Global Cultures

Reframing Perspectives: The Gig Economy

May 2017

Is the Gig economy changing how we work and hire? Today's workplace is morphing from primarily employee-based to one where subcontractors are the norm.

The huge changes to traditional workplaces characteristic of the last decade are just the beginning, as we see a fundamental change in the nature of work, according to a recent ANZ/Data 61 research report, The Future of Work, which explores key factors around our digital workforce and the new "gig economy."

In the gig economy, most people in the workforce won't be employees; instead they will hustle for 'gigs' - one-off work arrangements where their income will depend on how many small contracting jobs they can complete.

The report predicts a technology-enabled transition where our mostly-employee-based workforce shifts to a mostly- sub-contracting workforce over just a couple of decades.

“The big thing that is facilitating the gig economy is new technology. A whole bunch of entrepreneurs can use this new technology to bring buyers and sellers together without the need for a firm in between," explains Phil Lewis, the Director of the Centre for Labour Market Research (CLMR) and Professor of Economics at the University of Canberra.

Workplace structures have changed thanks to the ubiquitous use of mobile devices and cloud computing which allow remote working and internet-enabled collaboration – the ideal conditions behind the emergence of the gig economy.

Forward-thinking entrepreneurs quickly identified opportunities for this new technology age, where cloud and high-speed broadband access is the norm. Platforms like Uber, Airtasker and Freelancer have found lucrative pickings, skimming off a cut from every transaction.

This "gig economy" has two key players. First: the workers who choose to work independently on a task-by-task basis for various employers, rather than become a full-time one-employer worker. And second: the companies, who change their staffing models to include a small core of permanent staff, with other roles filled by "freelance" or "portfolio" workers.

The market runs the gamut from entry-level workers, like taxi and delivery services, to high-level knowledge workers in professional fields, whether technical, creative or consultancy.

The gig economy was facilitated by an environment where peer-to-peer (P2P) service solutions are available.

But what attracts consumers to demand these services, and why do workers and employers want to shift to this new world order?

“On the consumer side, there is a dissatisfaction with the current services offered, either because of the quality or the price - or, in a lot of cases, both," Lewis says.

But he says that so far, the gig economy holds a relatively small portion of the total economy. Ride-sharing and AirBnB are its most obvious services.

“Smart companies are adapting to potential changes in the recruitment process and using the gig economy to reduce costs," says David Holmes, CEO at GoCatch, an Australian-owned taxi booking app that recently launched a ride-sharing service in Sydney and Brisbane.

Andrew Joyce,
CEO of Found
- an Australian
gig-economy platform 

The Facts

In Australia, employment trends are already shifting; the Australian Bureau of Statistics shows that part-time workers increased by 3,100 in Nov 2016, while full-time workers reduced by 100.

Over a larger timeframe, the shift is starker: in 2016, there were 138,000 more people working part-time in Australia than in the previous year.

Three employment market trends are facilitating a growth in gig participants.

The under-employed are prime candidates, with the ABS estimating that under-employment - people working less hours than they would prefer - remained at 8.5 per cent for the third successive quarter by Nov 2016.

The Future of Work report also cites growing spare capacity in the labour market, with more than 358,000 young people 'disengaged' (not working or in education).

At the same time, the proportion of youth in full-time education has increased. Ultimately, this is likely to improve their long-term chances in the job market; but for many, it also means they are keen to obtain part-time work to fund their studies. 

Gig economy fans point out that the trend helps reduce unemployment and encourages entrepreneurship, since most service providers on gig platforms are self-employed and must build basic small business skills.

“The number one benefit is flexibility and the opportunity for people to supplement their income if they want to," says Andrew Joyce, who runs a gig economy platform. He’s the CEO at Found, a Sydney-based smartphone app provider that allow direct links between employers and candidates. “As a niche product, it is fantastic,” he says.

freelancer1.jpg

Phil Lewis
University of Canberra

Is the Gig Economy Useful to Australians?

Lewis says that so far, take-up has been rather limited in Australia. He suspects there isn't quite so much dissatisfaction with existing services; or perhaps there are less potential workers needing the additional income.

“By contrast, in America it has really taken off,” he says. He suggests that the 'old-style' services that the gig economy is replacing in the US may have been previously unaffordable for many consumers.

Business users of gig-economy services include firms that can't afford a full-time IT person but still have a demand for IT services.

But in Australia, he says the firms currently providing those services tend to be large enterprises.

People who have full-time jobs in Australia aren't likely to leave for an uncertain gig-economy lifestyle.

“On the other hand, in America they have much lower wages, a lot less job tenure. They don't have a minimum wage like in Australia," says Lewis.

He acknowledges that for many people, driving a cab for Uber or using Airbnb is also a far more attractive proposition than unemployment.

Electronic delivery has also facilitated a global 'gig economy', where tasks can be performed from anywhere in the world.

On the surface, accountancy is a good example of an industry ripe for such disruption, Lewis says.

But dig deeper and it's not that simple.

Australian accountants often perform client tax returns as part of an accounting firm's services - and most company contracts will prevent them moonlighting for external clients, he says.

Tax returns could be processed in the gig economy - but only by individuals with the required skills. Offshoring will not work if you try to hire an accountant who is unfamiliar with Australian tax filing practices.

Traditional and Remote Employment

Unfortunately, at the entry levels, the gig economy is no substitute for a full-time position. Taking entry-level services as an example, it is clear that a regular guaranteed income is not possible.

“There is a lack of work density in these gig economy platforms. With food delivery, for example, they are really only active for about four hours a day, during lunchtime and in the evening. Creating a full-time role from this is impossible," Joyce says.

"Also, you cannot set your own pricing. In many ways, the platform is working against you to satisfy overall supply and demand requirements."

But the gig economy's key attribute is flexibility - and for those with an entrepreneurial bent, it's a godsend.

Perceptive drivers do not rely solely on platform bookings, he says.

“Between five and nine in the morning, for example, many limo drivers will not use mobile platforms as they prioritise existing bookings and regular clients," says Holmes.

He is focused on providing what users want and the next revision of his Found platform will include an option for selecting a favourite driver, for example.

“The shift to peer-to-peer services is a dramatic change and apart from ridesharing, food delivery and other entry-level skills, there are other areas worth considering such as creative design or corporate rebranding," he says.

"It is possible for any small company to obtain creative or technical personnel at competitive rates and without hiring a new full-time employee."

Supplemental income only? It depends on how good you are.

“Former taxi drivers for example will do very well on the ride-sharing platform and are often members of several platforms to ensure constant work is available. They know where to be and at what time to obtain jobs," says Holmes.

A lot of business people classed as entrepreneurs earn less than full-time workers, quietly running their own business as part of the gig economy.

“For many people, working for someone else doesn't suit them. Given a choice of labouring for somebody or having your own business cleaning windows, many choose to run their own company," says Lewis.

freelancer2.jpg

To Regulate or not?

The gig economy has grown rapidly for a whole host of reasons.

“In Australia, in particular, there are plenty of strict requirements around employer-employee relationships or contractor terms,” Joyce says.

He says employees and contractors both need to clarify the expectations of their role.

When Uber first came into Australia, it became clear that there was no law against asking someone to give you a lift. But the law did prevent people from hailing an Uber on the street, adds Lewis.

“You can't protect an industry that is so anti-consumer," he says, of Australia's taxi industry.

"Many taxi drivers now drive for ride-sharing companies. With taxi plates costing $500,000, it is the owners rather than the drivers that make money, with many plates owned by companies and drivers hired at low rates," says Lewis.

But high competition and low rates sparks concerns about exploitation and poor outcomes.

Despite kickback against any attempt to regulate the gig economy, Holmes believes that, done right, that's where the answer lies.

Gig providers don’t want to find themselves subject to hidden liabilities but taking steps to prevent these can be fraught.

Holmes believes that licensing and background checks are best managed by the government and law enforcement.

However Lewis says that self-regulation has been key to success for some of the larger gig-economy players.

“The reason Airbnb works is that they have a strict quality control policy and the same with Uber, who vets both drivers and customers," says Lewis.

David Holmes
CEO, GoCatch

Minimum Wage

The minimum wage came into Australia in 1896 to prevent employee exploitation; more than a century later, the gig economy may be its undoing.

“Even with a very basic understanding of employment law, the gig economy is operating in a grey area, especially in the areas of minimum wage," says Joyce.

Those in the lower tiers of the gig economy need protection; desperation means that some will accept work for almost any rates.

A freelancer can operate across borders but where services (like food delivery) are physically carried out in Australia, you are clearly an Australian worker, points out Joyce – and therefore subject to some basic rules.

“When the new iPhone came out, a whole load of Airtaskers were waiting in line [to buy them],” he says. “In Australia there is no legal way of employing someone for 24 hours without a break in an instance like this."

The big challenge for the government is that each platform in the gig economy will portray those carrying out the services as contractors and not employees, adds Joyce.

Either the government must regulate the gig economy - or deregulate traditional employment, he says.

Others agree.

“The government has set taxi pricing - but there's no price-setting for ride-sharing, which makes taxis uncompetitive as they cannot change the pricing. The answer is to regulate or deregulate both," says Holmes.

The proliferation of the new gig economy has also put Australian companies at a disadvantage.

“Most of the profits from these gig economy platforms do not go to Australian companies," Joyce says.

"You've basically introduced a foreign company into the marketplace and presented them with an unfair advantage where government regulations are not enforced."

Homework or office work

Lewis, Holmes and Joyce all work from home on occasion and all three believe it makes them more productive.

Holmes was quick to add that he would not eliminate onsite work altogether. “There is something about working in a team that is innately human and efficient," he says.

There's also consensus on the need for regulation - provided those regulations do not restrict quality of service, efficiency or innovation.

A gig economy that provides core protection for drivers or other freelancers is the dream – and is also the only way that the gig economy can compete fairly with the traditional workplace for entry-level workers.

Those with highly sought-after skills will fare better than newbies, more able to protect themselves from companies seeking to game the system with low rates and high project turnover.

But ultimately, Lewis says, all participants in the gig economy will have plenty of choice.

“You could theoretically have an app for every industry," he says. "Yes, we need safeguards in the system but these must be implemented in a sensible manner rather than reacting to the issue of the day as it occurs."

Subscribe to our e-newsletter

Are you an Existing ANZ Customer? *