Why don’t we all just quit our jobs and go freelance? Good question. There’s not a really good reason why we should not. Gig work improves job satisfaction, opens up work opportunities that might have normally been unavailable, and appears to have few negative impacts.
There is an interesting report on the gig economy available online, entitled “Independent Work: Choice, Necessity, and the Gig Economy.” It’s a big report, so I’ll summarize the key findings for you.
In this October 2016 report, McKinsey Global Institute finds that about 20 to 30% of the working-age population in Europe and the US engage in some form of independent work. The report explores whether gig work is truly a voluntary arrangement, and whether the work is lucrative or satisfying.
What is the Gig Economy?
McKinsey defines independent workers as having a high degree of autonomy, payment by assignment (not hours), and a short-term relationship with their employer. Independent work connects a large pool of workers with a large pool of customers, on a scale that can be global. The workers and customers link up for efficient matches via the internet and cell phones. Only 15% of independent workers are using online marketplaces, implying there is potential for significant growth.
In my opinion, if the arrangement is truly independent, gig workers are businesses and not employees. This is a complication because independent business operators tend to be dropped from formal labour market statistics. This makes the gig economy bewildering to the human resources field. Also, these businesses are often too small to be measured by those tracking major corporations, such as stock markets or auditing firms. That means that independent workers are also not fully understood by experts in finance and accounting.
All the cool stuff happens at the boundary between categories, and nowhere is this more true than in the gig economy.
Is Temporary Work Truly Voluntary? Is it Satisfying Work?
In conversations about the gig economy, there is a recurring question: how is this work any different from the contingent workforce of under-paid service employees? McKinsey overcomes this confusion by placing independent workers into four segments:
- Free Agents do independent work by choice and get most of their income from this work.
- Casual Earners choose this life but their gigs are supplemental income.
- Reluctants get their primary income from independent work but would prefer a permanent job.
- The Financially Strapped get supplemental income from gigs and do so out of necessity.
The free agents in the top tier “report greater satisfaction with their work lives than those who do it out of necessity.” The fact that they could choose independent work had a greater impact on job satisfaction than geography, age, income bracket, or education level.
The higher job satisfaction of free agents reflects several dimensions of their work lives including satisfaction with their choice of their type of work, creativity, opportunity, independence and empowerment, hours of work (amount and flexibility), and atmosphere. Independent workers like their boss more, that is to say, yes they do like themselves. Some satisfaction indicators are equal to regular employment, but there were no job dimensions where free agents were less satisfied.
Free agents perceive that they make about as much money as they would in a permanent job.
Amongst the Reluctants and Financially Strapped, temporary work does not drive low job satisfaction. Those who do any work out of necessity report a similar level of job dissatisfaction, regardless of whether they are independent or have traditional jobs. It’s an important distinction: people who are forced into temporary work are dissatisfied, but the main driver of dissatisfaction is the phrase “forced into,” not the word “temporary.” It sounds about right to me, considering how strong the human spirit is in resisting coercion. And some of the temporary-ness is circumstantial and not attributable to a specific negative entity.
While it is notable that some people are “stuck” in these precarious roles, I personally think it is open to debate whether workers would be better-off with the absence of such arrangements. That is, the supplemental income might truly make a difference, with no adverse impact on job satisfaction. And it is not entirely clear whether the gigs can be converted into permanent jobs. There may be cases where the elimination of gigs would simply result in the elimination of an income stream.
Opportunities and Threats in the Gig Economy
Digital links between workers and customers can be global in reach, and since only 15% of gig workers are connected to a digital platform, things could open up and grow substantially. For the economy on the whole McKinsey notes that a growing gig economy “…could have tangible economic benefits, such as raising labor-force participation, providing opportunities for the unemployed, or even boosting productivity.” There is the additional advantage that some services could be provided in a more flexible manner, improving the buyer or consumer experience.
I think there is a trade-off for the common citizen, that sometimes a less secure employment situation can be mitigated by a more beneficial arrangement for that same person acting as a consumer.
McKinsey rightfully identifies that there are challenges posed by the gig economy, including needs for training, credentials, income security, and benefits. That is, if we are shifting towards a touch-and-go economy it will be harder to ensure everyone can be a winner, or even be able to get by. There’s an increased demand for social supports coming from all quarters, including consultants at McKinsey.