On-Demand Economy: a revolution of the job market?

The history of humanity is about constant change. Social, political and environmental transitions have been accompanying mankind throughout the centuries, so have economic transformations. Trade, money and capitalism, just to name a few out the numerous and groundbreaking inventions, which have shaped the life and productivity of people on Earth.

One of the greatest revolutions came in the early 1900s when Henry Ford created the first assembly line, giving a new definition to the division of labour. Production became a lot quicker and cheaper and consequently the luxury of automobiles finally came to be available for the masses. Many argue that the appearance and aggressive expansion of modern ‘on-demand companies’ will bring a similarly critical change in the job market.

On-demand companies connect freelance-workers with consumers by using computer technology. Need a chauffeur, doctor, lawyer or a consultant? You not have to do anything but choose from a great variety of freelancers, press a button on your computer and they are right at your door. In a manner of speaking, it makes life easier and more convenient for both the worker and the employer. But what is the cost of such great flexibility?

It is undoubtedly true that working flexibility is generally good. It gives the ‘employee’ the great advantage of freedom that is especially handy when it comes to organizing everyday life. However, they often overlook the fact that this type of freedom also makes them more vulnerable, especially when they get older. In our welfare states employers, companies pay for their workers’ health insurance, leave and pensions. But when there are only ‘occasional’ employers all risks are pushed back to the individuals.

Apparently, there is an immense need that Western governments respond to this phenomenon, otherwise the social nets that have been being built for long decades will soon turn into useless institutions. All Western systems of social care are highly tied to companies and thus, although not intentionally, grade freelancers and contract-workers as second-class citizens who are not provided the access to pensions and, at least to basic healthcare. Social support should be made tied to the individual, equally guaranteeing basic support for all citizens.

Nevertheless, we should not forget to mention that the introduction of such measures would require either the government or tax-payers to cover all the new costs. However, neither of these options is without serious drawbacks. In the former, tremendous strain would be put on state budgets. National economies are already in debt and a growth of expenditures would only lead to growing instability on the market that is most unwanted. In the latter, purchasing power would drop hence financial insecurity would grow. All in all, there is every likelihood that if the remaining tax-payers are made to support those who have for example, never built up pensions, there will be a distinct possibility that civil unrest will grow.

Albeit many suggest therefore that we should get back to 'traditional' employment patterns, the bad news is that all trends suggest that this transition is irreversible. About 53 million Americans are already working as freelancers and their numbers are gradually increasing. Earning money just by putting one's idle devices and time to use is definitely alluring for many, so it may be safe to deduce that the trend will not change. Consequently, states will have to adapt taxation and social care systems to the changed circumstances and will also have to accept that Adam Smith's 'invisible hand' will be influencing the market significantly more than it has moderated it since John Maynard Keynes' and Roosevelt's New Deal. And that may not be an easy task but it does not at all seem to be impossible.

On balance, the overall picture seems to be that although the growing importance of on-demand economy will lead to crucial socio-economic changes, we can presume that, albeit at great costs, but governments will be able to take up the challenges of the transition of the job market. I believe that this change will not be as radical as some would claim, hence I would hesitate to call this a revolution.