The gig economy is a new concept that has taken the world by storm and is changing the way people work throughout the world. It’s known as a ‘gig,’ and it often entails working on small or miniature projects for a short amount of time and being compensated accordingly. Today’s gig economy workforce includes millions of people all around the world. Young people in emerging nations are also interested in the gig economy, and many are quitting established organizational structures to work independently. The application of digital technology and the usage of platforms has further fueled current interest in the gig economy. When discussing the gig economy, the platform economy—and, more precisely, platform work—is frequently brought up. App-based transportation, such as Uber, food delivery, Fiverr, Upwork and other consumer-facing services, marks a particularly obvious shift in the workplace.
While the notion has a lot of supporters in developed countries, it is also being promoted in emerging economies as a way to boost employment and economic value. In 2017, the Bureau of Labor Statistics projected that 55 million people in the United States worked as gig workers, accounting for 36% of the workforce. Many economists believe that by 2030, 80%t of the workforce will fall into this category. The epidemic has ushered in a paradigm shift in how businesses approach the rising gig economy, with examples such as the rise of freelance marketing and media. The gig economy continues to grow in various other emerging markets as well with a global rise of freelance, contractual, and flexible jobs instead of traditional full-time work.
To ensure the success of gigs as a source of revenue, certain prerequisites must be met. However, the future of this business model is bright, and it is likely to become a significant contributor to the global economy in the near future. While hiring gig workers has been on the rise for years, the pandemic appears to have boosted those numbers. According to Forbes, in the summer of 2020, there were 24% more gig workers than in prior years. Many self-employed individuals prefer greater flexibility, which was especially important during the epidemic, especially for those with young children or elderly parents at home who needed to be cared for. Technology has also played a role, with new platforms allowing gig workers to sell their services or bid for employment all over the world and work from nearly anywhere.
The Positive Effect of the Gig Economy
The emergence of the gig economy is aided by technological advancements, low-cost labor, and entrepreneurial spirit. Workers can connect across geographical boundaries using e platforms. As a result, productivity is increased, and employment and income distribution are also improved. According to a McKinsey study, persons who choose to conduct independent work and make it their major source of income are happier at work than traditional workers. Let’s look at some of the advantages of the gig economy:
Due to increased labor force participation rates and easier access to lower-wage workers from abroad, the emergence of the gig economy is projected to boost overall productivity, resulting in more specialization and standardization of work.
With multiple employers, the gig economy has a favorable impact on employment because there is greater independence and freedom to select when and where to work, as well as a lower chance of job and income loss.
- Businesses save money and time
In the gig economy, businesses may save both time and money by reducing their costs. Companies aren’t hiring people for long periods of time with all of the benefits of a fixed-term employee. This helps them to save money while simultaneously bringing on the best person for a limited time.
The Negative Effects of the Gig Economy
The benefits of the gig economy are dispersed and affect a variety of stakeholders, including employees, firms, and consumers. When it comes to its drawbacks, however, they rely heavily on workers. The negative effects include:
- Less social protection
Employees in traditional occupations frequently have a lot of benefits and safeguards. From health benefits to retirement plans to unemployment insurance or the ability to drive a corporate car, a traditional job has it all. Unfortunately, because independent workers are only executing transitory jobs, they do not benefit from any of this. They must manage their retirement and health insurance plans, as well as their own vehicle and gasoline.
- Less Security
Independent workers are paid per order and a certain amount of assignments and are often paid in full once the job is completed and delivered. So if they don’t work, they don’t get paid. With all the regulatory bureaucratic fees involved, there’s even the possibility of not being paid for work that has already been completed. Also, getting paid exorbitant sums of money that do not even come close to compensating for the amount of effort put in.
- Less social interaction
Depending on the sort of job, being an independent worker can be incredibly lonely, and it may even make people regret having constant company. Obviously, this is not the situation for persons who work as drivers or carers. Consider someone who spends all of their time alone doing long-distance pickups and deliveries.
The Impact of Gig Economy on Developed Countries
Developed economies recognized the writing on the wall far sooner and have backed it up. Due to the core demographic difference, there are more roles in the high-income category than in emerging economies. Individuals in the gig economy are most common in the United States and the United Kingdom.
According to a business journal, freelancers in the United States contributed about USD1.28 trillion to the economy in 2018. Meanwhile, the current growth rates suggest that, the gig economy will employ more than half of the US workforce by 2027. Whereas, according to a UK magazine, is it estimated that, the UK’s gig economy employed 4.7 million people in 2019.
It is still evolving in Europe, where people are taking their time to adjust to this new way of working due to challenges such as a lack of job security.
The Impact of Gig Economy on Emerging Countries
The gig economy is generally regarded as a disruptor of an existing system. The solid ‘9 to 5’ way of life, on the other hand, is a long way off for the vast majority of people around the world – especially in low-income nations, where formal jobs are still scarce. In Zimbabwe, for example, it is believed that 90% of people work as subsistence farmers, vendors, or small-scale traders in the informal sector.
The positive side, however, has a different story overall. Developing countries such as the Philippines, Pakistan, India, Sri Lanka, and Bangladesh account for more than half of the global gig economy, according to a recent analysis by a research organization. It is flourishing in these countries because the gig economy has the ability to generate additional economic value and livelihood alternatives.
In the next 8–10 years, it is fairly estimated that the gig economy could generate 90 million jobs and add 1.25% to India’s GDP, according to an Indian business journal. According to a Malaysian magazine, around 4 million Malaysians worked as freelancers in 2018, and the number continues to rise.
Gig work as a source of income is expanding all around the world. Employees are increasingly seeking more flexible work possibilities than those available in traditional organizational structures. Despite the lack of job security and supplementary benefits such as medical coverage, having many professions is appealing to new-age workers. Despite the continued pandemic, the gig economy is proven to be a lifeline for many unemployed workers, lowering the jobless rate. With the expansion of the business model, more regulations are being enacted to regulate the workforce, as well as the formation of labor unions. Growth brings change, and the rise of the gig economy as a source of income will aid in the evolution of many people’s professional lives.
The gig economy is beneficial to both employees and businesses, and it has the potential to alter the traditional work environment. Of course, the practical benefits that result from the evolution of new labor prospects offered by digital technology should not be overlooked. On the other hand, it’s necessary to think more critically about the platform economy’s future and how it will affect the world of employment.
By 2027, it is predicted that, independent professionals will make up to 60% of the workforce, putting legislative pressure on governments and compelling businesses to spend up to $6 billion on protecting employees’ rights. If the gig economy continues to develop at its current rate, it will employ more than half of the US workforce by 2027. According to Wonolo’s gig economy statistics, more than half of the country’s workforce will be undertaking freelance work in eight years if current trends continue.
This is the effect on a rich country; nonetheless, the effect on developing economies is highly positive.
By Thareendra Kalpage
About the Writer
The writer is a business leader, published author, entrepreneur, business mentor, angel investor passionate about the topics of business & Technology.