California recently made headlines as it passed a bill, AB 5, to reclassify freelancers or independent contractors, also known as “gig workers”, as employees. The intent of the bill is to provide more benefits and protection for freelancers, but many employers and freelancers are at odds with the new law, set for January 2020. For employers, the law may cause a 30% increase in costs as the newly classified employees would require minimum wages, health benefits, holidays, and more. For freelancers, being classified as employees will restrict their freedom and flexibility to set their own hours and other work terms, which, for many freelancers, is the huge draw away from traditional jobs and towards contract work, with 51% saying that no amount of money will draw them back into traditional work.
But what exactly is the Gig Economy and how relevant is it in the bigger picture of the American workforce?
The Gig Economy is basically the workforce that consists of independent contractors who are hired by firms on a short-term or project-basis. Because the workers are not employees, companies do not have to hire and onboard, and then provide the same benefits, as they would actual employees. On the other hand, gig workers, again, because they are not employees, have the flexibility to set their own terms in regards to pay, number of hours, location from where they work, etc.
The reason AB 5 came into being is because in recent years several lawsuits were brought up in which gig workers were exploited with low pay and employee-like conditions, meaning companies had more control over the worker’s terms than they should have over those classified as independent contractors. California is a leader and what happens there may very well spread into other states. Therefore, it is good to stay up to date on what is or isn’t affecting the Gig Economy.
Despite all the press, the Gig Economy is currently not outpacing traditional jobs. According to surveys, while a quarter of Americans are involved with gig work in some way, only 10% of that same population relies on gig work as a primary source of income. Therefore, traditional jobs are still very much at the forefront. However, this is not to say that the Gig Economy hasn’t been growing. As more people realize the benefits gig work offers, for workers and companies, the opportunities have been increasing. According to another survey, 50% of millennials are already freelancing and it is predicted that 50% of the American workforce will be gig-based within the next decade. It’s also becoming more common for recent graduates to end up doing gig work before they may find an employee position with a company. Because of the growing reality that most, if not all, people will receive some exposure to the Gig Economy in coming years, even universities are preparing their students with entrepreneurship and innovation courses, incubator programs, business training, and more.
Therefore, while the Gig Economy has not yet taken over, it is growing quickly. As with any movement that is gaining leverage, policies begin to form to ensure that it proceeds in the most beneficial manner. It can be a long tug-of-war between different sides as the policies are shaped and reshaped, but it is an indicator that the issue is of growing importance. Hence, with the passing of AB 5, we can be confident that the Gig Economy is here to stay.
This article was written by Nabila Ikram.
Nabila Ikram has a B.A. in education, followed by a professional journey working with several business and nonprofit startups, including a couple of her own. Along with her business adventures, she has been writing and editing in various capacities and across industries over the years. She has traveled extensively and has a passion for learning and reflecting on matters of culture, society, and the “Information Age”. She enjoys reading, writing, and, as a mother of three herself, uplifting other mothers in their own personal and professional pursuits.