More CEOs Should Consider the Potential of the Popular Gig Economy

Hillary Clinton and Jeb Bush are making political points about the “gig” economy. Should CEOs be focusing on the trend in their business strategy?

The gig economy, of course, refers to the increasing fragmentation of jobs into one-time or limited-time engagements of independent contractors rather than traditional full- or even part-time employment. Major digital disruptors such as Uber car-sharing and the Airbnb vacation-rental site essentially have created this new layer of the economy with the popularity of their services and by creating revenue opportunities for individuals who want to provide them.

Republican presidential candidate Bush made a point of backing the entrepreneurial drive of Uber by taking a ride with an Uber driver recently, while Democratic presidential favorite Clinton made a point of raising concerns that workers could be exploited in the gig economy.

“CEOs in numerous industries besides transportation need to stay ahead of how the rise of the gig economy might affect them.”

Uber CEO Travis Kalanick is escalating his company to high-profile leadership in the gig economy as it tilts against vested interests such as city bureaucracies, taxi services and their licensed drivers, who are in favor of restricting for-hire vehicles. Uber even took out a full-page ad in The New York Times railing against Mayor Bill de Blasio and proposed curbs on Uber’s services in New York.

But CEOs in numerous industries besides transportation need to stay ahead of how the rise of the gig economy might affect them, for good or ill, and the opportunities it may create for them, not the least of which is the face that gig workers can save companies on labor costs and employee social-security taxes.

The number of Americans in all industries holding jobs mostly performed by part-time freelancers or part-time independent contractors grew to 32 million from just over 20 million between 2001 and 2014, according to Economic Modeling Specialists, rising to almost 18% of all jobs.

Apple, for example, directly employs fewer than 10% of more than 1 million workers around the world who are involved in its business. A company called HourlyNerd, based in Boston, connects alumni of top business schools and other specialized programs to companies with projects in need of completing, ranging from market analysis or examinations of pricing strategy, according to the Times. Surely the availability of gig workers in those disciplines is of interest to many CEOs.

Just as the gig economy is spreading, however, and becoming more mainstream, so are complications that business chiefs also will need to examine. For CEOs and company owners, political opposition to this type of employment is one thing, but legal opposition is a more immediate threat.

Some workers are suing over working conditions, compensation and other issues that naturally are sharper in the employment of independent contractors than traditional employees (one example that received heavy media exposure was the FedEx case).

“The rising legal retribution,” says Fast Company, a bible of the digital economy, “is a huge threat to the gig economy” because it could eliminate or reduce the huge labor-cost advantages. “Lose this workforce structure—either by a wave of class-action suits, or through the collective action of disgruntled workers—and you lose the gig economy.”

Read more:

Proof of a ‘Gig Economy’ Revolution Is Hard to Find (The Wall Street Journal, July 27, 2015)


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