29 October 2019

The end of the gig economy?


The ‘gig economy’ may be a horrible phrase but it manages to capture a lot of what is good and bad about the way the economy works now. Whether the world of ‘portfolio’ careers, ‘contingent’ employment and mobile working is a blissful liberation from the toils of nine-to-five or a trap designed to make the rich richer and the poor poorer is certainly a question many like to ask, but it may be yesterday’s question. The gig economy might not be where we are headed after all.

The theory goes like this. Mobile technology means that we all walk around with an office in our pockets. The mainframe of formal work has been dismantled. Most of the tasks that used to be office-bound can be completed anywhere. These changes have decoupled people from the workplace.

More than that, the bonds between worker and employer have been loosened, and sometimes dissolved. If everyone is online, all the time, then companies that used to be employers can scoop up the skills or the work they need on an entirely contingent basis. Thus we have global companies, the Ubers of this world, who spend much of their time fighting down any suggestion that their relationships with workers are any more meaningful than a Tinder date.

This is why much of the new work that has been created over the last few years has been on a contingent basis. In the UK the Office for National Statistics (ONS) says the number of freelance workers rose by over 50% in the fifteen years after 2001, and the number of self-employed under 24 almost doubled.

These are real trends. More work is contingent. More people work for themselves. But the fiction that this is a one-way street leading to an economy of exclusively transient relationships is beginning to break down. Indeed, ‘fiction’, ‘contrivance’ and ‘artificiality’ were the words used in a recent UK Supreme Court ruling against Uber’s contention that its drivers were not employees. The Supreme Court thought otherwise, and said that Uber drivers like other employees were entitled to minimum wage rights and paid holidays.

This regulatory pushback is accompanied by another counter-trend that is perhaps more interesting. There is evidence that neither workers nor employers are convinced that a largely freelance economy is in their interests.

Consider the length of time that employees typically stay in a job. It is a common assumption that employee turnover is increasing. But statistical data do not bear this out. In the US, data from the Bureau of Labor Statistics show that on average people stay slightly longer in their jobs today than they did fifteen years ago (the average was 4.2 years in 2018). Recent data from the Chartered Institute of Personnel and Development (CIPD) which has been tracking job tenure for decades show that people in the UK are also staying in jobs for longer, with average job tenure of 8.6 years in 2017, higher than 20 years earlier. And the proportions of freelance versus full-time employees has barely changed since 1998, while the proportion of ‘involuntary’ freelance workers (that is, freelancers who would rather have a permanent job) has fallen sharply since peaking in 1994 and again in 2013. So while the number of freelance workers has grown, so has the number of full-time workers.

The CIPD research which is based on data from the ONS and equivalent sources in the EU makes it clear that full-time employment is not necessarily high quality employment. The UK has a low share of part-time or freelance employment compared to the EU average, but it also has a higher level of pay inequality and a greater share of low-paid jobs. Full time employment is not necessarily a benefit to the employee – but it is certainly not decreasing.

So much for the obligatory gig economy. If there is an assumption that full time work complete with worker protections is disappearing, it is not supported by the data.

One reason for that might be that many companies also do not believe that breaking the contract between employer and worker is in their interest. The cost-saving opportunities that come with cutting down on permanent staff are easy to see. The hidden costs of doing that are less apparent, but no less real. As the economy moves ever closer to an ideas-based model, the risks of having only impermanent relationships with the people who generate and refine your ideas are likely to grow.

This may be why even some large conservative companies such as banks are seeking to reproduce some of the benefits of the freelance economy – the ability to change fast, to work in temporary organisational structures, and to speed up the flow of new ideas – within a full-time employment workplace. One much quoted example is the Dutch bank ING, which has had considerable success in replicating ideas from the world of tech companies within conventional employment terms, such as working in small temporary teams and pursuing ultra-rapid product development ‘sprints’.

For ING the result has been a leap in productivity – something that the freelance economy has not been outstandingly good at. Productivity and value are the mantras of business today in a low growth world where such things are difficult to find.

Could it be that it is time to look beyond the gig economy? Or put it another way: the future of the gig economy may look more like a permanent residency after all.

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Richard Walker is a journalist and communications adviser to financial companies.