The gig economy continues to flourish with 36% of U.S. workers participating in it as their primary or secondary job, according to Gallup.
The freedom to pursue multiple career paths and work flexibly is appealing to many. The draw of the gig economy and desire to maintain a better work/life balance has sparked change in today’s workforce, with no signs of slowing down. In fact, a recent report by MBO Partners states that millennials make up the largest and fastest-growing segment of the independent workforce, and more than half of Generation Z workers are freelancers. At the core, technology is the ultimate enabler of this trend, making the gig economy more accessible than ever. But, does the popularity of the gig economy come at the expense of small businesses? How can a small business owner compete?
As large organizations enter the gig economy and serve as intermediators, small businesses are experiencing even more competition within their respective markets. The gig economy was a well-intentioned way to provide worker flexibility. However, we are increasingly witnessing giant corporations building business models that revolve around technology and capitalize on gig economy workers, while shifting risk entirely onto these individuals. This is both empowering and disempowering those participating in this “free” market system.
The gig economy has now become intertwined with the concept of working for an app. Take Uber and Lyft as key examples. Tapping local talent, drivers are viewed as contractors who can make their own schedules and are no longer tied down to a traditional 9-to-5 workday. They also don’t interact with coworkers or even have true bosses. Instructions are auto-generated and performance is judged through reviews. The price of this flexibility is that employee wages remain relatively low.
The gig economy is designed for temporary work. However, organizations like Uber — despite its tremendous revenue — use it as a replacement for full-time employees. Uber’s workers will never become full-time employees, unless mandated to do so. It is for these reasons we are seeing ride-hailing app workers now pushing back on these larger corporations citing insufficient pay and working conditions.
Technology enables large organizations to enter markets that they traditionally would have avoided due to full-time talent investment and the overhead involved in entering a new region. This creates increased competition and pressure on small businesses which, naturally, don’t have the same proprietary technology or resources to compete on the same level.
Take the home services industry as another example. Traditionally, large corporations haven’t had a strong foothold in providing services such as residential painting, cleaning, pool maintenance, and other skilled labor work because the commitment and risk of getting set up in a smaller market hasn’t been worth the pay-off. This is a space that a local home service business would normally occupy. But a company like Handy (an operating business of ANGI Homeservices that IAC, a multi-billion-dollar company, owns the majority of) leverages the app-based gig economy model to fulfil customer demand, which shifts risk to workers. As is the case with Uber, a worker under this model must invest in his or her own tools and materials, eliminating the need for companies like Handy to worry about the capital expenditure required to enter new markets.
The good news for small businesses is that they can take advantage of technology that contains the capabilities many gig economy tech companies are built on, without the limitations, and often exploitation, that apps such as Uber and Handy cause. It is easier than ever to find a solution that provides the ability to connect service providers with customers, automate work requests, scheduling and communication, optimize routing, and integrate payment. Technology platforms today can serve as the backbone infrastructure for a business and simplify the process of running a company by streamlining the operational capabilities. It allows organizations to focus on tasks that create value, thus staying competitive against larger corporations and enabling small business to take control of their own destiny.
It is these technology platforms that capture the true entrepreneurial spirit of what the gig economy should represent. Workers are given the tools they need to control their career path and reap the full benefits of their hard work. They can turn passion into a viable business, rather than serving as an on-demand employee for large multi-national corporations.
As we look toward the future, it is the assistance of these technologies that will help to shape the evolving nature of the gig economy. With the increasing desire to break free from the restrictions of a traditional job, the gig economy will continue to form the business landscape. If workers continue rebuke the notion of serving as on-demand employees for corporations, the gig economy just may benefit businesses in the end.
