The gig economy has been a field of growing interest for employers worldwide. It essentially consists of employers hiring contractors to complete jobs through a specific platform, which would eliminate the costs associated with more traditional employment. For example, this may include hiring marketers or administrative assistants temporarily to complete a project using a content management system.
While the idea of alternative work arrangements and the gig economy may seem innovative and the next best thing, recent data from the US Bureau of Labor Statistics shows that the number of people working in alternative work arrangements is decreasing instead of growing, according to an article published by Quartz. This includes those who are independent contractors and temporary workers, which means they do not work permanently at a place of business or aren’t employed directly with an employer.
In this article, you will learn the following about the gig economy.
- Economists are Perplexed About the Decline in the Gig Economy
- The California Senate Changes the Rules on the Gig Economy
- How to Create Job Stability and Satisfaction among Contractors
- Colleges are Teaching Students How to Participate in Gig Economy
- How Runrun.it Software Supports Workers in the Gig Economy
Economists are Perplexed About the Decline in the Gig Economy
Various independent studies had expected there to be a rise in the number of contractors working in the gig economy. Economists are perplexed with the numbers shown by the US Bureau of Labor Statistics since they did not expect a decline in the gig economy.
The data shows that the number of Americans participating in gig work decreased to 10.1% of the labor force in 2017. Previously, this number was 10.9% in 2005. This paints the theories of economists Lawrence Katz of Harvard and Alan Krueger of Princeton as inaccurate since they predicted in December 2016 that gig workers made up as much as 15.8% of all employees. In fact, these economists claimed that nearly all US job creation was due to the gig economy since 2005. However, the results from the Bureau of Labor Statistics shows a more accurate picture.
Independent contract work experienced the most severe decrease where contractors accounted for 7.4% of all workers in 2005, but only 6.9% of workers in 2017. Temp workers and those who work for third party contract companies held steady from 2005 to 2017.
The experts were baffled, explains the Quartz article. For example, analyst Mary Meeker cited trends that predicted 7 million workers would be employed in the gig economy by the end of 2018. Other gig-affiliated company studies claimed that more than 30% of Americans are freelancing including about half of millennials. However, the data from the Bureau of Labor Statistics does not back these predictions.
While many experts believed that Uber would be playing a major role in hiring many people as independent contractors for driving customers, the company only had 900,000 drivers in the US as of May 2018.
“Uber, which is ‘huge,’ is also small,” said John Horton, professor at New York University’s Stern School of Business, who has studied the gig economy. “On the scale of the labor market as a whole, it’s unimportant.”
This shows how the gig economy may not be hiring as many people as the experts would have you believe. On top of this, some state governments are changing certain laws to protect workers and not allow companies to classify nearly as many workers as independent contractors. This is most prominent in the state of California.
The California Senate Changes the Rules on the Gig Economy
In September 2019, the California Senate voted to pass the Assembly Bill 5, which will drastically change the future of the gig economy, according to Quartz. This bill will change the status of hundreds of thousands of independent contractors as employees. Clearly, this will further lead to a decline in the number of people who are considered working in an alternative work arrangement.
Companies such as Uber and Lyft will be increasingly affected by this legislation and future changes similar to the one in California. This vote passed the Senate by a vote of 29 to 11 and needs to pass a final vote by the State Assembly after they approve amendments. Lastly, this legislation will need to be signed into law by California governor Gavin Newsom who is already behind it as of September 2 (Labor Day).
“The State Senate made it clear: your business cannot game the system by misclassifying its workers,” assemblywoman Lorena Gonzalez who authored the bill said in a statement. “As lawmakers, we will not in good conscience allow free-riding businesses to continue to pass their own business costs onto taxpayers and workers. It’s our job to look out for working men and women, not Wall Street and their get-rich-quick IPOs.”
The publication Fortune explains that California’s Assembly Bill 5 considers classifying workers as contractors only if their job is outside the usual work processes of the business. Essentially, this means that all employees will have to be paid at least minimum wage and receive overtime pay.
This new law would lead to significant profit losses for companies like Uber and Lyft. These two companies would have to pay each individual driver an extra $2,000 to $3,600 per year, based on data from Barclays Plc and Macquarie Capital. This would cost Uber as much as $500 million in California every year.
Essentially, laws like the one in California could change the gig economy and lead to even less workers participating in alternative work arrangements. However, if you, as an employer, want to ensure that you have contractors satisfied with their work arrangements, you will need to follow some basic steps that won’t lead state governments to step in.
How to Create Job Stability and Satisfaction among Contractors
While the new workforce generation is more interested in remote and mobile-based work, there is still a strong desire for job stability. As such, it is imperative for companies to provide their contractors with the satisfaction and job stability workers seek.
As an employer, it is essential for you to create job stability as a form of competitive advantage over other companies. If you can prove to your talented contractors that their work is essential and you will keep them on to work on future projects, you will have lower turnover rates. Lower turnover will give you an advantage and a better reputation within your market.
If you end relationships with your freelancers and contractors quickly without establishing any trust, you’ll see poor reviews of your organization all over the Internet. This will make it that much harder for you to hire new contractors in the future.
As such, you’ll want to offer more job stability and benefits for your workforce whether it is for a salaried employee or a contractor. If you do so, your reputation will soar and you will have no problem hiring quality talent.
While the gig economy may not be growing as quickly as the experts predicted, more training and education is slowly gearing students to take part in this new form of work.
Colleges are Teaching Students How to Participate in Gig Economy
One professor at Babson College in Massachusetts created a course in 2012 called “Entrepreneurship and the Gig Economy,” according to Quartz at Work. Professor Diane Mulcahy wanted to teach MBA students how to obtain contract work, negotiate fees, and market themselves in the emerging gig economy. Other colleges have also been continuing this trend in teaching students how to take on new freelance and contract roles as the corporate world continues to change.
Mulcahy initially had never heard of any courses in the United STates like the one she began. However, other universities began to follow suite. For example, in 2018, the University of Michigan’s Ross School of Business added a class called “Thriving in the New World of Work.”
This class is focused on teaching students how to navigate their future careers including uncertainties as well as how to become more resourceful. Students are also encouraged to assess their strengths and weaknesses as well as values and passions when it comes to pursuing contract jobs in the new work environment.
Along with teaching students how to go from one project to the next with contract work or freelance gigs, it is useful to teach students how to gain more stability through a type of position called the permalencer.
The way this is defined is that permalencers are workers who have one or two clients that offer them regular, consistent work. Freelancers, on the other hand, freelancers work with multiple clients on a project to project basis and often look for jobs on a more constant basis. In order to be considered a permalencer, there are several qualities that are needed including:
- Self-employment and having your own schedule
- Majority of income comes from ongoing contracts
- Job profile includes providing consulting in your area of expertise
- Having the ability to take on freelancing gigs sometimes and not being exclusive to the more permanent clients
Another interesting area of expertise that students may need to be exposed to include ghost work where every worker is uncredited for their contribution to a company. Essentially, this means that a blog writer will not receive a byline or those who worked on a marketing campaign or created web design will not be credited for their contribution.
Flexible careers may not be growing as quickly as experts predicted, but they are still desired by employers worldwide. As such, it is imperative to have the right tools in place to help improve communication between freelancers, permalencers, managers, and salaried employees.
How Runrun.it Software Supports Workers in the Gig Economy
Workflow management software such as Runrun.it tools can help your company by supporting your team of workers while tracking the amount of time spent on projects, managing assigned tasks, and improving collaboration across your team.
These tools will keep your contractors and salaried employees motivated to complete their projects by removing workflow obstacles and ensuring communication is more transparent. Click here to try a free trial today!