Advantages and Negative Implications of the Gig Economy

This study explores the advantages and negative implications of the gig economy. It discusses the flexibility, cost reduction, and job opportunities it offers, as well as the risks and challenges faced by workers, employers, and trade unions. The gig economy is transforming the traditional working model, providing opportunities for freelancers and independent contractors.

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Human Resource management
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Table of Contents
Introduction......................................................................................................................................3
Advantages of the gig economy......................................................................................................3
Negative implications of the gig economy......................................................................................6
Conclusion.......................................................................................................................................8
Bibliography..................................................................................................................................10

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Introduction
The traditional model of working environment largely viewed those with permanent working
jobs as having an advantage compared to contract workers. However, this perception is changing
greatly with the rise of the gig economy which is rapidly transforming the traditional working
model. Most of the contemporary skilled workers are opting out of the normal full time working
structure and creating their own path. Working in the future will be characterized by flexibility in
working conditions, working hours, and the independence of choosing working locations.
Currently, there is an increase in demand for short term contractors. The increase in gig economy
growth can be attributed to a large number of millennial exploring opportunities in this working
model. Young professionals prefer the autonomy and flexibility that is provided by the gig
economy. The gig economy refers to a working environment that supports short-term
engagements, temporary contracts, and independence in contracting. It is widely known as the
‘freelancing economy.’ There has been an increase in both employers and employees supporting
this form of working, indicating a fast changing working environment. For example, a study
carried out in the USA indicates that 20-30 percent of its population earn through independent
contracting (Kuhn, 2016, pp.160). Many corporations across the world have a high demand for
specialized skills and they are opting for freelancers to fill the gaps. In gig economy workers
operate on a part-time basis as independent contractors and they are responsible for paying their
own taxes and savings. Unlike the traditional working forms, the gig economy does not offer
typical employee benefits such as retirement investments, health insurance cover and saving
accounts.
Advantages of the gig economy
The gig economy is expanding with more than a third of the workforce identifying themselves as
gig workers. The gig economy has been positively viewed due to its numerous advantages such

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as flexibility in working hours, ability to work remotely, and the ability to select projects or
works that suit the worker. Additionally, many businesses are benefiting from the reduction of
costs that comes with the gig economy such as health cover insurance, retirement benefits and
creating saving accounts for the employees (Friedman, 2014, pp.180). There are a number of
benefits that the gig economy poses for different stakeholders including the employer, worker,
government and trade organizations. For example, between the period of 2005 and 2015, more
than 90 percent of net employment growth in the US was attributed to alternative work
arrangements (Huckle, Bhattacharya, White and Beloff, 2016, pp.462). Following the advent of
technology, there exist various companies that support the gig economy. Silicon Valley has
given rise to renowned companies such as Uber, Airbnb, and TaskRabbit that gives opportunities
to employees to freelance (Healy, Nicholson and Pekarek, 2017, pp.242). Freelancing enables
employees with fulltime careers to supplement their income easily. Freelancing gives the
workers flexibility in terms of working hours and increases the earning potentials as they are able
to negotiate higher perks. In a study of 600 Uber drivers, they were asked ‘if both full-time
employment with some benefits and net salary or part-time Uber-driving were available, which
will they likely choose?’ interestingly 75 percent opted for the part-time driving due to the
flexibility it offers (Todolí-Signes, 2017, pp.200). Among the benefits of the gig economy, are
the low barrier of entry and the endless opportunities for the worker. In the gig economy, the
worker has to just carry out a cost-benefit analysis based on the resources and expertise the
worker has for example if the worker has a vehicle, he can opt for Uber or Lyft, for an extra
room there is Airbnb, for expertise in organization and technical skill there is Zirtual company
(Lehdonvirta, 2018, pp.28). Freelancing enables novices to gain experience in their new field.
The employees are able to take inventory of their skills and interest and freelance on

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opportunities that interest them and best compliment their skills and assets. The gig economy
provides the advantage of high quality and varied job options for the worker. Additionally, it
curbs unemployment by giving the worker a sustainable cushion of income. Gig economy
enables companies to leverage skilled professionals for a short term contract that would
otherwise be costly to hire on a full-time basis. For example, a startup company cannot have the
resources to hire a full time six figure executive, but a cheaper consulting executive may range
within their budget. An example of an employer benefiting largely from the gig economy is Uber
(Acquier, Daudigeos and Pinkse, 2017, pp.9). The company contract freelancing drivers with
their own vehicles through their mobile apps. The benefit that Uber accrues from this is
enormous savings on running costs. Uber does not have to hire managers to control their drivers
and it does not incur the cost of maintaining the vehicles, unlike the traditional taxi services
(Friedman, 2014, pp.179). The gig economy additionally enables employers especially those on
seasonal business to use on-demand talents to meet their needs. For example, Amazon Company
in 2017 contracted over 120000 workers to meet the seasonal demands (Petriglieri, Ashford and
Wrzesniewski, 2019, pp.150). Many of these were freelancing workers placed through agencies.
The gig economy also limits the losses a company incurs when hiring incompetent staffs. Gig
economy facilitated a trend where employers hire workers on short contract and place them on
probation whereby they monitor their output, consequently hiring those that meet the needs of
the company. A survey by the Centre for State and Local Government Excellence indicates that
the gig economy is increasingly finding its way into the public sector. Most of the government
are experiencing the plugging of staffs. Some of the governments are relying on agencies to fill
these roles, especially in the information technology sector. Turning on the gig economy has
enabled the government to overcome staffing pressures. A trend seen in the government involves

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hiring some of the experts such as procurement consultants, albeit for short term business to help
the government in the purchasing process. The dispersion of the gig economy felt like a means to
an end for trade unions. However, the increase in the signing of the gig economy promises a
revamp of the trade unions. For example, the General Municipal Boilermakers (GMB), a British
trade union negotiated a deal with one of the gig economy company Hermes. This deal saw the
self-employing company offering incentives such as union representations to the freelancers and
minimum wage guarantees. This results in progress for the rights of freelance workers
necessitating the union to gain members in a sector that has been largely dormant. The threat of
the gig economy has necessitated trade unions to revamp the traditional approach of negotiating
deals across the table and mobilizing workers on the ground.
Negative implications of the gig economy
Some of the implications characterized by the gig economy include risks imposed on the
employees, the employer and rendering defunct trade unions. The government is also affected by
trying to formulate new policies and laws of regulating gig economies. The workers in the gig
economy do not have privileges such as insurance covers, retirement benefits and incentives such
as paid leaves. The workers have to establish their own covers which are expensive. In some
other gig economies such as Uber, workers do not only contribute their time and labor, but also
capital in buying the vehicles and maintaining them. In traditional economies, the business
provided the capital and the workers were only required to produce labor. The gig economy has
developed a new economy of known as sharing economy. This type of economy means
organizations are asset light meaning they create revenue by connecting customers to small
providers a case seen in Uber, Hermes, and Airbnb (Wood, Graham, Lehdonvirta and Hjorth,
2019, pp.60). In this model, the risk shifts to the worker. An example of this is when Uber driver

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secures a loan to buy a motor vehicle. If the driver is in future decommissioned by Uber, or the
changing market trend increases the number of Uber drivers imposing on demand, the driver is
burdened with a debt that he has no means of servicing (Kässi and Lehdonvirta, 2018, pp.245).
Gig employers also face the risk of lawsuits associated with business models. Platform providers
constantly lobby to ensure their freelancers are not classified as employees to limit their liability
on the worker entitlement which can drive up operation cost. Most of the sharing economy
companies such as Uber faces lawsuits such as the Employment Tribunal that seeks to
commission the drivers as workers (Zwick, 2018, pp.682). Such lawsuits can have a ripple
repercussion on the cost of business operations of the company and the wider gig economies.
Another key issue that arises for the employer is quality of service. Due to the constant
outsourcing of freelancing, a company can acquire different workers with diverse culture. It is
hard for the company to cement its organizational culture to the contracted workers, and it can
result in the compromise of the quality of service (Manyika, et al., 2016, pp.15). Another
inherent problem in the gig economy is the lack of trade union representation. Trade unions have
been known to champion for the right of its members through collective bargaining agreements
and better pay conditions. Trade unions are in a battle with gig companies to limit exploitative
practices of the sharing economy companies. Since the gig workers are mostly categorized as
self-employed, it is increasingly difficult to represent them on legal grounds. The emergence of
the gig economies has resulted in some of the trade unions losing members (Graham, Hjorth and
Lehdonvirta, 2017, pp.148). However, the tribunal ruling on a case presented by two Uber
drivers categorized them as workers and not self-employed and by extension, this applies to all
drivers (Cramer and Krueger, 2016, pp.180). This means Uber is a mosaic of small businesses
linked together by a common platform. Such changes in the economy hamper the operations of

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the trade unions and they have to work hard to champion for inclusivity on the rights of gig
workers (Stewart and Stanford, 2017, pp.428). The government is also hugely impacted by the
rise of the gig economies. Most of the experienced workers are being attracted by gig companies
due to the flexibility of working conditions. Additionally, governments are in constant
deliberation on policies that will protect gig workers against exploitation by the companies. Big
retailers and shared-economies companies such as Uber have the ability to influence political
contexts to cushion themselves against liability and risks involved in the business. Governments
and policymakers are asking questions on how to conceptualize the gig economy and protect the
workers.
Conclusion
From the foregone, it can be established that the gig economy is here to stay. By analyzing
critically the reason for the emergence of the gig economy, it can be attributed to large
macroeconomics factors such as global trade, globalization, outsourcing, increase expertise and
technological shifts such as the rise in smartphones use. Gig economy represent largely the
transition that is being experienced the world over in the economy, whereby employers can
select talent from across the globe. Likewise, the employees have more freedom in choosing
where they want to work, how long they want to work, the timeline of their work schedule and
potentially the amount they want to earn. This enables the employee to become a master in his
own carrier and facilitate the juggling of different life roles. The government has also realized
the potential and economic shift occasioned by the rise of gig economies and have responded by
formulating policies aimed at limiting exploitation in the sharing economy. The trade unions
have also revolutionized their negotiation methods and sought the mobilization of freelancers
and across the table negotiations to facilitate better terms of service in this large industry.

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Although there are a number of obstacles that are needed to be overcome in the implementation
of gig economies, the advantages it poses outweighs the challenges. Similarly, policies and
regulations are being enacted to address these challenges and it is only a matter of time before
they are resolved. The recent Employment Tribunal ruling against Uber that categorized the
drivers as workers in shared economies is an example of the dynamic shifts that are being
witnessed in the gig economy facet. The gig economy is a great facilitator of the income
distribution. Historically, people who owned means of production experienced wealth
accumulation at a higher rate than the laborers. Contrary to the traditional economy forms. Gig
workers are now able to own at least a small portion of the means of production. Following this
trend, equalization of wealth can be actualized in the near future. The shortage of in-demand
skills requires more people to adopt the gig economy to fill these roles. Ultimately, there is more
winning than losing in the gig economy. The advent of technology has played a critical role in
supporting the connection of experts with various projects that interest them. Additionally, such
shared economy companies such as Hermes, Uber, Lyft, and Airbnb facilitates global
connectivity among consumers and service providers. From the above outline, gig economies
provide a win/win for the parties involved.

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