It's time to do something about the financial perils of gig work
The gig economy is creating financial hardship for millions of American workers, even as the overall economy continues to expand.
The gig economy is booming as more Americans opt for job flexibility versus the traditional nine-to-five. However, this rapid growth is not without resistance. Protesters and government officials are urging gig economy giants, like Uber and Doordash, to embrace employer status. Why is this such an important initiative? Because gig workers are struggling to make ends meet, while corporations are capitalizing off of the workforce’s back.
Today, the U.S. economy is healthy—in fact, it’s better than healthy. According to the Bureau of Labor Statistics (BLS), total employment is expected to increase by 20.5 million jobs between 2010 and 2020, with 88 percent of all occupations experiencing this growth. While it’s easy for the BLS to make this determination, they’re unable to accurately measure the current state of our temporary workforce. Due to great confusion over the term “gig work,” estimates of how many Americans take part in non-full time work vary greatly—not to mention how these workers are faring financially.
Related: The external workforce: It’s more than a gig
The gig economy is creating financial hardship for millions of American workers, even as the overall economy continues to expand. So, how can we realistically say that the U.S. economy is thriving when we’re not considering the status of a great portion of the country’s workforce?
Gig workers are struggling
The BLS estimates that there are 5.9 million contingent workers in the U.S., while a study from Upwork found that there are 57.3 million gig workers. Ignoring the vast disparity between these two estimates, whatever the number is, a decent portion of America’s workforce is struggling financially.
According to a Federal Reserve report on economic well-being in the U.S., workers who supported themselves through the gig economy struggled financially far more than the average person. Fifty-eight percent of full-time gig workers said they would have a hard time coming up with $400 to cover an emergency bill — compared to 38 percent of people who don’t work in the gig economy. Both numbers are alarming, but the gap suggests that this informal economy is destabilizing to those who power it.
To make matters worse, gig workers typically don’t receive benefits and protections, such as worker’s compensation and health care. In other words, the group of people that would most likely need to dip into their pockets for an emergency expense are the same people who financially wouldn’t be able to.
Why is the gig economy growing?
Today, finding a job is undoubtedly easier than it has been in previous years, but finding a good one isn’t. And the gig economy is partly to blame. Sure, people turn to the gig economy for the flexible hours, but for many, the easy and immediate access to wages through gig economy platforms is the only way to make ends meet.
The growth of the gig economy is also driven by corporate America who classifies their workforce as independent contractors to avoid the costs associated with classifying them as employees. For instance, if Uber and Lyft were required to embrace a traditional employer status, they could incur increased labor costs of 20 to 30 percent.
Even more traditional retailers are embracing the gig economy. Home improvement giant Lowes recently announced their plans to lay off thousands of maintenance and assembly workers, whose jobs will be outsourced to independent contractors. This move is a direct repercussion of the labor shortage, which is pressuring employers to increase pay to attract talent, subsequently forcing them to adjust their staffing plans to make up for the costs.
The solution: Embracing employer status
Understandably, the gig economy is an attractive and cost-effective staffing option for business owners. However, the moral dilemma associated with not providing a workforce with at least minimum wage and access to benefits is the real issue at hand. Labor groups and government officials have taken note, and are pushing back against gig economy giants for undermining centuries of worker’s rights by strategically classifying their employees as independent contractors.
Gig workers themselves are also taking stand. In particular, tech giants like Google have been in the limelight as of late, as their bevy of independent contractors have stepped up to request the same basic employee rights that the company’s full-time employees are privy to. Last December, Google’s contractors sent an open letter to CEO Sundar Pichai, demanding the same benefits, protections and basic corporate communications as full-time employees. These types of bold initiatives are powerful steps forward in changing the unjust tribulations facing gig workers, but more needs to be done.
As tech has undeniably powered the growth of the gig economy, it can also be used to enforce change. Platforms that embrace employer status of a company’s workforce and then leases those workers back to the operator facilitate a best-of-both-worlds scenario for all parties. The workforce is able to receive benefits and protections, and business operators don’t need to concern themselves with high labor costs, tedious employee paperwork and other administrative burdens that come with embracing employer status.
It’s easy to say that the economy is thriving, especially in comparison to recent years, but is this statement factual given that a vast portion of America’s workforce is struggling financially? In order to make change and empower the nation’s gig economy financially, business operators need to step up and accept their dutiful position as employers.
Scott Absher is CEO and co-founder of ShiftPixy.
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