The State of the Gig Economy

The changing gig landscape includes new regulations

March 12, 2020 | Scotty Hendricks

gig economyThere are many reasons why people choose to work in the gig economy. In a 2018 study by Gianpiero Petriglieri, Susan Ashford, and Amy Wrzesniewski, the people interviewed valued the independence that came with being an independent contractor working gigs rather than being an employee with a stable job. They put a high value on being able to focus on work they enjoy, or that plays to their talents and creative desires.

Given that 150 million workers in the United States and Europe choose this business model, it is clear that these perceived benefits are nothing to reject out of hand. However, these benefits come at a price. The stress of not having the same security as the traditionally employed can get to people. The fact that many in the gig economy are not employees means that they lack the same protections that employees have when interacting with companies. This often leaves gig workers in situations where they can earn less than minimum wage and gets companies out of more than a few taxes.

It is little wonder then why the gig economy is starting to draw the attention of regulators. In California, Assembly Bill 5 (AB5) went into effect on January 1st of this year in hopes of addressing some of these issues. The bill reclassifies many gig workers as employees of the companies they do business with, particularly those who are working under arrangements where the company they work with is directing their business. The goal is to improve conditions for workers by reclassifying them and therefore giving them the benefits of the legal protections employees already have.

On the one hand, the increased regulation from governments will undoubtedly improve working conditions and assure that participants in the gig economy are getting at least the same treatment as those working in more traditional models. Given many issues that persist in the gig economy, few contractors will oppose the goals of the bill.

However, these benefits may come at the price of the flexibility that many in the gig economy cherish. Because so many people in California will now be employees rather than independent contractors, companies may decide to use the new definition to hold their employees to new standards that they would previously have not been able to impose.

The bill, along with other events in places stretching from Japan to Norway, places the gig economy at a crossroads. While reclassifying many contractors as employees is one solution, it is not the only one.  Many gig workers around the world are starting to unionize, with or without being inside of the typical legal framework for unionization, which offers a route to protecting both the worker and the independence they have as contractors in some cases.

Some of the employing companies in the gig economy, such as Uber, Lyft, and Door Dash, themselves have also suggested that if they are exempted from California’s AB5 they would be open to sectoral bargaining rights for contractors, minimum wage concessions, as well as some benefits for workers. This, while not an utterly different model than what exists now, but also suggests another way forward for the gig economy.

The future of the gig economy is always subject to change. Between calls to bring it more in line with traditional models, to organize it, or to make it just a little more tolerable, there are a wealth of options available to choose from. All that is certain is that change is on the way.

  • About The Author
  • Scotty Hendricks is a writer based out of Chicago. He covers a wide variety of topics including science, technology, philosophy, policy, and current events.