Why workers in the gig economy are likely to earn less economic rents than traditional employees

This article discusses why workers in the gig economy are likely to earn less economic rents than traditional employees. It explores the factors such as short-term nature of gig economy jobs, lack of minimum wage protection, and limited career growth potential. Additionally, it examines the impact of more gig economy workers on traditional employees, including potential reduction in wage rates and employment conditions.

Economic Principles
Why workers in the gig economy are likely to earn less economic rents than traditional
employees
The gig economy has moved significantly from the traditional labour market. Mainly, the
change is because it links consumers with workers and contractors through online platform
businesses to perform their tasks. One perfect example is the Uber business. It is imperative to
note that this innovation has allowed many individuals to obtain employment opportunities that
would otherwise been unavailable under the contemporary labour market model (Bajwa,
Gastaldo, Di Ruggiero and Knorr, 2018). However, the likelihood that workers under the gig
economy earn less wages and salaries than their counterparts in the traditional labor market.
To begin with, one can attribute the differences in earnings to the fact that gig economy is
characterized of short-term jobs. As such, these jobs are on-demand, making them contingent in
nature, thereby a significant reduction on the amounts earned by the individuals. Thus, when the
demand for their services is high they earn more, but when the market conditions are bad and
their earnings go down (Kearns, 2019). When compared to the workers in the traditional market,
they have a consistent flow of work and earn a constant amount throughout the month, thereby
increasing their earnings in a big way.
In addition, the traditional workers are protected by the minimum wage rate legislations
implemented by the government. As a result, they are able to earn a much higher amount
compared to workers in the gig economy who are not protected by such laws and regulations
(Barbosa, 2019). As such, they have to accept the pay rates offered by businesses and consumers
requiring their services. In turn, this significantly reduces their possible earnings at the end of the

month, making it impossible to match the economic rents of the workers in the contemporary
labor market. Furthermore, the individuals in the gig economy have a limited growth potential in
their career as compared to their counterparts in the traditional economy who have a high growth
career potential. In turn, over the long term period, workers on the traditional employment have a
greater potential of earning more income compared to individuals working in the gig economy.
The effect of more workers in the gig economy on the traditional employees
The existence of more workers in the gig economy might potentially cause a reduction in
the wage rates and employment conditions of traditional employees. Predominantly, this is
because employers would have a wide variety of employees to choose from for short-term and
part-time basis. Consequently, this would reduce the need for many full-time and skilled
employees for their businesses. It is also worth noting that the increased number of workers in
the gig market would translate to an increase in the availability of skills and expertise online that
is required by employers in the economy. The effect would be an increased supply of labor
amidst a constant demand for labor. This would then push the wage rates downwards. As a
result, the employees in the traditional market would be forced to lower their reservation wage
rates and working conditions than before.

References
Bajwa, U., Gastaldo, D., Di Ruggiero, E., & Knorr, L. (2018). The health of workers in the
global gig economy. Globalization And Health, 14(1). doi: 10.1186/s12992-018-0444-8
Barbosa,A.A.R & Vilnitis, M.(2019).Innovation and construction management in Brazil:
Challenges of companies in times of quality and productivity. Retrieved from
https://iopscience.iop.org/article/10.1088/1757-899X/251/1/012040/pdf
Kearns, M. (2019). The End of Traditional Employment—The Other Gig Economy. Retrieved
from https://www.toptal.com/insights/future-of-work/traditional-employment-gig-
economy