“Gig economy” describes an economy based on performing tasks and projects, increasingly often offered through digital platforms, and replacing a regular full-time employment.
This form of employment is used by freelancers or more broadly, gig workers, who largely choose it voluntarily but a large percentage of temporary workers are forced to engage in the gig economy due to lack of permanent employment offers. The gig economy involves, on the one hand, high-class IT specialists, and on the other hand, drivers providing transport services through companies such as Uber.
How many gig workers are out there?
According to a study carried out by Morgan Stanley, as much as 35 per cent of the US working population (over 55 million people) may be engaging, to a varying extent, in temporary work, and by 2027 this percentage could reach up to 50 per cent of all workers in the world’s largest economy. In France, Germany and the United Kingdom, the supply of such labor will grow at a rate exceeding the average rate of employment growth. The number of gig workers in the European Union doubled in the years 2000-2014, and they were the fastest growing group of employees. However, gig work is only treated as the main source of income by several per cent of the total number of employees in developed countries (3.8 per cent on average in 2017) and by over 10 per cent in the so-called emerging markets.
An analysis conducted by the EY consulting company shows that since the financial crisis, the full-time hiring rate among the S&P500 index companies (i.e. the largest companies in the United States) has fallen to 2.7 per cent. Meanwhile, temporary workers account for an average of 17 per cent of all employees in US companies, and in the case of 20 per cent of the companies they even account for 30 per cent of the work force. Similar trends are also observed in other economies — for example, in 2016, almost 5 million people performed commissioned tasks in the United Kingdom. Nearly half of the HR directors of global companies surveyed by PwC expect that external contractors will account for 20 per cent of the total number of workers, while the value of the gig economy is expected to reach USD2.7 trillion in 2025.
Gig workers in every sector of the economy
The phenomenon of assignment work applies to virtually all sectors of the economy. Research conducted by BCG on 11 markets indicates that this form of work is the most common in the IT sector, where commissioned work provides the basic source of income for 9 per cent of workers, while 24 per cent of workers see it as an additional source of income. The highest pay rates are found among specialists in artificial intelligence and machine learning, whose remuneration reaches an average of USD115 per hour. Rates exceeding USD70 can also be achieved by blockchain technology developers (USD87) and by robotics experts (USD77). The second largest share of gig workers is found in the finance and insurance industry (commissioned work is the basic or additional source of income for 26 per cent of the workers), followed by agriculture, mining, the manufacturing (19 per cent), as well as transport and logistics (17 per cent). This means that the gig economy embraces fields in which both higher and lower qualifications are required. Having said this, it seems that the higher the level of competences required, the more often the contract work is performed out of choice, even though for many workers it is a prerequisite to remain on the labor market. And so in 2017, an Uber or Lyft driver could expect average monthly earnings of USD783 in the United States, that is, half of the income obtained four years earlier (data from JP Morgan). This was the worst-paid sector in the whole gig economy, although it should be noted that most drivers of companies offering the so-called ride-hailing services did not work more than 10 hours a week. This means that for them it was an additional source of income. BCG’s research shows that while contract work destroys traditional jobs, it allows people to stay on the labor market. Over 30 per cent of the respondents claimed that the development of the gig economy gave them a chance to find employment again and to acquire new skills.
Technology supporting the gig economy
Dedicated digital platforms play an increasingly important role as a medium for finding and recruiting contract workers. Among the directors of 800 global companies surveyed by SAP in May 2018, more than one-third admitted that such platforms are an important way of acquiring professionals and that the importance of this method of recruitment will continue to grow. The platforms can work on behalf of various employers, offering strictly defined working conditions or allowing for negotiations between the employer and the employee regarding the principles of project implementation and the methods of remuneration.
The largest operator in Europe is the Twago platform, acquired by the Dutch company Randstad, with over half a million professionals registered. Similar platforms are operated by the software giant SAP, Philips, or by the global consulting companies. One solution that combines the character of a social network with global ambitions, is the Singapore-based Humans platform created in 2017. It utilizes blockchain technology and artificial intelligence solutions and has already attracted 200,000 users. Platforms that provide access to employees for hire are the object of interest of companies such as IKEA, which has bought a popular website TaskRabbit specializing in casual work, or the e-commerce giant Amazon. These platforms cover both jobs that do not require high qualifications, as well as offers for software experts (e.g. Amazon Web Services).
Across the world, there are already over 50 million people registered on platforms offering gig work. BCG distinguishes between two basic segments of users: digital nomads, who work remotely in various parts of the world, as well as fly-in experts. Both groups individually negotiate their contracts on the platforms. Other users, such as people entering or searching for data, doing translations and making accounting entries, as well as digital assistants who receive orders online but work in the real economy (plumbers, drivers), work on the basis of predetermined price lists or tariffs. The positive aspects of such contracts include flexibility and high level of autonomy in the performance of the assigned work, better work-life balance, and in the case of ethnic minorities and people from emerging markets, the opportunity to enter the market or to acquire work experience, despite the often longer working hours. They also have a beneficial effect on women’s professional activation. Interestingly enough, research conducted at the Cardiff University shows that freelancers often exhibit higher levels of job satisfaction than full-time employees. Their biggest drawbacks of gig work are the unpredictability of the income and lack of social welfare and pension benefits.
Gig workers include both millennials and people close to the retirement age
The gig economy primarily involves two age groups of employees. The first are people aged 55-64 who exhibit a high propensity for flexible and independent work. In 2025 they will account for up to 15 per cent of the global workforce. The second group that manifests its professional independence, also due to the lack of any alternatives, are the millennials — in the United States young workers account for around 40 per cent of all self-employed people. Companies quickly recognized the benefits of cooperation with such workers, creating special freelance management systems. Their benefits primarily include quick access to talents and professionals from all over the world that can be hired for demanding projects conducted under time pressure and often outside of standard business processes. They are almost immediately connected into the company’s network or cloud solutions, without the burdensome recruitment processes and onboarding. The costs start to be of secondary importance. According to researchers from the Oxford University, in the years 2016-2017 the number of projects based on the outsourcing of talents among the largest global corporations increased by as much as 26 per cent. 80 per cent of HR directors of global companies, surveyed by the Conference Board business association, believe that the share of contract work in the global economy will grow robustly, among other things, due to the necessity of maintaining competitiveness.