Diane Mulcahy on the Gig Economy

An interview with author Diane Mulcahy, preeminent thought leader on the gig economy

April 25, 2019

Diane Mulcahy

All around us, we see that the world of work has fundamentally changed—there are more freelancers, more part-time workers, and more contractors, all while the security of traditional salaried employment has diminished. The realities of this new economy are far-reaching and complex. While independent work can offer a better work-life balance and provide opportunities to explore one’s skills and interests, it lacks some of the benefits and legal protections of full-time salaried employment.

There are few people better-versed in the potentials and pitfalls of the gig economy than Diane Mulcahy, an author and consultant who, six years ago, created the first MBA course on the gig economy at Babson College and lectures at universities across the country, including Harvard, Dartmouth, and Northwestern. Diane wrote the groundbreaking book The Gig Economy, which analyzes this emerging economy while providing hands-on tips for those seeking to thrive in it.

InfoWorks reached out to Diane to talk about the gig economy, skills development, the Departments of Labor’s policy failures, the pursuit of a work-life balance, and more.

InfoWorks: I loved your book’s emphasis on rethinking our culture’s approach to work. People accustomed to salaried corporate employment can’t imagine structuring their own schedules, taking extended vacations, or pursuing their passions as part of their “work.” In your experience, what is the most significant cognitive hurdle people must jump when they’re leaving salaried jobs? 

I think the most significant cognitive hurdle is for people to believe they truly have a choice about how to structure their lives—both professional and personal. In the book, I take readers through an exercise on creating an exit strategy to leave their job—and emphasize that there is an exit strategy for almost everything in our lives. If you decide the life you’re living no longer reflects your values and priorities, or isn’t getting you closer to your definition of success, then you can change it. That doesn’t mean it’s easy or simple or fast, but it can be done.

InfoWorks: Your overall message is one of optimism about the gig economy. Yet many people are critical about the lack of benefits (health insurance; retirement accounts) and legal protections. What are the benefits of gig work that counteract these pitfalls?

Many employees have not fully come to terms with the level of job insecurity in our economy; they believe they’re more secure than they actually are as full-time employees. The reality is we live in a globalized world that’s highly competitive and incredibly dynamic. Businesses are responding to that. They’re pivoting, they’re opening new markets, they’re introducing new products. They need different people, different skills, different expertise in different places all the time. As a result, they regularly conduct lay offs, downsize, outsource, and contract out what used to be full-time jobs. That’s the reality of our economy. I don’t think it’s going back to something more static.

Given that, I think it makes sense for people to accept that long term job security simply doesn’t exist, and that any of us, at any time, could be downsized, laid off, rightsized, or otherwise let go, for reasons that have everything to do with business and nothing to do with us or our performance.

More than 75% of independent gig workers work that way by choice, and they do so in part for the security—they feel more secure having multiple clients and multiple sources of income rather than relying on a single salary from a single employer. And independent workers do have ways to obtain benefits. There are more opportunities to save for retirement as an independent contractor—you can save more and faster because the limits are higher than for a traditional employee. The Affordable Care Act gives independent workers a way to obtain health insurance without having to be an employee. In many states, premiums are subsidized for lower-income workers.

That said, the general lack of employer-provided benefits and other rights and protections for independent workers reflects the significant problems with our labor market structure. I cover these issues in my Harvard Business Review article on how our labor market and tax system need to change to support all workers, not just full-time employees.

InfoWorks: In your book you wrote, “We’re also seeing a transition from a tenure-based system of employment to a skill-based one.” What are the best ways to stay on top of skill development?

There are so many ways! Everyone can take advantage of the many on-demand, online, and low-cost (or free!) courses and education options, can obtain digital badges or certifications, and can seek pro-bono or volunteer work to develop skills and experience (e.g., if you’re an accountant by day, work on the events committee of a local nonprofit to gain marketing skills). You can network to keep current on what skills are in demand, and you can cultivate the mindset of a lifelong learner—keeping an open, curious mind and being willing to be a beginner, learn, and take on opportunities that challenge you to move beyond your comfort zone and become proficient in other areas.

InfoWorks: The Gig Economy isn’t just about gigs, but about opportunities in the spaces between gigs—time to explore interests, travel, volunteer, develop skills, and spend time with family and friends. How do you think this part of the Gig Economy will affect our culture in the coming years and decades?

I think this is an essay in and of itself! The short answer is that this is already happening—we are already seeing the American dream shifting from quantity of stuff to quality of life, and the focus change from having things to having experiences. These are trends that will only accelerate as workers find they have, or can create, more time to focus on people and experiences, which research clearly shows makes people happy.

InfoWorks: Your book wasn’t shy about critiquing the Department of Labor’s failure to fold the reality of today’s gig economy into its policies. You wrote, “The government has stood inactively by, failing to update policies to offer increased security and financial stability to workers who don’t hold a full-time corporate job.”

Why do you think the government has been so slow in this area? Where do you see change finally coming from, and what form might it take? 

There are so many reasons why the government has been slow to respond to the Gig Economy, including inertia, lack of awareness, poor data collection, tax maximization (the tax compliance rate is much higher for employees than for independent workers, so from a tax perspective, the government wants to support employees), and an unwillingness to enact policies that could be seen as not favorable to business. Our labor market is clearly obsolete for today’s work world—we know that changing the laws and regulations that make up the structure of our labor market is a necessary, but massive, undertaking.

There has been some legislative movement. Senator Mark Warner in Virginia introduced a tiny pilot experiment around portable benefits. Aside from this, the government has been slow to respond to changes in the workplace. It’s not like there are numerous proposals seeking public comment—we’re not even at that stage.

Current labor laws and regulations penalize everyone who is not a full-time employee. Despite our national narrative about supporting entrepreneurship, if you take the leap and the risk to quit your job and create your own business, you will be taxed additionally and separately for that choice (via the Self-Employment Tax) and lose the rights, benefits, and protections that our government provides only for full-time employees. One policy solution that I’ve spoken about is the idea of pro-rated benefits that would require companies to provide benefits on a pro-rated basis to all their workers, regardless of whether they are employees or independent contractors.

InfoWorks: A lot of your book is devoted to practical, how-to information, like defining one’s version of success, making a “calendar diagnostic” of time/priority allocation, and performing a “checkbook diagnostic” to help transition away from a high fixed-cost lifestyle. Why are these kinds of exercises so important?

These exercises require reflection. They force us to stop and reflect on our lives and make active, conscious choices about how we’re living it, rather than passively default into the habits and choices of people around us. When I teach my class on the Gig Economy or coach individuals who are transitioning to independent work, I have them do weekly reflection papers and work. It is incredibly powerful.

InfoWorks: Your book contained some hair-raising statistics about home ownership under the heading “Home Ownership Is Killing the Middle Class.” Why do you think Americans are so married to the idea of home ownership? Do you think these attitudes will change as the gig economy becomes more entrenched?

The federal government has spent decades promoting policies (low interest mortgages, home mortgage interest deduction, property tax deduction, etc.) to encourage and support home ownership. Many Americans believe that home ownership is something to aspire to and represents a critical component of the “American dream.” As a result, too many Americans own too much house, purchased with too much debt, in markets that are stagnant or declining.

InfoWorks: What do you see as the most important development or change in the Gig Economy since your book was published in 2017?

The ideas of the gig economy and independent work have become much more mainstream. I think there’s more discussion and attention being paid to independent work. When I created my MBA class six years ago, a Google search on the gig economy would generate maybe two or three results. Now it generates pages of information, articles, surveys, white papers, and reports, all talking about the future of work, and the ways traditional work isn’t working.

Now that gig work is becoming more of a mainstream idea, people are feeling more comfortable working that way. I remember I gave a webinar at Harvard Business School, and in the comments afterwards, people told me they were so excited that there was a name for what they’re doing—that they no longer had to feel like they were “unemployed” because they didn’t hold a traditional full-time job. There’s now much more (and more robust) discussion from individuals and companies about the future of work and alternatives to full-time jobs, which has really validated working independently as a choice. This is all positive. I think what’s missing is the bigger-picture policy discussion about how we are going to create a labor market that supports all workers, not just full-time employees.

Diane Mulcahy is the author of The Gig Economy and continues to write, speak, teach, coach, and consult about the gig economy. She is a Forbes contributor and writes regularly for the Harvard Business Review.

 

Interview by Katherine Don

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