The Gig Economy: Convenience and Controversies

Source: U.S. Chamber of Commercegrown by over 15 percent in the last decade

Whether calling an Uber or ordering Tacoria on DoorDash, the gig economy has become integrated into our daily  life. In contrast to the traditional economy, the gig economy relies on independent contractors and freelancers who take on flexible and temporary jobs, or gigs, on demand instead of through contracts. With the continued rapid growth in technology, gig economy-focused companies, such as ride-hailing or delivery businesses, have made their services available to customers at a touch of a phone screen. Yet, despite the meteoric rise of the gig economy and the convenience it offers to consumers and workers, it has not come without controversy how businesses treat their workers.

The gig economy has grown by over 15 percent in the last decade. This expansion has been fueled by the increasing convenience of gig services through technology and apps, as well as the typically competitive prices of gig services for customers combined with work flexibility for contractors. The cheaper prices come from the slashing of bureaucratic and administrative costs that traditionally are associated with hiring full-time employees. This has enabled gig economy businesses to increase their profits while keeping prices low to attract customers. Many contractors have also benefited from this low-commitment labor model. While over a third of the US workforce now participates in the gig economy, the majority of these participants also hold another primary job. Gig work is a flexible way to supplement, not replace, one’s main source of income. In conjunction, the benefits for gig workers, consumers, and companies have enabled the gig economy to enjoy rapid growth. 

Despite what might seem like a beneficial business model for all parties, the rise of the gig economy has raised concerns about how workers ought to be treated, and not everybody believes that the gig economy is truly fair for all. In fact, many states have passed laws that restrict gig economy-focused businesses. This pushback has largely stemmed from the debate on whether gig workers — such as Uber drivers — are independent contractors, a job status that is not entitled to the same benefits and protections as contracted employees. The same reason that many gig services are cheap has also become a point that gig workers are simply exploited for their work.

Although states often have slightly differing definitions of independent contractors, they typically require them to have autonomy in work hours, standards, and locations. Many states also include that independent contractors for a company must be performing work outside the normal course of business for that company, such as a freelance accountant doing taxes for a restaurant. Make note that while rideshare and delivery drivers have received the most prominence in the rising gig economy, other occupations such as freelance accountants and photographers have also long been considered gig workers. The difference between these workers lies in their method of employment. Typically, accountants and photographers truly are freelance workers — they set their own hours, standards, and prices. In addition, when hired by a company for a temporary role, they conduct work that is outside the usual scope of business. Meanwhile, this litmus test becomes murkier for other gig services. Uber and Lyft, for instance, contend that they are actually technology companies that mediate ride requests between customers and drivers. For these companies, having to recognize many of their workers as employees would drastically cut into their bottom line. However, whether their argument is believable is contentious. 

Nevertheless, it appears that the gig economy is here to stay. California, most notable for passing a state-wide law that required many gig businesses to classify their workers as employees, ultimately could not enforce this standard as Uber and Lyft retaliated with legal challenges. Then, in a recent election, Californian voters passed Proposition 22, which allows delivery and ride-sharing businesses to continue using their independent contractor-models. With future projections showing gig work becoming increasingly common, these questions over how workers ought to be classified will only be amplified.