The rise of the gig economy has brought substantial transformations in the labour market recently. According to the World Bank, there are currently 1.57 billion freelancers, which accounts for 46.4% of the total global workforce [1].

The gig economy refers to individuals who utilise online platforms (websites or apps) to offer their time and expertise, delivering a service to a third party in exchange for compensation [2]. Gig workers, also known as freelancers or independent contractors, take on individual tasks or projects for various clients or platforms rather than being employed by a single, traditional employer. Such self-employment encompasses a wide range of age groups, educational backgrounds, and income levels, it tends to be more prevalent among younger individuals.

The Gig Economy Growth

Enabled by digital platforms and technology, the gig economy has disrupted numerous industries, from transportation and hospitality to creative services and IT. McKinsey survey showed that 36% of employees (about 58 million) identify themselves as independent workers, which is about 10% increase from 2016 [3]. This transformation is driven by several key factors:

• Technological progress has simplified the online operations of small businesses, leading numerous to transition from conventional physical establishments to digital platforms.
• Demographic shifts have also played a role in the expansion of the gig economy. Millennials currently constitute the largest workforce generation, displaying a preference for flexible work setups and a willingness to accept lower wages for the opportunity to work remotely.
• Entrepreneurial opportunities: The gig economy provides an opportunity for individuals to turn their skills and passions into income-generating ventures.
• Cost-Efficiency for Businesses: For businesses, hiring gig workers can be cost-effective. They can tap into a diverse pool of talent without the need for long-term employment commitments.

The Impact on Workers

• Flexibility: The ability to choose when and where to work and the freedom to accept or decline projects. It can be especially appealing to parents, students, retirees, and those seeking a better work-life balance.
• Instability: Flexibility is frequently encountered with constraints, especially for people with limited power or experience. It can often lead to instability and challenges in forecasting the income or the duration of an employment.
• Skills Development: Freelancers frequently acquire a diverse range of skills as they navigate different projects and industries. This adaptability and willingness to learn are essential in an ever-changing job market.

The Impact on Businesses

• Scalability and cost savings: Businesses can easily scale their workforce up or down based on demand, without the overhead of maintaining a full-time staff. Onboarding expenses of small to medium-sized businesses can exceed $40,000 [4], but when hiring gig workers, these costs are nearly eliminated. Furthermore, gig workers do not receive unemployment benefits or severance pay.
• Access to specialised talent: Numerous businesses consider employing freelancers with specialised skills on temporary contracts as a more sustainable long-term approach to adapt to evolving market needs, rather than continuously retraining permanent staff. Moreover, permanent workers can usually do only low-intensity jobs while they upskill. While freelancers may be able to invest more time and energy in acquiring skills.
• Challenges in management: maintaining team cohesion, ensuring quality control, and managing communication across remote workers can be difficult. Businesses must adapt their management practices to accommodate this new work model.

The Impact on Society

The gig economy is not only transforming the nature of work but is also impacting various aspects of society on a broader scale. Workers are actively seeking more flexible and adaptable ways to earn a living, while businesses are escaping from traditional employment regulations. This leads to consumers expecting services to be available on-demand.

These changing consumption patterns share a common trend—they enable individuals to outsource aspects of their life which involve recovering from and preparing for work. For example, faster transportation options like Uber provide people with more spare time to work, while food delivery eliminates the need for meal preparation [5]. Thus, the gig economy aligns with broader trends of increased work intensity. This means taking aspects of our lives that were traditionally managed at home and commercialising them.

Moreover, in many countries, social security benefits are closely tied to standard employment contracts. And due to the lack of social provisions for gig economy participants, the social burdens associated with their work will largely fall on private individuals. For instance, many gig economy workers lack access to workplace pensions, putting millions at risk of insufficient retirement savings.

The Future of Gig Economy

A research report from 2023 regarding the gig economy forecasts that the global market will surpass $873 billion by 2027, reflecting a compound annual growth rate (CAGR) of 16.18% [1]. These statistics indicate that despite concerns about an economic slowdown in 2023, the gig economy is poised for continuous expansion. Moreover, in times of significant uncertainty, this trend is likely to strengthen rather than weaken. For example, during the COVID-19 lockdown in 2020, new registrations on the freelancer platform PeoplePerHour surged significantly. In the UK, registrations increased by 300%, in Spain by 329%, and in Japan by a remarkable 513% [6].

The impact of the gig economy extends beyond mere numerical growth in the workforce. It serves as a crucial testing ground for innovative labour management methods. It holds the potential for profound qualitative changes in future work. Researchers argue that the gig economy functions as a “laboratory” for experimenting with new management techniques [4]. Understanding the dynamics within the gig economy is vital for shaping a better future of work and labour.

The shortage of skilled workers in the labor market and the growth of the gig economy underscore that the nature of work is evolving, thus businesses need to be prepared for that change. According to Peter Miscovich, Managing Director of Strategy + Innovation at JLL Consulting in New York, the gig economy is projected to constitute half of the workforce by 2030 [7]. Consequently, most corporate structures will adopt a contemporary “Hollywood” model of work, relying on agile and specialised workers for project-based engagements.

Reference List

[1] The Future of the Gig Economy for 2023 and Beyond(https://www.clearvoice.com/resources/gig-economy-future-2023/)

[2] What is the gig economy and what’s the deal for gig workers?  (https://www.weforum.org/agenda/2021/05/what-gig-economy-workers/)

[3] What is the gig economy? (https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-the-gig-economy)

[4] How Much Does It Really Cost To Onboard a New Candidate? (https://hronboard.me/blog/how-much-does-it-really-cost-to-onboard-a-new-candidate-employee-onboarding/)

[5] The Impact of the Gig Economy (https://www.bbvaopenmind.com/en/articles/the-impact-of-the-gig-economy/)

[6] The future of the gig economy (https://www.rolandberger.com/en/Insights/Publications/The-future-of-the-gig-economy.html)

[7] How does the gig economy shape the future of work? (https://hrforecast.com/what-is-the-gig-economy-and-why-is-it-the-future-of-work/)