The future of work was meant to involve the Uberisation of everything, but in-built limitations may find the ‘sugary drink’ world of the gig economy confined to niches of the employment market.
There’s a running in-joke in the start-up community that every new would-be tech breakthrough ‘unicorn’ will front potential investors and explain their pitch by saying, ‘It’s like Uber but for….”.
With similar platforms launching in industries as diverse as food delivery, design and lawn mowing, the expectation was many people would soon be part of a grand new age of work. The gig economy.
Except maybe the future of work isn’t what we expected.
The ‘natural limits’ of the gig economy
Found Careers co-founder Andrew Joyce is one expert who believes the gig economy will not disrupt the economic and work realities we’ve become used to quite as deeply as was once expected.
Speaking with ReadyTech CEO Marc Washbourne on the WorkED Podcast, Joyce said he believes the gig economy has ‘natural limits’ and that we’re already butting up against those constraints.
“The view two or three years ago was, ‘everyone’s going to be a contractor, everyone’s going to be doing a different job every day’, but we’re now starting to see the natural limits of the gig economy.”
He’s not alone. In recent years sensible heads at home and abroad have had time to gather data on the gig economy and think through the impacts, including how it interacts with workplace laws.
In just one example, Deloitte’s 2019 report The path to prosperity: Why the future of work is human found Australians are actually staying with their traditional employers now for longer than ever. It found 45 per cent of workers have been with their current employer for more than five years and that the rate of self-employment has actually been falling for almost a century – to a new record low.
“The gig economy isn’t taking over,” the Deloitte report states. “Casual jobs are a smaller share of all jobs than two decades ago, and that share hasn’t budged in over a decade.”
The Victorian Government has also been charting the gig economy’s limits as part of an inquiry into the sector. Commissioning a landmark survey of 14,000 people across Australia, it found just 7.1 per cent of people had sourced work through a technology platform in the 12 months to June 2019, while 13.1 per cent have at some time used a platform. Of those people using platforms to source work, only 15.5 per cent relied on this work to meet their basic financial needs and only 2.7 per cent of current platform workers derived 100 per cent of their total annual income from platform work.
So what happened to the early promise of the gig economy? It turns out that, while the gig economy does serve some people and businesses well in some circumstances, it doesn’t in many others.
A new age of flexible work?
A 2016 McKinsey Global Institute report Independent Work: Choice, Necessity and the Gig Economy, estimated that between 20 and 30 per cent of the working age population in the US and Europe were at that time engaging in what could be considered ‘gig economy’-style work.
McKinsey also found that – if workers had their way – that percentage would creep even higher. The report estimated that 40 to 50 per cent of the entire working population had an appetite for gig economy work, uncovering a latent demand for this more independent and flexible style of work.
The appeal of gig-style work is reflected in research findings closer to home. In the Australian cut of its 2019 Millennial Survey, Deloitte found 50 per cent of millennials and Gen Z would consider doing gig work instead of working full time and 61 per cent would supplement work with gig assignments.
These findings reflect the positives of the gig economy. Appealing to the entrepreneurial spirit that young employee in today’s working world can understand, gig work promises to deliver a new breed of tech-enabled, independent and flexible work unheard of during previous generations.
For millennials, Deloittte found the top drivers of wanting to get involved were the chance to earn more money (58 per cent), work the hours they wanted (41 per cent) or achieve a better work-life balance (37 per cent). The Victorian Government, in its survey of workers, found that actual gig workers are most satisfied with choosing the hours they work, being their own boss, choosing their own tasks or projects, working at the pace they chose, and enjoying the work they did.
What about employers? ReadyTech CEO Marc Washbourne said on WorkED that the gig economy has advantages including the ability to source great people in a competitive recruitment environment.
“A lot of this is tech-enabled, so it does open up a global market for skills; you get much wider access to often hyper-specialised talent in a world where it’s also hard to attract and retain talent. It also allows employers to scale up and down, so it’s pretty appealing,” he said.
It’s true the ability to maintain a flexible workforce brings in a potential new age of flexibility for employers that could help them become more nimble and responsive to market conditions. A global survey from recruiter Robert Half found employers would actually like one third of work to come from the freelance or temporary worker pool by 2023. Perhaps ‘idealising’ their perfect workforce, Australian hiring managers envision a future 70:30 split between full timers and temps.
Found’s Andrew Joyce said there are definite positives flowing from the gig economy. In particular, he said it gives workers the chance to go out and get more work to fit their schedule, build up a portfolio of opportunities, or get a ‘side hustle’. In the end, he says this advantage boils down to flexibility.
Mixing risk with reward
While the flexibility remains, for some gig workers the risks may not outweigh the rewards. A series of findings have uncovered that the outcomes achieved through the gig economy can vary considerably.
- McKinsey’s international report found only 30 per cent of gig workers are considered happy, full-time ‘free agents’. Another 40 per cent dip in as ‘casual earners’ on the side. This left 14 per cent classified as ‘reluctants’ who only do it full-time because they have to, and 16 per cent who are ‘financially strapped’ and forced to top up their income with gigs to put food on the table.
- Attitudes differ by generation. A report from Prudential, Gig Economy Impact by Generation, found millennials are more likely to be in the gig economy out of choice, while Gen Xers are more likely to be there because they have to – and might prefer a traditional job. Interestingly, Deloitte’s Australian 2019 Millennial Survey found that, despite the strong interest, only 6 per cent had chosen to take the leap into the gig economy instead of regular full-time work.
- Australia might be a little more friendly to gig workers. The Victorian Government found our platform workers were ‘moderately to fairly satisfied’ (though it cautions workers can express high levels of job satisfaction in jobs which are generally agreed to be poor quality).
- Earnings in the gig economy can be volatile. A US Prudential report estimated that gig workers earn only 58 per cent of full-time employees. Meanwhile JP Morgan Chase Institute’s Online Platform Econony in 2018 report found transport (think Uber and Lyft) gig workers’ income fell 53 per cent from 2013 to 2017, even while leasing income (think AirBnB) grew by 69 per cent.
- This makes reliance on gig work more risky. A recent 2019 report on economic wellbeing from the US Federal Reserve found gig economy workers struggled financially more than the average person. It quantified this by showing 58 per cent of gig workers would have a hard time coming up with just US$400 to cover an emergency bill – much higher than company employees.
- In Australia, the Victorian Government pegged the average hourly rate for platform work at A$32.16. This includes professional service work at higher hourly rates of $50 or more an hour, to a very low income band under $10 per hour for some clerical, data entry, writing and translation work (this was despite the minimum wage at the time being $18.93 per hour).
The mixed results from the gig economy raise questions. In Hyperwallet’s 2019 Marketplace Expansion Index (rating economies based on their embrace of ecommerce and the sharing economy), Australia was ranked seventh as an ‘established’ marketplace. The caveat? “Regulatory pressure is preventing Australia from reaching its full potential”. The question is, what would our full potential actually look like, and how would this impact gig workers if regulation was not fit for purpose?
Regulators in Europe responded in April 2019 with minimum protection laws for ‘on-demand’ gig economy workers. They propose member states adopt more predictable hours and compensation for any work cancelled and an end to abusive practices associated with casual contracts. In Australia, regulators have proved similarly nonplussed: a 2017 Senate Committee inquiry into Corporate Avoidance of the Fair Work Act found gig workers were not legally independent contractors.
Andrew Joyce said one of the key issues with the platform gig economy is that ‘independent’ workers end up shouldering more of the platform’s business risks, leaving them potentially vulnerable.
“What’s bad about the gig economy is – and this has been an issue with some of the platforms so far – there is no protection around how much people earn per hour. There’s also no work density – you can’t actually get 40 hours of work a week delivering food for Deliveroo or Uber Eats – so you can’t build a full-time career there. As a worker, you’re basically taking all the risk – all the business risk – of the platform having not a very busy night or too many people turning up to work, that kind of thing.”
Joyce argues Australian workplace laws are a good thing in arresting the extremities of gig work.
“Everything that’s been successful in the gig economy – be it Airtasker, Uber, Deliveroo – the workers are being paid piecemeal, so they are being paid per job or per task completed. In the Australian workplace laws, you can’t do that on an hourly basis, so unless you can really accurately define what the person is being paid for and meet a whole bunch of very stringent requirements around proving they are a contractor, you just can’t get that contractor arbitrage – I 100% agree with that.”
The productivity question
Andrew Joyce believes what was originally missed in hype around gig work was productivity. With many roles requiring people to develop relationships and knowledge of a business over time, having gig workers do the work can represent a loss of knowledge, experience – and also productivity.
“Companies are a collection of people who work together and the more experience they have the more productive they get. So if you snapped your fingers and everybody is working a new job tomorrow, the economy would literally shut down – no one would know what’s going on. Some jobs are just not suited and will never be suited to having a high turnover of workers,” he said.
Joyce gives the example of a GP and a receptionist. While many people would intuitively think a receptionist’s role is more easily ‘gigged up’ via a tech platform, it is actually the GP that is more easily able to step into the same role in different locations and be more productive straight away.
“If you’ve got a job that is incredibly standardised – a GP is very standardised, you are seeing patients who have illnesses – they can be plugged into any workplace in Australia and do a pretty good job from the word go. If you’ve got a job which relies a lot on deep knowledge of personal relationships or is highly variable, they are the ones that are just never going to work,” Joyce said.
ReadyTech’s Marc Washbourne agrees. “I think the key word here is continuity. Be that relationship or knowledge. You think about sales roles or customer service roles, and what you are talking about there are actually long-term relationships and that sounds tough to gig up.”
The ‘sugary drink’ economy
Washbourne said there has been some big benefits come out of the gig economy for many people.
“It’s been fantastic for older workers that want to keep active, it’s been popular with young people and millennials, and I think it’s opened up some amazing opportunities for parents wanting to work from home, and people with disabilities are able to do more from home,” Washbourne said.
The Victorian Government’s research did indeed find that some people’s motivation for gigging included ‘finding work despite health issues or disability’ and ‘connecting socially with people’.
Found – which targets younger workers – is seeing a strong appetite from younger generations for work. Joyce said this could entail risks if they end up getting hooked on a diet of gig economy work.
“We hear from young people all the time, ‘I just want a job. I want a way of making money. I need to make money. I need that to exist in the economy at the moment’,” he explained.
“So in many cases it’s kind of the lowest common denominator; they’ll fall back to whatever they can get. This is where work protection is really important because if you said to someone who is desperate for a job, ‘I can offer you five dollars an hour’, they might just do it.”
This makes the gig economy much like a ‘sugary drink’, he said. “It’s a great pick-me-up at various points, but you can’t live on it. You know you can’t create your entire diet out of junk food; you can’t create an entire career out of gig stuff. But it’s great as a side, as a way to hold you through. The risk is that people come to rely on it or come to see it as a long-term option and it’s not, unfortunately, the way it’s operating at the moment.”
This means the future could indeed be limited for the gig economy. “I think we’ve found a really interesting niche case with the likes of Uber and Airtasker where they’ve grown very rapidly into a niche in the economy, but I think that is kind of it in terms of where this can go,” Joyce said.
Want to hear more? Listen to ReadyTech CEO Marc Washbourne’s interview with the co-founder of app-based job platform Found, Andrew Joyce, for an investigation of the gig economy reality, open plan offices and remote work. Is the gig (economy) up? Are we right to question the open plan office? Is remote work still the future? Listen to this episode of the WorkED Podcast to find out now.