The Gig Economy by Diane Mulcahy

“Gig” work arrangements (part-time, contracting, consulting, freelance, or on-demand work) are growing as a share of the overall labor market. Employers are attracted to gig arrangements because they have a more efficient billing structure, less red tape, and fewer legal obligations than traditional employment. Workers are attracted to gig arrangements because they typically come with high autonomy and lifestyle flexibility.

People are increasingly drawing their income from multiple sources, both active and passive. Diversification causes year-to-year income to be non-linear and unpredictable, but greatly reduces the income shocks traditionally caused by job loss. Independent workers have unprecedented control over their working hours and their lifestyle.

The “traditional” life path consists of 40+ years of binge-work followed by a sudden full retirement. The working career model is likely to be replaced by irregular alternating periods of higher and lower work activity. The increased ease of finding gigs will make it easier for people incapable of holding down full-time corporate jobs (eg students, homemakers, seniors) to flexibly participate in the labor market on their own terms.

As income becomes more non-linear and volatile, it will be increasingly risky to lead lifestyles with high fixed expenses, low savings, and high debt. People are increasingly abandoning the obligations of ownership of high-end items (including housing and cars) in favor of temporary on-demand access.

The biggest winners in the gig economy will be high-skill white collar workers, who will have the flexibility of building a custom career and a custom lifestyle without the baggage of traditional corporate jobs, all while still being able to make a good living. The biggest losers will be low-skill white collar workers, who will suffer income insecurity and reductions in working hours as their work transitions from employment to gig arrangements. For all types of workers, it will be increasingly important to be flexible to change, have a go-getter personality type, maintain broad professional networks, and have good organizational skills.

The current binary government classification of workers into “employees” and “contractors” is vague, outdated, and doesn’t reflect the increasing diversity of work arrangements. The current government practice of cracking down on employers who give “contractor”-style contracts for “employee”-style work is futile because it doesn’t address the root causes of the trend away from traditional employment.