The gig economy—the history and the essentials

The gig economy raises a number of interesting questions about the future direction of employment law. Advocates argue that the gig economy offers boundless innovation and empowers both workers and entrepreneurs, while critics suggest that it disenfranchises the workforce and undermines workers’ rights.

The article below originally appeared on Lexis®PSL and is the first chapter in our free Guide to the gig economy.

Denise Cheng, affiliate of Massachusetts Institute of Technology and former innovation fellow with the San Francisco mayor’s office, suggests that historical precedents and future trends both point towards a world of opportunity that will nevertheless require careful management.

The term gig economy is becoming increasingly common, but what does it describe?

The gig economy is a popular label to capture the idea of short-term and unpredictable work arrangements. It’s part of a spectrum of terms that describes peer-to-peer marketplaces that enable people to monetise their skills and assets.

Despite its common usage, the gig economy is an ambiguous and perhaps non-ideal choice to describe recent economic shifts because musicians, freelancers, and other creative professionals have long described their work in the same terms. The gig economy is laced with assumptions about worker welfare, but the term ‘gig’ is technically neutral. This casual usage obscures the nuance and gravity of the issues at hand. It is misleading and takes focus away from the real problem—precarity.

What are the origins of the gig economy?

It really depends on how far back you want to go—we could trace the gig economy back to domestic workers in aristocratic homes. As cities developed and populations moved, so did employment patterns. Since the workplace was often in the domicile, governments refused to intervene. Because these workforces were predominantly female, exploitation was largely invisible. The distinctions in employment norms between public and domestic realms—who holds authority, where, and why—offer early examples of some debates currently being revisited in discussion of the gig economy.

We could also say that the gig economy has its roots in piece work. As new machines came online during the industrial era, managers scrambled for new ways to measure efficacy. This was especially evident in the garment trades, where workers were paid a fixed rate for every piece of clothing they produced. Workers were at a disadvantage due to the strictly quantifiable nature of the relationship. While it may be more than a century later, there is an uneasiness about the levels to which taskers on Taskrabbit, cleaners on Homejoy, or drivers on Uber mirror domestic work and piece work.

Is this approach to employment being seen internationally and across all sectors?

In my conversations with journalists and researchers both in America and Europe, it seems like many countries are struggling with what to do.. To be clear, this sort of work has always existed, but gig economy platforms have forced it into the light—this is in part because the workforce is visibly white and better-educated than what we typically assume of low-wage workers. Part of the reason it feels so unprecedented is because countries are openly dealing with informal employment for the first time, and so we are trying to figure out culturally appropriate ways to bring it into the formal economy.

To what extent will it alter or threaten traditional jobs and employment law as it stands?

Certainly US labor laws have long-needed a tune-up. Gig economy workers fall under the independent contractor classification, one of only two labor classifications in the US. In comparison to employees (the other classification), rights and support for independent workers are weak, and independent contractors are both their own employer and employee. Besides higher taxes, it also means that if an independent contractor requires benefits like occasional sick leave, they have to find that income themselves.

One major problem is the lack of a clear definition of what ‘low income’ means for independent contractors. Welfare eligibility is based on an assumption of employment income, and because of this, struggling independent workers don’t qualify for certain types of public assistance. The precarity associated with the gig economy underscores that having only two classifications to capture the nearly 160 million Americans in the labor force is not enough. At the very least, it’s time to confront the job of amending the independent contractor status—a requirement that is at the core of the issue internationally.

What are the main advantages and disadvantages in the informal approach to employment?

As the ‘peer-to-peer’ label denotes, the use of profile pictures and rating systems is humanising, and this encourages trust in transactions. On the flip side, people of colour are at a disadvantage and have a harder time as both buyers and sellers on peer-to-peer platforms. Implicit bias is not always obvious—it might mean that an Uber driver gets lower ratings because of general implicit bias against people of colour or people who speak with accents. Ultimately, implicit bias can’t be eradicated, but it can be minimised.

Critics will say that the proliferation of space-sharing platforms such as Airbnb are cutting into job markets that provide real benefits to employees. The truest believers in peer-to-peer, meanwhile, will argue that disruption is part of a natural cycle that increases quality and efficiency—although technology destroys jobs its affordances will also create new ones (‘creative destruction’, as economic theory would put it). While the volume of jobs might stay the same, however, the people who lose low-wage jobs due to creative destruction aren’t often the ones rewarded with new jobs when they are created. Those typically go to workers with higher education levels.

The core proposition of the gig economy is its flexibility—the handicraft-trading platform, Etsy, surveyed their sellers in 2015 and found supporting evidence for this. The nature of working whenever you want, often from wherever you want, makes it possible for people to earn income without compromising on childcare, family obligations, medical schedules, and many other priorities. Gig economy opportunities can help people build up emergency savings or fill in the gaps when their income falls short.

During my research into the gig economy, one hopeful theme was the leveraging of gig economy opportunities for professional development. One interviewee was a freelance designer who instructed a graphic arts course on a peer-to-peer teaching platform—she included the class in her portfolio to signal her expertise to potential clients. Another interviewee worked casually in different fields using TaskRabbit and, through odd jobs, found that she had a talent for event production. Yet another interviewee used a short-term staffing platform to find temporary work at different start-ups. The flexibility allowed her to experience what she didn’t want in her next employer.

Approached thoughtfully, the diversity of platform companies provides opportunities to learn new skills. Approached carelessly, precarity will spread.

This was an extract from our full Guide to the gig economy. Click the link for free access.