HOW DOES THE GIG ECONOMY CONTRIBUTE TO THE OVERALL ECONOMY IN TERMS OF GROSS DOMESTIC PRODUCT (GDP) AND EMPLOYMENT RATES? WHAT ARE THE ECONOMIC BENEFITS AND DRAWBACKS OF THE GIG ECONOMY FOR WORKERS AND BUSINESSES, AND HOW DO THESE RELATE TO LABOUR MARKET

Abstract

The modern employment sector has seen a significant rise in the gig economy, bringing about unique opportunities and challenges for businesses and workers. This trend has transformed the traditional employment landscape, creating new dynamics that require further exploration. My paper delves into the freelance or on-demand economy, shedding light on its latest trends and its impact on the employment sector.

With the gig economy, individuals now have access to flexible work arrangements, while companies can leverage independent contractors to meet their business needs. According to a survey conducted by Mckinsey “a full 36 percent of employed respondents- roughly 58 million Americans- identify as independent workers.”, the rising trend of freelance has swarmed the economy in full swing. Most people across all boards benefit from the gig economy in multiple ways; most importantly, it offers flexibility and autonomy- which most workers cannot benefit from on a mundane 9-5 working job. However, this flexibility and autonomy comes at a price as employees usually prefer stable forms of employment, which is bounded by a permanent contract, which they benefit from in this case. Being an independent and part-time employee does come with low job security, hence it is considered as a “side hustle” by Mckinsey. It is usually considered a secondary source of household income and such workers are usually employed during peak seasons, like summer or christmas. Not only that but according to Mckinsey's 2022 American Opportunity survey on independent work, independent contractors and part timers can earn up to $150,000 a year, nonetheless this does not take into account the younger and less trained professionals, but rather the part time lawyers, accountants and social media influencers who have years on years of training.

The gig economy is driven by digital technology, making it easier for individuals to connect with clients or employers. This has expanded talent pools for businesses and provided workers with freedom to choose their work. Online platforms democratise work opportunities, allowing individuals to showcase their skills to vast audiences. Remote work facilitated by digital technology also allows for better work-life balance.

The gig economy has redefined traditional employment, blurring the lines between full-time employees and independent contractors. This has sparked debates on worker rights, benefits, and job security. Discussions are ongoing about whether gig workers should receive benefits such as health insurance and retirement plans. It's crucial to analyse the impact of the gig economy on industries, labour markets, and societal dynamics for businesses, policymakers, and workers. (Wood et.al, 2019).

This paper deals with the employment aspects of the gig economy, which includes crowdwork and app-based "work-on-demand." Crowdwork is work that is done through online platforms that connect an indefinite number of organisations, businesses, and individuals over the internet, allowing clients and workers to connect on a global scale. The tasks performed on these platforms can range from very small "microtasks" to larger and more meaningful works, such as creating a logo or developing a website. App-based work-on-demand involves offering jobs related to traditional work activities, such as transportation, cleaning, and errands, along with clerical work, through mobile apps. The companies that operate these apps typically set minimum service quality standards and manage the workforce.

The main issue of how the activities carried out in the gig economy are often not recognized as work and are instead designated as "gigs," "tasks," or "services." The term "gig economy" implies a parallel dimension where labour protection and employment regulation do not apply by default. This concealment of the "work" nature of these activities can have detrimental consequences. Workers are expected to perform their tasks flawlessly and smoothly like a software or technological tool, and if something goes wrong, they might receive worse feedback than their counterparts in other sectors of the economy. The possibility of receiving instant feedback and rates of workers' performance is crucial in ensuring businesses both flexibility and control. It also allows for the outsourcing of customer care to individual workers and reduces the need for internal performance-review personnel and mechanisms. Workers may also take the brunt of occasional disruptions in the service, leading to poor ratings from clients“In 2023, the projected gross volume of the gig economy is expected to reach 455.2 billion U.S dollars. The gig economy is commonly defined as digital platforms that allow freelancers to connect with potential clients for short-term jobs, contracted work, or asset-sharing” (Statista Research Department, 2024).

It encompasses a wide range of sectors from content creation and designing to ride hailing and hospitality services. With the advent of digital platforms and startups like Uber, Zomato, Airbnb etc. flexible models have been given a boost altering traditional employment patterns and influencing the broader economy. “As the gig economy continues to evolve, it is crucial to analyse its impact on various industries, labour markets, and societal dynamics. Understanding these trends is essential for businesses, policymakers, and workers as they navigate the ever-changing landscape of modern employment” (Wood et al, 2019)