The gig economy: Are workers on demand the future face of employment?

The ‘community’ model connects suppliers with customers but not everyone is happy

Peer-to-peer, the gig economy, the collaborative economy, the on-demand economy. For a 'new' way of working, there are already a lot of terms that have sprung up to define it.

But how does peer-to-peer differ from traditional employment, how rapidly is it developing and what are the implications for the future of work?

In the gig economy, high-tech companies act as brokers between contractors and customers using online platforms to facilitate a pure, market exchange.

Independent contractors use their skills or assets, such as a car or spare room, to derive income by completing tasks or 'gigs' during a defined period.

An indication of the rapid growth and power of these online platforms is evident in companies such as Airbnb or Uber Technologies. Accommodation hosting site, Airbnb, is now the second most valuable hospitality brand in the world after Hilton. In Australia there are about 90,000 hosts registered, making an average of around $7500 a year.

Uber, the transportation network app that has revolutionised the taxi industry, launched in 2009 as another small start-up in Silicon Valley, California. Recently it's been valued at US$50 billion.

But there are plenty of other start-ups populating the gigosphere. Cleaning services Handy and Homejoy, online work platform Crowdflower, parking-space finder Divvy, are all based on the same "community" model that is disrupting traditional marketplaces by bringing suppliers and customers together.

It suggests there is a large untapped demand out there not just among consumers but also suppliers. Software company Intuit estimates that by 2020, freelancers and independent contractors will make up 40% of the US labour force with on-demand employees a fast growing sub-category.

In Australia, the Grattan Institute reports that 8% of people would like to work more hours and cite a lack of flexibility as the thing that's stopping them.

‘Is it an underhand way for businesses to get around labour laws and pay these contractors low wages?'

NICK WAILES

Considerable unease

The business model of these platforms is based on having a very flexible labour force that obviates the need for traditional employer-employee relationships and all the associated costs. It's a model that incites considerable unease, says Nick Wailes, a professor and associate dean (digital and innovation) at UNSW Business School.

"It polarises people," says Wailes. "Is this creating communities of entrepreneurs who have been marginalised from the traditional economy, such as housewives, students, retirees and immigrants, offering them the flexibility of part-time working?

"Or, is it an underhand way for businesses to get around labour laws and pay these contractors low wages?"

In the US, the gig economy is on the radar in the presidential campaign. Hillary Clinton, in her first major speech on the economy, promised to crack down on "bosses misclassifying workers as contractors".

Since that speech, the California Labor Commissioner took a decision that has shaken the entire on-demand economy, ruling that an Uber driver in dispute with the company was an employee and not a contractor and that Uber was liable for his expenses. Uber, unsurprisingly, is appealing the decision.

Clinton, like many others, acknowledges that the gig economy is creating exciting opportunities and unleashing innovation but she cautions, "it's also raising hard questions about workplace protection and what a good job will look like in the future".

 The playing field

It's not just the Americans who are wondering where all this is heading. In Australia, public policy around the issue is being heavily debated.

The Grattan Institute is presently looking at the challenges posed by the peer-to-peer economy in case there needs to be policy change. Jim Minifie, an economist at the institute, says competition law, consumer protection, employment issues, sector-specific issues and tax and social security are all on the agenda.

"Platforms design a marketplace and define its rules. They compete with traditional employers who have to stick to workplace rules. That can give platforms a huge advantage – and can raise the question of whether limits should be placed on what rules they can devise," says Minifie.

He believes the gig economy will present stiff competition in the future not just in hospitality and transport but for professions such as lawyers, accountants and financial services firms because "it offers an alternative for flexible resourcing and, in some cases, clients will say they prefer to have a direct relationship with a professional working contractually".

Wailes agrees that what these platforms have shown is that you can have work delivered in a number of ways, and that it doesn't need to sit within the same company.

"It's easier for small business operators to access the market place and offer their services in competition with the big guns," Wailes says.

But many critics argue that the playing field isn't level. Uber has aroused anger among traditional cab drivers in Mexico City, Paris, London and elsewhere, who have accused the company of stealing their livelihoods as Uber drivers are not subject to the same tax, licence or safety regulations.

‘As it becomes easier and cheaper to find talent, companies will rely less on full-time employees and will hire on a task/project basis’

KEITH RYU

Decentralised and liquid

For the true believers, however, the gig economy is unstoppable. Keith Ryu, CEO of start-up workforce analytics company OnboardIQ, says labour is following the path of cloud computing.

"A couple of decades ago, when you started a business you had to buy your own servers and set them up, whereas now you just outsource it at a very low cost.

"We predict a similar trend in labour, where it will become decentralised and liquid. As it becomes easier and cheaper to find talent, companies will rely less on full-time employees and will hire on a task/project basis," Ryu says.

If that sounds Darwinian, Wailes says that many of the characteristics of the gig economy are already evident inside large organisations during the past decade.

"These platforms allow a contractor to move from project to project – but within companies your work life is more like that now, having a portfolio of different projects, developing your skills around those and cultivating an ability to sell yourself," he says.

According to Wailes, the customer feedback system that underpins a contractor's success in services such as Uber isn't dissimilar to how people, particularly at a senior level, operate in a traditional workplace.

"The importance of networking, getting yourself known, finding a niche and developing a reputation are all things that employees are now expected to do," he says.

 Ostriches, fighters and pioneers

Minifie believes that peer-to-peer is still in the early stages of what could be a big change to work patterns, but so far the number of people who are doing things differently compared with the old economy is small.

"How big this economy could get is difficult to say," Minifie says.

Rachel Botsman, a global leader in the analysis of the peer-to-peer economy, is less hesitant. She has seen three kinds of responses from traditional businesses.

"There are the ostriches, who think this will just go away, the fighters who believe regulation will save them, and the pioneers who are asking: how can we create new value from our assets and what is the new role we can play in our customers' lives?" she says.

Westpac is an example of a company getting cosy with disruptive start-ups. Last year, it invested $5 million in Sydney-based peer-to-peer lender SocietyOne.

But, according to Botsman, it's not just financial services that needs to look over its shoulder.

"Energy and healthcare are both highly regulated industries but in Holland, for example, a start-up is matching small energy providers with customers who buy power from them directly," she says.

Another example is Cohealo in the US, which is saving hospitals millions through sharing equipment via their online platform. Where there is excess capacity, it is reallocated.

But before everyone starts heading for the company exit, it's worth looking at a small piece of data hidden in the 2015 1099 Economy Workforce Report, the first major study on the work-life sustainability of being a worker in the in-demand economy.

It shows that insufficient pay was the overwhelming reason for attrition among workers, closely followed by lack of enjoyment. Could fun be the gig economy's Achilles heel?