Covid-19 Likely to Accelerate Gig Economy

Covid-19 Likely to Accelerate Gig Economy

Companies see benefits to gig workers that will continue post-pandemic.

A stunning event does not usually initiate a new trend. It accelerates an existing trend by curbing the forces that were previously resisting it.

Self-employment built this country. Artisans worked in small workshops with manual tools. Migrant workers routinely fulfilled seasonal farm demand. Babysitting, lawn mowing, and other casual jobs are routinely done off the books for cash. Michel de Certeau, the French theoretician, even gave a name to working a side gig while being fully employed: la perruque. It is an office worker using the company’s computer or a professor doing side consulting.

More recently, the number of people working part or full time as fractional contractors with no benefits, or as independent small businesses, has grown. This trend spans all generations, from college students seeking job experience to experienced retirees working for extra cash.

All four generations in the workforce have already embraced this freelance lifestyle. Boomers choose it for impact, Gen Xers to avoid being controlled, millennials for making a difference, and highly entrepreneurial Gen Z members to be solopreneurs. The common features are the flexibility in hours, location, and work they want to take on.

The gig economy really took hold during the previous crisis—in 2008, with the financial meltdown. With unemployment rampant, people who had been laid off started taking any job available, even if temporary. They found security in multiple clients; employers saw a way not to add to head count. A transitional step between two permanent jobs became a thing in itself.

All four generations in the workforce have already embraced the freelance lifestyle.

Job titles like freelancer, self-employed, solopreneur, and entrepreneur popped up in the workplace. The best estimates put the percentage of such a workforce at around 30 percent pre-pandemic.

The gig economy looked as if it were here to stay and grow. But California introduced a law this year converting contractors into employees with benefits. Legislators in a few other states like New York, New Jersey, and Illinois are following that lead.

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Then came the Covid-19 outbreak. As people stayed home, ride-share drivers’ earnings plummeted. At the same time, gig workers have become a crucial lifeline, delivering groceries, meals, and other supplies to people living in self-isolation. Online shopping has surged. It is clear that some laid-off people are taking up gig work for the first time.

The fundamentals that drove the previous growth of the gig economy remain solid and point to it continuing in the post-crisis “normal”:

  • Employers will continue to find great benefit because they can hire the best talent from around the world. Even with any additional hourly rate, it is still cost-effective because these workers come with specialized skills and are ready to go.
  • New emerging technologies expose a shortage of trained personnel. These can often be filled by skilled and competent people who prefer to remain freelancers.
  • Solopreneurs have an internal locus of control. Their efforts and abilities focus on outcomes in their chosen specialty. They have no desire for a full-time job.
  • Entrepreneurs will build more temp placement firms and platforms in specialized domains to efficiently match the right person at the right time. If needed, they will make them staff employees.
  • Entrepreneurs will embrace side-giggers for scaling their own early-stage companies. For the same cost they can attract an experienced and connected part-time team member who can out-deliver a junior full-time employee they could hire otherwise.

The recent crisis adds to these trends:

  • The lockdown created a surge in demand for take-out meals, as well as in manufacturing, transportation, and shipping. The pandemic has also spawned a new job, contract tracing, which will require thousands of workers. These various job niches may come down a bit post-crisis, but they will likely settle at a much higher plateau than before.
  • Pressure from workers, advocacy groups, and lawmakers has already led companies including Lyft, Uber, DoorDash, Postmates, and Instacart to roll out policies to protect gig workers. Online shopping platforms like Amazon, as they continue to hire more warehouse workers, will also adjust. Other gig economy platforms will also have to evolve and become better employers and corporate citizens.
  • The increase in work-from-home protocols and supporting new technologies will accelerate change in the way gig workers are integrated.
  • People who’ve recently lost their jobs or had working hours cut will turn to gig work for income and may not look back.

My prediction is that post-pandemic, like post-financial crisis, workers and companies will accept even more gig work in an expanded number of roles. The gig economy will continue to grow and may become the future of work.

Dr. Rajiv Tandon is executive director of the Institute for Innovators and Entrepreneurs and an advocate for the future of entrepreneurship in Minnesota. He facilitates peer groups of Minnesota CEOs. He can be reached at rajiv@mn-iie.org.

This column appears in the June/July 2020 issue with the title “Gig Ahoy!”

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