Gig Economy: Beyond the Buzzword

Gig Economy: Beyond the Buzzword

Millions of people in the U.S. and across the world are leaving behind traditional working arrangements to join the growing gig economy. In this tight talent market, organizations will find some of their best talent through freelance and other contingent labor arrangements. The gig economy has received a lot of attention over the past few years, but it is more than just a trend. Organizations need to understand this new way of working and who these workers are to get the most out of their workforce strategies.

The Gig Economy? Freelancing? What’s the difference?

While the term “gig economy” is the latest buzzword, the concept behind it is hardly new. The National Law Review argues the gig economy has existed for years; what we see now is just growth and rebranding. Manufacturing and retail companies have relied on temporary labor to get through busy seasons for decades. Organizations have contracted freelance writers and graphic designers on a project-to-project basis to find the right talent for the job. The “gig economy” is a new name for an old concept – contingent workers.

Contingent workers are defined as freelancers, independent contractors, consultants, temporary contract workers or other non-permanent workers. Unlike full-time employees, contingent workers are generally used on a project basis or to meet seasonal needs. This can create a more stable workforce that is protected against cyclical changes by quickly downsizing contingent labor if necessary. In the past, contingent labor was attractive during times of economic downfall. Now, contingent labor is used increasingly on an ongoing basis.

The gig economy also covers a broad range of workers – skilled and unskilled, high- and low-earning. According to the Harvard Business Review, “workers with specialized skills, deep expertise, or in-demand experience,” or those contingent workers traditionally thought of as freelancers, tend to be successful in the growing gig economy because they can earn more and select more interesting work. However, the same article suggests that low-skill, low-wage workers in retail and service positions can also benefit from the gig economy, where they can find a more flexible schedule and greater autonomy. These workers aren’t usually thought of as freelancers, but they’re part of the growing trend.

Who Works in the Gig Economy?

The phrase “gig economy” likely evokes an image of a millennial driving for a rideshare service or doing freelance writing or web design, but statistics available about the gig economy tell a very different story. Many gig economy workers are Generation Xers who were laid off during the Great Recession and turned to gig work. According to the Aspen Institute, between 2010-2014, nearly 30 percent of jobs created were independent contract positions.

A Staffing Industry Analysts study estimates about 44 million Americans or about 29 percent of the workforce have taken part in the gig economy. Of that, the study breaks down those workers into a few more categories:

  • Independent contractors or self-employed workers: 23.5 million
  • Human cloud workers: 9.7 million
  • Temporary workers assigned through a staffing agency: 9.5 million
  • Temporary employees sourced directly: 5.5 million
  • Statement of work consultants employed by a consulting firm: 2.9 million

An Aspen Institute survey of gig economy workers provides some demographic insights.

  • The highest concentrations of gig economy workers in the United States are in the Pacific and Mountain regions, with the lowest concentration in the Upper Midwest and New England
  • Gig economy workers are more likely than the average worker to work from home, but working from home is becoming less popular among gig workers
  • Gig economy workers are more likely than traditional workers to have been laid off, most likely during the Great Recession
  • Nearly 60 percent of all gig workers are male with a median age of 50 years old

Seniors are also a growing segment of the gig economy workforce, according to the JP Morgan Chase Institute. According to their recent survey, more than 400,000 seniors are participating in the online platform economy through apps like Uber and Airbnb, which is just one segment of the gig economy. This goes along with a greater trend of more seniors staying in the workforce. According to the JPMorgan Chase research, seniors get about a quarter of their income from labor.

Looking Forward

How confident can organizations be that the expanding gig economy is more than just a temporary trend? Some experts argue that the growth of the gig economy is tied to certain economic and political factors. Time Money reports the gig economy was a side effect of the Affordable Care Act. The article explains the increased cost of complying with the law pushed some organizations to rely on freelance workers, while at the same time, the increased availability of market plans gave some workers the ability to start the freelance career they wanted. Experts agree that at least part of the growth in the gig economy could be impacted by changes in U.S. healthcare laws. However, it’s not the only factor.

According to a study by the McKinsey Global Institute, the gig economy is growing in the U.S. and internationally. The study estimates that 20-30 percent of working people in the U.S. and Europe have engaged in independent work. This speaks to the fact that the gig economy is not a temporary trend tied to U.S. political and economic climate, but rather a global transformation in the way that people think about work. This suggests that while certain government policies may make an impact, the gig economy is here to stay.

Finding the Right Partner

So how do organizations that have been tied to the traditional employment model get their feet wet in the gig economy? They need to prepare by understanding what types of talent they are looking to tap into and understand how the best talent in that space operates. Then, they need to ensure they are set up to engage properly with different types of contingent workers – whether they’re independent contractors, employees of a staffing agency or statement of work workers.

When addressing these issues, it’s helpful to have an expert on your side. Working with a managed service provider (MSP) can alleviate some of the administrative burden associated with the contingent workforce, including compliance and risk mitigation and driving cost savings.

MSPs serve as strategic business liaisons, managing the entire lifecycle of an organization’s contingent workforce program from finding qualified suppliers to standardizing processes and much more. One benefit of using an MSP is their ability to leverage their vast supplier network to compare wages and make sure their clients are offering a fair and competitive rate. The relationships that MSPs have with their suppliers give them quick access to top talent which is critical when trying to fill specialized positions.

To learn more about how organizations can tap into the gig economy to find the best talent for their companies and how an MSP can help, check out our blog post on recruiting in the gig economy.

Post by Nicole Fuqua