Why the Gig Economy is a Race to the Bottom

In the last few years, we’ve seen the rise of a new work phenomenon. While in the past, we’ve had full time, part time, casual and contract (or project) work, the recent rise of the term gig economy has brought about a whole new category of legitimate work.

In years gone by, we called these “odd jobs”, not because they were peculiar but because they were done off and on – at odd times. However, many of the future of work pundits are talking about gig economy being the saviour of the working people. In the future robotics and automation will take many of the jobs that people currently do, at least the repetitive, easily duplicable ones. Some experts are saying that these “serve the people”, mishmash of gig jobs will become our mainstream work future.

Why They’re Wrong

Firstly, there is no evidence that gig jobs will become the way we work in the future. While there is most certainly a rise in the rate of part time jobs over full times ones, and a “casualising” of the workforce, there’s no evidence that doing odd jobs is going to be where we go. In fact, the gig economy exists because we are too busy to do our own “gigs” or odd jobs. If the workforce does move to a more casualised model, not only will have more time to do our own errands, we’ll also have less money to pay someone else to do them.

Workers Don’t Win a Price War

Which brings me to point two. The pressure is always on gig workers to lower their prices. It’s a competitive industry and typically the work goes to the best, that is, the lowest, quote. While this isn’t always the case, it’s certainly the most common. A colleague of mine, Ephraim Patrick, the talent leader of strategy and organisation at global consulting firm Mercer, coined it perfectly when we met two weeks ago. He said that the gig economy is a “race to the bottom”. Insert Quote And he’s right – and not just in terms of earnings.

Driving down prices means that workers are constantly minimising – not maximising – their earnings. To make it worthwhile, many ask for payment in cash. Do they declare it as income in their tax returns? Maybe – maybe not. So, not only does the Government miss out on revenue, but the workers have income that looks, on paper, substantially less than it is.

Who Looks Out for Gig Workers?

That might be fine – until they’d like to buy a house or car or even rent a property. Not only do they have a challenge substantiating constant and regular income, but a low income doesn’t bode well for borrowing money or leasing a home. What’s more, a gig work status doesn’t cut it for a bank’s security requirements, unless you’re registered as a business and have long term, significant and regular income AND profitability. Banks and financial institutions typically look for a solid employment history and salary before they’ll consider loaning money, so, for a gig worker, the chances are not good.

There are also other longer term problems associated with gig work – many of which fall under the banner of social concerns. Do these workers pay their own super? Are they covered for worker’s compensation? Do they put money aside for income protection or accident insurance? If they’re continually competing on the lowest possible price, possibly not.

So, in 20 years time, when these gig workers get to retire, what do they have? How much super, property or investments can they cash in to live on?

What Do Job Seekers Think About The Gig Economy

According to JobGetter’s 2017 National Job Seeker Survey, they’re not keen on it. An overwhelming 60% of those surveyed still preferred to look for full time work, and stability of a full time job came in as the number two on their list of job concerns. Given that gig jobs are typically “find it today, do it tomorrow” type jobs, there is very little to calm your mind about the stability of your income in the next week or month.

Employers aren’t fond of gig work either. I have yet to meet a hiring manager that’s thrilled by the thought of having to find new staff every second week. That leaves individuals and households (who don’t pay super, insurance or worker’s compensation) and not mainstream employers to hire gig workers.

The Service Sector Needs Dedicated Employees Not Gig Workers

The service sector is, certainly, growing, but I’m yet to be convinced it will be as a result of gig workers. As Australia’s leader in workforce data and analytics, at JobGetter we measure everything to do with jobs on a daily basis. While it’s true that the service sectors are, in fact, the fastest growing sectors, the jobs in demand are not “gig” jobs. They’re jobs in building and construction, childcare, aged and disability care, professional sales, retail, hospitality and office support services with small, medium and large businesses.

These service-based jobs are growing at 6% year on year and we’re not seeing the trends change any time soon. They’re also the type of jobs that require constantly changing circumstances and personal interaction. We know that jobs that are non-repetitive and highly cognitive are the ones that are safe from automation. We need creative thinking skills and the ability to create relationships and show empathy – things that robots, as yet (or anytime soon) can’t do.

Where Will We Be in 6 Months Time? What About 6 Years?

There are some great benefits for people who work in the gig economy. For the 30% of people we know through our survey who said they wanted more hours, gig work can be a great saviour. I met a woman just last week who worked as a gig worker to supplement her family’s income. (I asked her if she contributed to super. No, she said. That’s all in my husband’s name). But as to where the workforce is heading, I sincerely hope it’s not gig work that becomes the mainstay.

If it is, then we have some real problems to solve.

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