The New Consumerism: The Rise of the Gig Economy

The gig economy is one of the eight trends which we see as combining to create The New Consumerism. The New Consumerism sees today’s consumers reassessing their priorities and increasingly asking themselves what they truly value: Why own something that I only use sporadically? Why accumulate more belongings when I could be out experiencing life? Why pay for space I don’t use? Why work 9-5?

Fuelled by technology and globalisation, the gig economy – a work environment characterised by short-term contracts, freelance and entrepreneurship – has been on the rise. It offers both employers and workers more flexibility and efficiency, but also changes the terms on which most people work as there is a trade-off between freedom and security. While the gig economy can facilitate job growth, it may undermine the middle class expansion due to a decline in secured jobs and incomes.

Workers by Employment Status in Selected Advanced Economies: 2015

Source: Euromonitor International from International Labour Organisation (ILO)

• Along with the rise of the sharing economy and online platforms such as Uber, Airbnb and Upwork on which people buy and sell services and jobs, the gig economy, which involves the contract of independent or temporary workers, has been a growing trend. This has led to a gradual shift in the labour markets, especially in advanced economies where permanent employment has been common for long. In the USA, for example, employees made up 89.9% of all workers in 2015, compared to 6.3% for self-employed;

• Technological innovation and growing globalisation are factors behind the rise of part-time, freelance and self-employed jobs. Thanks to the internet, the workforce is becoming increasingly mobile and work can be done from anywhere. Also, high rates of unemployment amidst the global economic downturn and the entrance of the millennial generation (population aged 25-34) into the workforce are contributing to the growth of the gig economy.

Implications

While the size of the gig economy remains hard to measure, the changing labour and business environment it brings about has implications for workers, businesses and economies:

• For businesses, the gig economy with on-demand workers represents an opportunity to save resources (eg office space) and operation costs (eg benefits for permanent employees and training). They are also able to contract experts for specific projects who might be too high-priced to maintain on staff. Nevertheless, a reduction in long-term employment relationships also means a less stable workforce and less control, which may in turn undermine productivity and efficiency;
• The gig economy offers workers broader employment opportunities and a more flexible workplace arrangement. The on-demand work environment can improve work-life balance, while freelancers are able to choose the work they are interested in. However, gig workers will have to face insecurity and do not have the benefits that are often attached to permanent jobs such as pensions, health insurance or sick leave. Freelancers may also receive a lower wage compared to permanent employees;
• Due to the lack of work security and low wages, there has been concern that the rise of the gig economy may dampen income growth and undermine the foundation upon which the middle class in Western countries was found. The share of middle class households to total households in the USA and Germany largely stagnated during the 2005-2015 period, while in France it declined from 30.4% to 28.6% over the same period;

Middle Class Households in Selected Advanced Economies: 2005 and 2015

Source: Euromonitor International from national statistics

• The expansion of the gig economy has facilitated entrepreneurship and job growth, thus being beneficial to the economy. Nevertheless, the rise of freelance and unregistered jobs will pose a challenge for tax authorities, while policymakers will have to find a new form of employment contract that suits the changing workforce and prevents workers from being exploited. In France, taxes on payroll and workforce accounted for 5.8% of total government tax revenues in 2015.

Prospects

• While standard forms of work still remain the norm on the labour markets worldwide, the gig economy is seen by many as the future of work. It reflects the evolution of a new economy where lifetime employment and the traditional types of jobs are diminishing, particularly for new labour market entrants. Moreover, the move away from a “job for life” echoes changes in lifestyles in which time, freedom and flexibility has growing priority among workers. In fact, in order to motivate and retain their workforce, many large corporations have offered their employees more flexible working options such as core hours, job share, mobile working and working from home;

• Technology and growing internet usage will continue to enable the gig economy and facilitate the global job market by building connections between those with skills and time and those in need of them. By 2030, 57.4% of the global population will use the internet, up from 40.9% in 2015.