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Home / Opinion / Online-views /  The appeal and perils of the gig economy

One of the big trends we have seen over the last decade is the rise of the “gig economy"—where, instead of full-time employment, organisations contract with independent workers for short-term engagements.

A 2016 McKinsey report found that up to 162 million people in Europe and the US—20-30% of the working-age population—engage in some form of independent work, whether out of choice or necessity.

There are a number of reasons for this. In the digital age, the worker need not sit at a fixed location—the job can be done from anywhere, so employers can select the best talent available for a project without being bound by geography. Digitization has also led to staff reductions in many businesses. And very importantly, the millennial generation seems to have quite a different attitude to careers than their parents did.

More than any previous generation, millennials seek to do work that they want to do rather than have careers that may not satisfy their inner urges. They want to lead interesting lives, do not worry too much about what lies beyond the bend in the road, and enjoy better work-life balance. They are willing to give up some financial security for living life on their own terms.

This suits businesses fine. In a gig economy, they save resources in terms of benefits like provident fund, paid leave and office space.

This growing trend will have wide-ranging effects on our economies and societies.

Gig-economy workers range across the spectrum of professions, from the highly paid to below-minimum-wage. Management consultants, video producers and software engineers may earn top dollar, while delivery boys and chauffeurs may be paid per package or by the hour. Here, at the bottom of the heap, there is neither financial security nor dignity of labour.

At the heart of the controversy over the gig economy are companies like Uber, which demands obligations from its drivers as any full-time employer would, but without any perks or protections. Uber insists that its drivers are independent contractors and not employees, and has already lost several legal cases on this issue. It is appealing the verdicts.

The UK Labour Party has announced that if it comes to power, it will ensure full employment rights for gig economy workers, including sick leave and maternity leave.

An article in the March-April 2018 issue of Harvard Business Review reported the findings of a study of 65 successful gig economy workers. But even about these successful independent workers, the researchers write: “The…stakes of independent work are enormously high—not just financially but also existentially… The price of…freedom is a precariousness that seems not to subside over time. Even the most successful, well-established people we interviewed still worry about money and reputation and sometimes feel that their identity is at stake."

Young millennials may leap into the gig economy because they want to live their dreams. But for those who are not highly skilled, focused and confident, it may be a dangerous place to be in. Unless a person is extremely talented, his bargaining power will necessarily be limited. While companies routinely invest in training employees, a gig-economy workers will have to upgrade his skills on his own at his own cost.

When will he feel financially secure enough to start a family? Without a predictable steady income stream, he will find it much more difficult to get a bank loan than a regular employee. Also, an Oxford Internet Institute study found that there are already many more potential online independent workers than jobs, and this demand-supply mismatch will only get worse over time, depressing wages.

While the gig economy may seem liberating to many, the fundamental truth about it is that there is a huge risk asymmetry here.

Risk should be paid for honestly by the people who stand to gain from corresponding benefits. But if a person’s risk pool is just him with no one sharing it, material dignity would be lost.

As the gig economy keeps expanding, the concept of risk in society will change.

And the very way we run our governance systems and economies, from labour regulations to social security will need to hurry up and keep pace.

Sandipan Deb is an independent writer and editor.

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