What’s it: Gig economy is a phenomenon in the economy and employment structure where non-permanent jobs are trending and proliferating. Short term contracts, freelance, and part-time jobs are gaining popularity.
The internet and technology don’t just give rise to new businesses. But it also facilitates the way we work and communicate.
Companies increasingly need flexible workers such as freelancers and independent contractors rather than full-time employees. Some jobs don’t require employees to be in the office.
Why is it called the Gig Economy?
The word “Gig” comes from a social language that refers to live performances by musicians. They serve music at a particular time and aren’t bound by location. They took on several show projects and arranged their schedules.
Likewise, work, individuals are bound by time to complete tasks. However, they are flexible to do so and don’t have to be in the office. They can do several different jobs with different bosses.
The rapid development of technology is affecting the way we work. Now, work doesn’t have to be in the office. Companies no longer need full-time employees to do specific jobs.
The internet and communication technology facilitates interaction with other workers and transforms the way we work. Long story short, both move jobs and offices into the digital space.
Companies are increasingly recruiting flexible workers such as freelancers, independent contractors, project-based workers, and temporary workers. That gave them at least two benefits. First, they can select the best individuals. Second, they don’t have to incur fixed costs such as insurance benefits and office rent.
For workers, a more flexible way of working allows them to maximize time and income. They are better able to balance work and family. Moreover, they can do work anywhere, reducing stress levels due to monotonous environments.
One example of a gig economy in Indonesia is the emergence of online motorcycle taxis such as GoJek and Grab. The two companies recruit drivers to support the company’s operations. Likewise, the emergence of online tutoring and sites offering online-based jobs such as freelancer.com is also an example of the gig economy.
Why is the gig economy growing
Three main factors spur the development of the gig economy. They are:
- The emergence of new businesses, especially those that take advantage of technology.
- Financial pressure on conventional business
- Increased need to balance work and personal life.
The emergence of new businesses
Technology facilitates new businesses, creating several new, more flexible jobs such as software engineer, web developer, freelance writer, and content marketing.
Because work is more flexible, individuals aren’t tied to the location to perform the task. They can do it anywhere, be it at home, in a cafe, or even in a car.
Apart from that, people can also choose some part-time jobs. They can take several jobs from domestic companies or companies overseas.
Furthermore, technology is also transforming the way conventional business works. For example, to send a message, you don’t have to use a mail courier. You can do this with software such as Whatsapp or email.
Companies can auction off specific projects on sites like freelancer.com to find the right part-time worker. That gives them more options. They can select the best individuals according to the available budget.
Financial pressure on conventional business
Financial pressures also led to increased demand for a flexible workforce. Businesses save resources in terms of costs, workspace, and training. They can contract experts for individual projects, which may be too costly to employ full-time staff.
One example of a business experiencing pressure and technological developments is a printed magazine/newspaper. Many publishers are turning to digital channels to generate revenue. They accommodate the trendy needs of readers as they are increasingly online.
Such business transformation may be a challenge for some publishers. Apart from resource issues, online copying also presents a higher level of pressure. Not only big companies, but small companies can also easily enter the market. In fact, individuals with several team members can also launch online journalism.
Keep a balance between personal and work-life.
From an employee perspective, the emergence of flexible job types offers a more significant opportunity to balance work and personal life.
In terms of income, workers can take on several projects at once to earn more money. They can also share the work together with several people who are in different locations.
Pros and Cons of the gig economy
This section will summarize some of the advantages and disadvantages of developing the gig economy for both workers and businesses.
Advantages of the gig economy
In general, the benefits of the gig economy for workers are:
- More flexible and more mobile. Workers have more alternatives to optimize time and income. They can also complete tasks on the go and can better balance work with family.
- Freedom to choose jobs. Workers can choose the type of project they will take on. Also, project options are more varied because they come from companies around the world.
- More opportunities to earn a higher income. Workers can take on several jobs at once. They may focus on one big project and take on several small jobs to add their income.
For businesses, the gig economy is beneficial because:
- Facilitates operating efficiency. Hiring part-time workers is a cheaper and more efficient alternative. The company does not need to pay for training fees or benefits such as insurance. That helps lower operating costs.
- More choices. They can select some of the best individuals in their field, according to the company budget. Options are more varied because the supply comes from local workers and from all over the world.
- Lower fixed costs. Businesses do not need to provide office space, equipment, and facilities. That reduces fixed costs, enabling them to quickly break-even and economies of scale.
Disadvantages of the gig economy
Not forever, part-time work benefits everyone. There are several downsides to doing such work:
- Do not get allowances. Workers don’t receive benefits, such as insurance and pensions. Businesses pay them according to the contract. Therefore, they must be selective in choosing jobs.
- Pay taxes from their own pocket. If they become permanent workers, the company may pay their income tax. On the other hand, if they work part-time, they don’t get that kind of benefit.
- Less stable income. Workers must pursue projects to secure income. But it is a difficult task. They have to compete with individuals around the world. Thus, the market demand for a particular job is lower than the available labor supply. As a result, getting multiple projects at once is more complicated.
For businesses, outsourcing work to the part-time workforce also raises several problems, such as:
- Workers are less reliable. The chances of hiring inappropriate workers are higher. Without a rigorous selection process for hiring permanent employees, companies don’t know if they are reliable or just a mere appearance.
- No experience effect for businesses. Firms cannot reach a cost reduction from specialization and experience effects. It contrasts with permanent workers whose experience effect allows them to become more skilled and more productive.