The Gig Economy's Impact on Traditional Workplaces
For decades, working full-time for only one employer at a time was everything we knew. It was the norm, and rarely anyone questioned it. But, the rapid increase in digital technologies, cheaper and faster Internet, CMS (content management software) solutions, VoIP (Voice-over-Internet Protocol) services, etc., has made it easier to work without being tied down to a particular location which has given rise to flexible working arrangements. Remote work, work-from-home, and the gig economy have become buzzwords as a result of the traditional economic relationship between workers and employers changing.
Then the pandemic hit, and seemingly overnight, companies had to find a way to adapt and enable their employees to work remotely to alleviate the impact of the pandemic crisis on their business. Even those who never considered remote work or found the idea frightening because they felt they aren't tech-savvy enough were just thrown into it with no other choice if they wanted to keep the job.
In a way, the pandemic was a crisis-induced natural experiment that made us see the different possibilities technology offers and realize that the world of work is inevitably changing. When they were given no other choice, people learned that they could adapt and that remote work was no longer this impossible idea. After experiencing its various advantages, many employees aren't ready to give them up easily. If not given a chance to continue working remotely for their company, a significant number of people may consider changing their job or stepping into the world of the gig economy.
For many organizations, this means it is time to pivot, understand the needs of the modern-day workforce, and leverage all that the gig economy offers.
What is the Gig Economy?
Although there is no broad agreement on the definition yet, the gig economy can be described as a free market system that includes a short-term, on-demand professional relationship between an independent worker and a client. Instead of being employed by a single employer on a full-time basis, the gig worker is considered an independent contractor, working with one or more clients simultaneously, getting paid by the task, and enjoying more flexibility and autonomy.
In their McKinsey Global Institute Summary on Independent Work, Manyika et al. (2016) write how there are three defining features of independent work: a high degree of autonomy; payment by task, assignment, or sales; a short-term relationship between worker and client.
When it comes to who constitutes the gig workforce, the definitions vary again. Gallup (2018, p.2) offers a broader definition: "the gig economy includes multiple types of alternative work arrangements such as independent contractors, online platform workers, contract firm workers, on-call workers, and temporary workers."
Furthermore, Gallup (2018) mentions "a tale of two gig economies" — independent workers and temporary or contingent workers. Independent workers (freelancers and online platform workers) often enjoy the advantages of nontraditional arrangements, such as flexibility, more freedom and autonomy, more creative freedom, and a higher degree of work/life balance. On the other hand, contingent gig workers (on-call, contract, and temporary workers) are treated more like employees but without the benefits, pay, and stability that traditional employment offers.
This article will focus on independent contractors who enjoy more autonomy and flexibility and have more control over their working conditions.
The Gig Economy is here to stay
In 2007, Timothy Ferris released a book called The 4-Hour Workweek: Escape 9–5, Live Anywhere, and Join the New Rich, which became the No.1 New York Times bestseller. In it, Ferris suggests a pathway for workers to become what he refers to as "New Rich." Two key attributes of the "New Rich" are time and mobility. What might have been completely new and maybe even seen as somewhat insane at the time of the book release is now something millions of people worldwide are striving for.
In 2019, Mastercard and Kaiser Associates evaluated the gig economy, which in their study refers to "digital platforms that allow freelancers to connect with individuals or businesses for short-term services or asset-sharing" (p.2). Their results showed that the global gig economy is expected to grow by a 17% CAGR, with a gross volume increasing from $204 billion in 2018 to $455 billion in 2023.
However, the pandemic and the economic unrest that came with it may have impacted these numbers. Although we will know more about the size of that impact during this and the following year, interesting findings from the previous year already show that many employers and workers started embracing temporary and gig work during the pandemic.
In 2020, Upwork, the world's largest freelancing platform, released the results of the "Freelance Forward: 2020" study, the most comprehensive survey of the U.S. independent workforce, which showed that 36% of independent professionals freelanced full-time during the previous 12 months, which is an increase of 8% compared to 2019. Even more interesting, it was shown that 12% of the U.S. workforce started freelancing during the pandemic for the first time. 60% of these new freelancers reported that they wouldn't consider taking a traditional job, no matter the amount of money offered.
According to the results of the same study, 58% of non-freelancers who were, at a time, new to remote work because of the COVID-19 circumstances reported that they are considering freelancing in the future (Upwork, 2020).
When one is doing what they love and find what they do meaningful and rewarding, they are often willing to go above and beyond.
Many independent workers choose this independent working style because of the autonomy and flexibility it offers. Independent workers have a higher degree of freedom, more control over their time, and a better work-life balance. Bessa and Tomlinson (2017, p.157) report that "a range of studies show that employees are more motivated, perform better and even work harder when they have some control over their working time, location of work or schedule."
Independent workers get to choose when, where, and what they'll work on. Because they are not tied down to a particular location, they may work out of coffee shops or while they're on a beach. Some decide to travel and work from a foreign country. Some gig workers combine work and leisure and regularly travel while working, accepting a nomadic lifestyle. They are known as digital nomads.
A higher degree of control, flexibility, and the possibility of choosing make independent workers more efficient and satisfied.
The results of the “Freelance Forward: 2020” study (Upwork, 2020) showed that 73% of non-freelancers who were new to remote work because of the pandemic circumstances reported that they are considering freelancing in the future because it made them a productive worker.
Because of its flexibility regarding time and place of work, the gig economy may also benefit individuals who want to work but may be excluded from the traditional workforce, such as working mothers or people who can't work in a traditional setting anymore due to age or physical condition.
Although many independent workers choose to work this way full-time or use the gig work as a supplemental income, some turn to it out of necessity.
Manyika et al. (2016) showed that people who actively chose their working style enjoy greater satisfaction than those who turned to gig work out of necessity.
However, although they are less satisfied with their income and income security, those who do gig work out of necessity still report being satisfied with the flexibility of work and the content of the work they do (Manyika et al., 2016).
Independent work has many advantages, but it also has some downsides.
Gig work doesn't offer some benefits that a traditional job does, for example, the paid sick leave, the pension, and the health insurance that are being covered by the employer. Gig workers also have less social protection, less job security, and financial certainty than traditional workers. Being an independent worker requires a high level of self-discipline, which might prove challenging for some. Additionally, not having colleagues around to talk to might make some people feel lonely.
Despite some disadvantages, it can be concluded that independent workers enjoy the myriad of benefits that gig work offers, and more and more workers are considering it.
The gig economy is beneficial not only for the workers but also for the companies.
Saving time and money
Thanks to the gig economy, businesses may save time and money. Because the work in the gig economy is detached from place, no office space is needed for the gig workers, which cuts the office space costs. Furthermore, the company doesn't have to manage equipment or office supplies. Since the employer doesn't have to pay healthcare and other benefits for gig workers, even more money is saved and can be reinvested in the business.
However, saving money is not the only benefit that the gig economy offers.
More agility, flexibility, and scalability
As Manyika et al. (2016, p.20) write, "companies and organizations benefit from scalability: they can keep core operations focused on what they do best and call in independent service providers exactly when they need them." Employers can hire experts for services they don't need regularly. Hiring on-demand offers more flexibility to the organizations and the possibility to add new skills and capabilities that their main team may lack. Instead of having their employees work on tasks that they aren't skillful at or don't have the needed knowledge for, employers can hire one or more independent workers and use their strengths and specialized skill sets.
The gig economy offers a more agile workforce as well as the ability to quickly adjust the number of people and the expertise of people working for the company depending on the business needs.
More efficient and productive workers
As mentioned above, various studies have shown that people work harder, are more productive and engaged in their work, and perform better when they feel like they have some control over their work hours or work location. We may think that if people aren't in the office or aren't controlled, they won't do as much work. But, the truth is, even when people stay in the office for eight hours, they for sure aren't productive the entire time.
According to one survey, an average office worker works productively for less than 3 hours out of an eight-hour workday (Vouchercloud, 2017). RescueTime, a software company whose time management app of the same name is used by millions of people worldwide, analyzes the anonymized and aggregated data on how RescueTime users spent their time the previous year. In 2019, the results showed that, on average, the workers spent 2 hours and 48 minutes of productive time a day. Another key finding was that remote workers showed to be more productive, and they saved 2–5.5 hours a day compared to office workers (MacKay, 2019).
With the right support system, remote workers complete the majority of their daily tasks even though they work fewer than eight hours a day, and they report feeling more accomplished at the end of the workday. Remote workers are 20% more likely to say they complete all their daily tasks "every" or "most days." (MacKay, 2019).
Workers who provide value
If we apply the results of the studies done on remote workers to gig workers who may have even more flexibility and control over their work time, we can see that the hours spent working don't necessarily show the value of the work done. It is essential to keep that in mind—just because someone sits in the office for eight hours doesn't mean they do more valuable work than someone who works productively, even if they work just a few hours a day.
Although the gig economy offers many benefits, there are some challenges that employers may face.
From the legal perspective, there is still ambiguity over worker classification. The companies have to be careful and avoid worker misclassification, which happens when a worker is classified as an independent contractor, even though they meet the legal definition of an employee.
For some employers, having less control over the workers may also prove challenging. However, when chosen correctly, the gig workers the company works with are already specialists in their field, so they usually need less supervision.
Motivation and team cohesion
Gig economy workers are not actual employees, so it may be hard to motivate them using the traditional approach. Their motivation often doesn't come from earning more, being rewarded, or being committed to the organization, so executives might need additional training to learn how to identify their needs and motivate this competitive labor force.
Another thing important to consider is team cohesion. Because their work is usually project-based, independent workers don't necessarily feel like they are part of the team. That may impact their attitudes and their commitment to the company. Although their work with the organization may be short-term, gig workers still have engagement needs. It is important for managers to better relate to the temporary workforce and convey the organization’s culture, mission, values, and expectations (Gallup, Inc., 2016).
Where to find Gig workers
Some of the most known general freelance platforms are Upwork.com, Fiverr.com, and Freelancer.com.
However, one can also look for freelancers on industry-specific sites. For example, Toptal is a platform that prides itself on working with the highest-quality talent. In fact, according to them, they offer the top 3% of freelance talent in software development, design, finance, product management, and project management in the world. Contently connects businesses and talented freelancers that create powerful, unique, industry-specific content. 99designs gathers top creative professionals and experts in graphic design.
Freelancers with appropriate expertise and skills can also be found on LinkedIn. To make the search even easier, LinkedIn has a separate section that's dedicated to freelance work called ProFinder.
Another option is posting a job post on sites such as Indeed or FlexJobs.com.
Paying freelancers/independent contractors
If the collaboration with a freelancer is done through a platform such as Upwork or Fiverr, the payment is made through the platform itself.
If the work with an independent contractor is done without using online platforms, usually the client receives an invoice for the services done on an agreed schedule. In that case, some popular digital paying options include PayPal and Wise. Recently, with the new feature called Direct Contracts, Upwork also made it possible for freelancers to create contracts for non-Upwork projects and send them to clients.
To make sure everything runs smoothly and the team is well-coordinated, several helpful software can be used.
Software such as Trello, Asana, Monday.com, ClickUp, Jira, Basecamp, Teamwork, and similar can be used for more successful project management.
For team communication, Slack is considered one of the best apps out there at the moment and is used by some of the biggest remote-first companies.
When it comes to video conferencing, there is Zoom. During the pandemic, Zoom became a household name, such that many people even use the word "Zoom" as a synonym for a video call at this point.
Microsoft Teams is another popular collaboration platform that unifies and simplifies chat, voice, video, and file sharing between team members.
Maximizing the benefits of the Gig workforce
It may be best for the executives to start by identifying what positions are key for their business and need to be held by full-time employees and what projects are maybe better suited to gig workers.
Because the gig workers aren't actual employees, they don't necessarily feel committed to the organization. To understand the organization better and help them feel more connected to it, it is advisable to convey the organization's culture, values, and mission. Because of the nature of this collaboration, it is best to do so concisely, skipping too many or irrelevant details.
Even though the independent contractors aren't necessarily physically present, they still feel the need to engage, and many enjoy feeling like they are a part of the team. Those needs should be taken into consideration.
Gig workers have enough freedom and flexibility to choose to leave for a better opportunity when presented with it, which means that the employers should do what they can to keep the highest-quality talent from leaving or working with the competitors.
What does it all mean?
As mentioned earlier, the gig economy is here to stay, and as many predict, its rapid growth is expected to continue.
A question that will soon be answered as the pandemic quiets down is—how many traditional workers will be ready to go back to their offices after experiencing all the advantages the remote work offers?
The organizations that want to keep up with changes that are happening to the traditional workplace should try to learn as much as possible about remote work (and its various forms) and the gig economy.
The gig economy is beneficial for the workers because of the more flexibility, autonomy, freedom, and better work-life balance this working style enables. More and more people realize that they don't have to wait for retirement to start living and want to "live" here and now.
On the other hand, choosing to work with independent contractors enables organizations to save money and become more agile and flexible while simultaneously working with more efficient and productive people who provide not necessarily more hours but more value.
Even though the gig economy might seem complex because of its relative novelty, its benefits to both the workers and the organizations make it worth considering.
Bessa, I. & Tomlinson, J. (2017). Established, accelerated and emergent themes in flexible work research. Journal of Industrial Relations, 59(2), 153-169.
Gallup, Inc. (2018). Gallup’s Perspective on The Gig Economy and Alternative Work Arrangements. https://www.gallup.com/workplace/240878/gig-economy-paper-2018.aspx
How Many Productive Hours in a Work Day? Just 2 Hours, 23 Minutes…(2017). VoucherCloud. Retrieved May 18, 2021 from https://www.vouchercloud.com/resources/office-worker-productivity
MacKay, J. (2019, January 24). The State of Work Life Balance in 2019: What we learned from studying 185 million hours of working time. RescueTime. https://blog.rescuetime.com/work-life-balance-study-2019/
Mastercard & Kaiser Associates. (May 2019). The Global Gig Economy: Capitalizing on a ~$500B Opportunity. https://newsroom.mastercard.com/wp-content/uploads/2019/05/Gig-Economy-White-Paper-May-2019.pdf
Manyika et al. (2016). Independent Work: Choice, Necessity, and the Gig Economy. McKinsey Global Institute. https://www.mckinsey.com/featured-insights/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy
Upwork. (2020). Freelance Forward: 2020. The U.S. Independent Workforce Report. https://www.upwork.com/releases/new-upwork-study-finds-36-of-the-us-workforce-freelance-amid-the-covid-19-pandemic
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