Pandemic Unemployment and the Gig Economy

Last Month, I asked the question: “Who is the Gig Economy?” My intent what to point out that when the news media talks about the Gig Economy they often just cover those who work as independent contractors for larger corporations like Uber, Airbnb, and Instacart. My point was that this did not include the millions who work independently from the corporate infrastructure of these multi-national corporations.

In this article, I want to ask another question: “Will the current number of unemployed swell the number of Gig Workers?” The current pandemic has created the highest unemployment numbers since the Great Depression: over 30 million people have filed for unemployment!

While it is possible that many of these people will find work again when the economy recovers, it may be some time before that happens. In the meantime, millions of these workers will look for work elsewhere, and the quickest way to find it is in work they already know how to do, closely related to what they did before.

Since there will be fewer jobs with companies, many of these workers will start their own businesses doing the same work, but on a contract basis. Some may even end up working for the companies that let them go, doing contract work. This is because companies still need the work to be done, but they have fewer hours available and they need to reduce costs. So, who better than the people who did the same work before?

In essence, these contractors will enter the gig economy. Until the current pandemic is brought under control, we will not know how many of these gig workers will remain in the gig economy and how many will return to their former jobs. However, there is one thing we can say with some certainty: it is a larger number than it would have been without a pandemic. The current crisis will inevitably drive many more people to the gig economy and many of them will stay there.

The most important benefit of gig work

It is often said that the gig economy is attractive because of the freedom it provides. People often site flexible hours, the ability to work from home, and the ability to choose the work they want to do, but this is only a small part of it. The real freedom that matters is that which comes from setting one’s own salary. So why do gig workers have greater freedom in setting their own prices?

Because companies have less work for them, gig workers need to work for more than one company to make ends meet. In doing so, gig workers become less dependent on each one. If a relationship with one company falters, the other companies help support the gig worker through this period. Unlike single-company employees, gig workers are no longer dependent on a single employer for their entire financial wellbeing.

From the perspective of the gig worker, this also creates greater leverage to negotiate higher prices for their services. Unlike a single-company employee, who will seldom request a higher salary for fear of angering their superiors and jeopardizing their only source of income, gig workers have far greater leverage to do this more regularly. If salaries in a specific industry rise sharply because of demand, gig workers will be the first to follow the trend.

Why all “gig workers” are not the same

Uber drivers, Amazon delivery people, and Doordash employees are not truly gig workers because they do not have that freedom. There are only 2-3 large corporations in each each industry, so those workers do not have the luxury of being able to set their own prices. Losing one contract can amount to losing half or a third of their entire salary.

If corporations in an industry have such a dominant position to take that leverage away, then that is an industry that is not allowing gig work to thrive. California’s AB5 law would even argue that these corporations need to provide benefits not unlike they are required to for their regular salaried employees. More importantly, that type of work is not the representative of the gig economy, as I suggested in my last article.

However, for those industries where gig workers have more companies competing for their skills and experience, the gig economy will thrive. This is especially true for highly skilled work requiring experience, training and education. This is because salaries will rise with demand, and this will bring more people to the gig economy. As always, money talks.

Conclusion

We can’t know how many skilled and experienced people will stay in the gig economy once the current crisis subsides. However, there is no denying that the basic need of people to earn a living will drive many people there until it does. If there are less jobs, then starting a small company on one’s own may be the only option. While need will drive them there, many will find that they can earn higher pay in the gig economy than they could in a single-company job.

This influx of workers into the gig economy, particularly for in-demand industries such as programming, accounting, interior design, legal services, and project management, will also make those industries more flexible and stronger. They may become the first to come out of the economic recession. In other words, this economy may actually be saved by gig workers.

At the risk of sounding overly dramatic, one could conclude that the leveling of leverage between the companies and gig workers, could actually help both sides survive and thrive. It will be a symbiotic relationship that may become the model for how we emerge out of the economic recession.