the gig economy and the future of work

THE GIG ECONOMY AND THE FUTURE OF WORK

NATHALIA MAGANHA

THE GIG ECONOMY WORK TRANSACTED

THROUGH DIGITAL PLATFORMS

DEFINITION:THE GIG ECONOMY


CHARACTERISTICS

Online platforms connect workers and customers

The payment is intermediated by the platforms

Users work whenever they want

A rate is paid for a specific task


WHO CAN BENEFIT FROM IT?

This formula is generating significant benefits for entrepreneurs from different industries. Did you know? Uber became the fastest-growing startup in all history, and today it is already higher valued than Ford or General Motors.

CONSUMERS

WORKERS

ENTREPRENEURS

The gig economy is democratising the access to many types of services, making them more affordable and highly efficient.

Workers see the platforms as alternatives to generate income at convenient and flexible dynamics.

DO NOT MIX IT WITH THE SHARING ECONOMY.


▸ Online platforms where work can be transacted

‣ Examples: ‣ Drivers can connect to Uber to offer rides ‣ People with specific skills can connect to

Fiverr to offer any service in their area of knowledge

THE GIG ECONOMY VS

▸ Systems that facilitate the sharing of underused assets

‣ Examples: ‣ Blablacar connects travellers with

drivers with empty seats ‣ Airbnb connects people looking for

accommodation with those with spare rooms or underused properties

THE SHARING ECONOMY


BUT THEY DO HAVE THINGS IN COMMON.✓ TRUST SYSTEMS

Reputation is a fundamental aspect for building relations in a collaborative consumption. In a recent survey about the sharing economy, 69% of the interviewees said that they would not believe in sharing economy companies until they were recommended by someone they trust.

✓ CRITICAL MASS In order to have that, early adopters have create a critical mass for social proof, enabling

others to overcome psychological barriers related to new behaviours. Also, only with a wide range of choices consumers will feel satisfied, enabling collaborative consumption to compete with conventional platforms.

✴ Example: Uber Pool This specific service from Uber allow passengers to share the rides with others going to the

same direction. It combines the essence of the gig economy (the driver working through the platform) and the essence of the sharing economy (passengers sharing empty seats).

ANALYSIS

FREELANCING IS BOOMING

of the Americans participated in some sort of freelancing in 2015

of British freelancers see their roles as long-term

34% 40%of the total American workforce is expected to participate of some sort of freelancing as of 2020


3/478%of the freelancers would recommend it to friends and family

SNAPSHOT OF THE GIG ECONOMY

of the working-age population participates in the gig economy today

>1% 2/3is what Uber represents in the Gig Economy, being considered a “quintessential” employer for gig work


$1.3is what the gig economy can inject in the global economy as of 2025, according to McKinsey and Company

trillion per year


THE UPSIDE OF THE GIG ECONOMY✓ FLEXIBILITY AND FREEDOM

The gig economy allows workers to have their own schedules, work from anywhere and pick only projects of their interest.

✓ MOBILITY By spending less time with displacements, people have more time to focus in activities that really matter, relieving the traffic and polluting less.

✓ GLOBAL PRODUCTIVITY By putting the right people in the right place, productivity increases along with job satisfaction.

✓ MINORITIES OVERREPRESENTED Studies have shown that minorities tend to be overrepresented in the gig economy. In addition, some issues at work, previously limited by physical barriers, tend to be solved in the new economy, facilitating the access of those with special needs.


THE DOWNSIDE OF THE GIG ECONOMY✓ ALMIGHTY COMPANIES

Workers rely on the platforms for work, but platforms can take extraordinary measures without their consent.

✓ WHO IS RESPONSIBLE? In the case of negative experiences, companies tend to avoid responsibility alleging that they are simply intermediators between parties.

✓ LACK OF TRANSPARENCY The lack of transparency is not only felt by consumers, but also by workers that are not aware of certain algorithmic decisions.

✓ INCUMBENT´S LACK OF COMPETITIVENESS In certain industries, specific regulations are necessary, and if the new entrants are not subject to equivalent regulations, the competition becomes unfair.

✓ INDEPENDENT CONTRACTORS OR “EMPLOYEES”? Some workers are working full time through the platforms, but their classification as independent contractors would be depriving them of protections guaranteed by law, such as the minimum wage.

✓ WAGE DEGRADATION The gig economy is making services more affordable, but also raising questions about the real cost of that.

CONCLUSIONS


GIG ECONOMY COMPANIES TEND TO FOLLOW THE SAME PATTERN.✓ Their main asset

is the SOFTWARE INTERFACE

✓ They match CONTINGENT WORKERS with those looking for a specific service

✓ The platforms receives a FEE relative to the task

✓ INFORMATION is being generated and kept


MILLENNIALS ARE DRIVING THE GIG ECONOMY, BUT THERE IS A SPECIAL POTENTIAL FOR BOOMERS TOO.

MILLENNIALS BOOMERS

✓ First digital natives ✓ Largest generation of the global

workforce ✓ The most optimistic group about

freelancing

✓ Interested in new projects ✓ Willing to work if they could have

flexible schedules ✓ 54% are far beyond ideal retirement

savings


THE IDEAS BROUGHT THE PLATFORMS ARE NOT NECESSARILY NEW, BUT INTERNET IMPROVED THEIR REACH AND EFFICIENCY.There have always been people willing to drive others to the airport in exchange of a payment, regardless of regulations.

The difference is that internet has put all of those drivers and passengers together, and through reviews and rating systems, created a network of trust, making it easier to rely on.

IN THE NEW ECONOMY, INFORMAL SERVICES ARE GETTING ORGANISED.


THERE IS AN IMBALANCE REGARDING THE DISTRIBUTION OF ITS BENEFITS.

Deprived from the securities that traditional forms of employment would provide and powerless towards the rules imposed by the platforms, workers are the most fragile point of this chain. At the present moment, earnings derived from the platforms represent a relevant supplemental income for those who already enjoy the benefits of a traditional job, but far from being an ideal choice for those who are working full time through them.


SERVICES OFFERED BY THE GIG ECONOMY ARE LIKELY TO BE DISRUPTIVE.Those who tried them tend to consider them:

✓ MORE CONVENIENT ✓ MORE EFFICIENT ✓ WITH BETTER FACILITIES ✓ WITH BETTER PAYMENT METHOD ✓ BETTER GENERAL EXPERIENCE

when compared to traditional platforms. In addition, those who never tried them are likely to try them soon, and only a few minority reject them in this first moment.


DISRUPTION IS A POSITIVE FORCE; AND INCUMBENTS CANNOT CLOSE THEIR EYES FOR INNOVATIONS.They have to keep innovating to avoid being surprised by disruptions. The innovation must be for:

✓ PRODUCTS ✓ SERVICES ✓ PROCESSES ✓ ORGANIZATIONAL

STRUCTURE


IT CHANGES THE DYNAMICS OF COMPETITION.IT EMPOWERS THE SMALL TO COMPETE WITH THE GIANTS

IT MAKES THE COMPETITION GLOBAL

What can result in downward pressure in wages, especially in the

developed countries.

Collaborative economies give ordinary people the chance to

compete with big chains.


THE NEW ENTRANTS NOT ONLY TAKE INCUMBENT´S MARKET SHARE, BUT THEY ALSO INCREASE THE SIZE OF THE MARKETS.

SAN FRANCISCO, UNITED STATES

2012. Annual earnings in the taxi industry BEFORE Uber:

2014. Uber´s annual earnings in the city:

million$120 million$500


Workers current expectations

towards workplace:

✓ Freedom ✓ Flexibility ✓ Autonomy ✓ Purpose

THE GIG ECONOMY

THE GIG ECONOMY IS A MATCH WITHIN THE WORKER´S NEW EXPECTATIONS.

HIERARCHICAL

BUREAUCRATIC

JOBS

RECOMMENDATIONS


WHAT TO DEMAND FROM GOVERNMENTS AND COMPANIES✓ UPDATED LABOR LAWS

They have to be revised in order to better fit this new world of contingent workers, guaranteeing fair practices for all parties.

✓ REGULATION OF THE SERVICES In most of the industries, the services have to be regulated in order to guarantee a fair level of competitiveness. Governments have the challenge to do that without discouraging innovation.

✓ BETTER TRANSPARENCY RULES Companies have to be more transparent and ethical with consumers and workers.


REFERENCES✓ Botsman, R., & Rogers, R. (2010). What’s Mine Is Yours: The Rise of Collaborative Consumption. New York, NY:

HarperCollins Publishers.

✓ Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What Is Disruptive Innovation? Harvard Business Review. Retrieved from https://hbr.org/2015/12/what-is-disruptive- innovation#

✓ Horowitz, S., & Rosati, F. (2014). 53 Million Americans are freelancing, new survey finds. Freelancers Union. Retrieved from https://blog.freelancersunion.org/ 2014/09/04/53million/

✓ JPMorgan Chase & CO Institute. (2016). Paychecks, Paydays and The Online Platform Economy. Retrieved from https://www.jpmorganchase.com/corporate/institute/document/ jpmc-institute-volatility-2-report.pdf

✓ Katz, L. F., & Krueger, A. B. (2016). The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015. Scholars at Harvard. Retrieved from http://scholar.harvard.edu/files/lkatz/files/katz_krueger_cws_v3.pdf?m=1459369766

✓ McKinsey & Company. (2015). A labor market that works: connecting talents with opportunity in the digital age. Retrieved from http://www.mckinsey.com/global-themes/employment- and-growth/connecting-talent-with-opportunity-in-the-digital-age

✓ Uber is higher valued than GM, Ford and most of the S&P 500. Nasdaq.Retrieved from http://www.nasdaq.com/article/uber-is-higher-valued-than-gm-ford-and- most-of-the-sp-500-cm551162#ixzz49QhVcRkh

THE GIG ECONOMY

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