of Huffington Post points out (see the link above), because he wrote a single article on a freelance basis outside his employment, he would be counted among the freelance or contingent workforce, in spite of the fact he has a full-time job with benefits.

Some would even argue the gig economy is in a “bubble,” with too many companies investing in the concept in spite of the fact there have been lawsuits finding such workers are really employees. It’s also true that many people still demand full-time employment and aren’t interested in working as freelancers.

Many employers themselves still prefer to hire permanent employees. It is much easier to manage in-house employees than freelancers, and it is very difficult to establish and maintain a robust and coherent organizational culture with a remote and largely transient workforce.

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Brian Kreissl

Brian Kreissl is the product development manager for Thomson Reuters Legal Canada's human resources, OH&S, payroll and records retention products and solutions.
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