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Gig Economy: Evolution of labour market

IFM_ Gig Economy
The gig economy is expected to grow to $455B by 2023 year-end in gross volume transactions

A gig economy is a system in which independent contractors and freelancers occupy temporary and part-time employee positions instead of full-time, permanent workers. Gig workers gain flexibility and independence but little or no job security. In order to save money, many firms choose not to pay these workers benefits like health insurance and paid time off. Even if some businesses provide benefits to gig workers, they contract out the management duties of these plans (in other words, outsourcing) to external organizations/third parties. The term ‘gig’ is taken from the music industry, where performers schedule “gigs,” which are one-time or temporary engagements at various venues.

Understanding a Gig Economy

Many people work part-time/temporary jobs, or as independent contractors in a gig economy. For those willing to use them, a gig economy produces less expensive, more effective services like Uber or Airbnb. The advantages of the gig economy may be lost on those who don’t use modern services like the Internet. Cities typically have the most advanced services and the deepest roots in the gig economy.

A gig can be any job with a wide range of positions. The labour can be everything from delivering food or driving for Uber to programming code or doing freelance writing. For instance, contract employees as opposed to tenure-track/tenured professors, including adjunct and part-time professors. By appointing more adjunct/part-time professors, colleges and universities can save expenditures while better-matching teachers to their course requirements.

Factors behind Gig Economy

Experts predicted as of 2021, up to one-third of the working population would have already been engaged in some form of gig work in America, and the gig economy is very much on its way to becoming a dominant market force in the coming years. Since these professions permit independent contract work and the companies don’t require freelancers to report to offices, experts are now anticipating a rise in the employment figures in this sector. Part-time/remote works are far more common among gig workers.

Additionally, since they are not required to recruit someone based on proximity, employers get the luxury of having a greater selection of suitable candidates. Also, computers have advanced to the point that they can either replace human jobs or enable people to work from home just as productively as they could in person.

Market factors are contributing to the rise of the gig economy as well. Businesses which cannot afford to recruit full-time workers to complete all the necessary work frequently use temporary/part-time workers to handle time-specific projects.

On the employee side of the equation, individuals frequently discover that they must relocate or hold numerous jobs in order to support the lifestyle they desire. The gig economy might be seen as a large-scale reflection of the fact that changing occupations frequently throughout a lifetime is also prevalent.

In 2020, the gig economy saw tremendous growth due to the COVID pandemic, as gig workers supplied goods to customers, and locked down at their own homes. People whose occupations got terminated in those pandemic times turned to these part-time works for money.

Criticisms of the Gig Economy

The gig economy has significant drawbacks despite its advantages. While not all firms favour hiring contract workers, the gig economy trend can make it more difficult for full-time employees to advance in their careers because these temporary workers are frequently less expensive to hire and have greater availability and flexibility. In some industries, workers who prefer a traditional career path and financial stability, are seeing those jobs getting crowded.

For some workers, the flexibility of gig work might actually disrupt the work-life balance, sleep patterns, and everyday activities. In a gig economy, frequent flexibility implies that the employees must be accessible for duties, regardless of their other priorities, and must always be on the hunt for the next gig. The competition for gigs has grown too, and the workers who are unemployed are not often covered by insurance or any other financial assistance, which comes under the USA’s CARES Act of 2020.

In effect, gig economy employees behave more like entrepreneurs than regular employees. The stability of consistent employment with a regular salary, benefits—including a retirement account—and a daily schedule that has defined work for generations is quickly disappearing, which may provide the individual worker more flexibility of choice.

Last but not least, long-term connections between employees, employers, clients, and vendors may deteriorate as a result of the fluidity of gig economy transactions and relationships. As a result, the advantages that come from long-term relationships of trust, established routines, and familiarity with clients and employers may be eliminated. It could also discourage investment in relationship-specific assets that would otherwise be profitable to pursue since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along.

Examples of Gig Economy

Occupations that people find and access through online job-listing sites are examples of gig economy jobs. These positions are frequently temporary or contract ones. These include operating a vehicle for a ride-sharing company, painting a person’s home, and working as a freelancer for duties like gym training and private tutoring. There are no additional perks, such as health insurance, and the job is exchanged for money.

Benefits of the Gig Economy

The gig economy had many benefits for both employees and employers. A hiring manager has access to a diverse talent pool. There is no commitment to keep the employee on or concerns with firing them if the skill turns out to be subpar. Additionally, firms can hire from the gig economy at a time when it is getting harder to find full-time employees. Additionally, since employers don’t have to cover benefits like health insurance, using gig workers is a cost-effective option. Benefits of the gig economy for employees include the ability to perform several jobs, the freedom to work from anywhere depending on the employment, and flexibility in their daily schedule.

Is Gig Economy worth it?

Studies show that 79% of individuals who work in the gig economy are more satisfied than when they were doing traditional jobs. In 2021, the value of the global gig economy is predicted to be USD 347 billion. It is predicted that design and computer freelancing employment is the most common with 59% of gig workers working in them globally. It is also noted that the oversupply of expertise in these industries is driving down the compensation. In the US, 60% of gig workers are engaged in freelancing activities at least weekly, with 44% of them considering it to be their main source of income.

The global gig economy is anticipated to develop at a compound annual growth rate (CAGR) of 17.4%, from USD 204 billion in 2018 to USD 455 billion in 2023. In the Western World, the number of independent contractors is rising steadily. For instance, it is predicted that there will be 86 million freelancers in the US by 2027, while there were 4.7 million more gig workers in the UK between 2016 and 2019.

The average hourly wage for freelancers in the world is USD 21. The number of high-earning freelancers in the US (those who claim to have an annual income of over USD 100,000) has been increasing every year and now totals 3.1 million people (20% of the workforce). The majority of full-time freelancers in the US are unprepared for a financial emergency; 80% of them say it would be challenging to cover a USD 1,000 unforeseen bill.

Overall, gig economy employees are happier with their jobs. Around 79% of full-time independents claimed that working for themselves made them happier than working in a typical formal employment in the US. Gig workers worry about their cash more. It is reported that around 45% of full-time gig workers and 24% of typical full-time employees have high Economic Anxiety Index scores. According to data from 2017, in the US, most freelancers worry about their working circumstances. Among gig workers, 54% don’t have employer-based benefits.

According to analysis and the figures provided by Mastercard, the global gig economy is predicted to be valued at close to $350 billion in 2023. Uber, Airbnb and asset-sharing platforms account for a significant portion of the value added by the gig economy.

If one examines the global gig economy state from 2018, the division of capital in the gig economy is clearly visible. The TRNS (Transportation-Based Services) has $117.8 (57.8%) capital. Whereas the ASSET (Asset-Sharing Services) $68.1 (30.3%), HGHM (Handmade Goods, Household & Misc Services), $16.7 (8.2%), PRFS (Professional Services), $7.7 (3.8%), respectively.

Nearly 90% of the overall gig economy is attributed to asset-sharing platforms and services based on transportation. This is not surprising, given the rapid expansion of services from these categories that could be provided on a freelance basis, driven by the phenomenal success of businesses that offer them, such as Uber and Airbnb. It is not shocking that the economy is worth so much if one considers the number of workers currently contributing to this sector. For instance, there are 4.7 million freelancers in the UK compared to 57.3 million in the US. According to Mastercard, the stark difference in numbers between these two countries can probably be explained by more than just the total population difference, Americans account for 44% of global gig gross volume.

Freelancers steadily rising in the West

The total number of gig workers worldwide is expected to continue increasing in the coming years. Experts give reference to the studies conducted by MBO Partners, Upwork, and the University of Hertfordshire when discussing the growth. For instance, the University of Hertfordshire study discovered that between 2016 and 2019, there were 4.7 million gig workers in the UK (defined as persons who had worked for an online platform at least once per week). In just three short years, there has been a considerable increase. Additionally, the present US gig workforce of 57 million is anticipated to increase to 86 million by 2027; this corresponds to a 50% increase in 7 years, which is an astounding number given the US gig labour’s already large size. Finally, the rise of sporadic gig workers in the US is another example of how the gig economy’s workforce is expanding. In the US, the number of occasional independents (those who perform gigs for less than 15 hours per week) increased by 42% over the course of three years and was stable at 15 million workers in 2019.

As per the Payoneer report, freelancers around the world earn $21 per hour on average. The report stated that the younger generations are paid less than the global average, with income progressively increasing as age groups move along. Earnings for the ages 18 to 24 and 25 to 34 are $16 and $19 per hour, respectively, which are less than the global average. The report also stated that 69% of all gig workers fall into one of these age categories. As a result of age and job experience, the majority of the population earns less than the average, which indicates that there is an unbalanced allocation of capital in the gig economy. Furthermore, according to Upwork, the median rate for freelancers in the US is $20/hour, whereas the median rate for the overall US workforce is $18.80/hour. Additionally, the hourly median wage for freelancers providing skilled services is $28.

According to MBO Partners, a full-time US independent makes $68,000 on average annually, which is more than the $59,000 median household income nationwide. There are a startling 3.1 million high-earning full-time independents in the nation. To be clear, the survey defines a high earner as someone who earns more than $100,000 each year. Over the past ten years, the number of high-earning freelancers in the US has been continuously increasing. That number increased from 1.9 million to 3.1 million people between 2011 and 2019, a 64% increase.

Tech leading the way

Technology has dominated the development of the gig economy by overcoming the complexity of contingent labour. Without technology, gig work would just be limited to project-based work. Using a gig workforce independently has its own set of challenges, regardless of how advantageous it is for any business. Most businesses struggle to handle sizable on-demand staffs that are not on a regular payroll without the right tools and technology. However, the emergence of work tech platforms has enabled businesses to efficiently finish the full cycle as each step of the process becomes effective thanks to automation and built-in smart-assist capabilities. Work tech cloud-based systems give businesses the instruments they need to manage deliverables and hours worked as well as monitor and assess results to increase efficiencies, improve communication, and generate higher income.

For instance, a no-code technology can offer end-to-end workflow management that is tailored to business requirements. It can configure the permutation and combination of potential workflows, calculate payouts automatically, and use algorithms to ascertain the skills and backgrounds of gig partners, among other things. The same technology also provides training interventions, automatic reallocation to meet deadlines and SLAs, project-wide visibility across the world, and local insights into attendance, shifts, and task completion.

Assuming the role of a gig partner nowadays, technology has made it possible for businesses to outsource essential operational recurring work to gig partners rather than just transactional, short-term project labour. Finding employment has become simpler and smoother for gig partners because of the technology infrastructure of work-tech platforms. From applying for a job to finding work based on their abilities and location to in-app training, task fulfilment, and even payment, processes and applications are made to ensure a seamless experience. All of this can be done with only a few touches on the phone.

The tech of endless possibilities

Experts say, technological advances, notably in the fields of artificial intelligence (AI), robotics, and data analytics, have shortened the gap between people and services, particularly in the labour market. For instance, there are platforms available today that process reams of big data from all over the world on a second-by-second basis, use AI & ML powered smart task allocation to ensure the right gig partners are matched for tasks in real-time, and simultaneously validate a different set of big data provided by gig-workforce using image recognition and artificial intelligence-powered audio transcription.

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