Declaration of Independents: Thinking Beyond the Gig Economy
It might be time to stop calling it the 'gig economy.'
We live in a deeply entrepreneurial society. One of the quintessential elements of the American dream is the ability to bypass the traditional model of 9-to-5 employment and establish a business. Many Americans cherish the opportunity to be their own boss, which is why there are almost 30 million small businesses in the country. And over the past few years, this attitude has seen a resurgence in interest.
Last year, former Intuit CEO Brad Smith said in an earnings call that an analysis by his company and Emergent Research found that these workers comprise about 34 percent of the workforce -- a number expected to increase to 43 percent by 2020. While some of this growth can be attributed to the effects of the 2008-2009 recession (such as the reduction of full-time jobs), this isn't the only variable.
It's clear that the so-called "gig economy" is here to stay, but we shouldn't assume it's a fixed phenomenon. As more people decide to make a living on their own, other entrepreneurs will seek ways to partner with them and give consumers greater access to their products and services. This can increase convenience for consumers, provide more work for contractors, and offer a level of security and reliability that wouldn't exist without the influence of a third party.
How companies are powering today's shifting workforce
While there's no shortage of pessimism about the gig economy, there are also good reasons to be optimistic. Many Americans now enjoy a level of freedom they would never have with a traditional job, and the gig economy is being expanded and formalized in a number of key ways.
In fact, it may even be time to start thinking outside the narrow confines of the "gig economy," a term that implies a certain level of transience and doesn't incorporate the role of large technology platforms that contractors are increasingly using. Perhaps a better term would be the "fluid economy," which captures all the changes we're seeing -- from the flexibility enjoyed by independent contractors to the widespread use of digital resources by consumers.
We'll continue to see platforms like Uber transforming this space, and there will be more and more streamlined ways for customers to do business with dedicated contractors -- many of whom are doing independent work full-time. The word gig makes most of us think of a short-term job or something meant to supplement a more regular stream of income, but this often isn't the case in the fluid economy. Many of the individuals who are sourcing jobs through these digital platforms or marketplaces are experts at their craft who run full-time businesses.
There's no doubt we'll see more mutually beneficial arrangements between independent contractors and companies in the coming years. This will transform a huge range of industries, from driving professions to hospitality as we begin to see more platforms that connect businesses with these workers.
Why more and more people are doing independent work
Just as the relationships between established companies and independent contractors challenge traditional notions about freelance work, there's considerable evidence that the fluid economy is undergoing a few substantial changes.
According to an October 2016 report by the McKinsey Global Institute, there are 162 million people in the U.S. and Europe who do some form of independent work. Despite the perception that many participants in the fluid economy are there out of necessity, the report found that 30 percent of independent workers choose to rely on freelancing for most of their income, while 40 percent use it to supplement their primary source of income. Only 14 percent are reluctantly earning most of their income from freelancing, while 16 percent are forced to do independent work because their regular jobs don't pay enough.
These numbers support the idea that we're witnessing a psychological and behavioral shift toward greater participation in the fluid economy. People are choosing to accept the risks that come with sidestepping traditional employment. These shifts are also being driven by the availability of technology that makes it much easier for independent workers to connect with clients and market their products and services to customers.
The gig economy, while often convenient, was also a choppy experience for the customer as the ecosystem was developing. The more evolved, fluid economy has given way to a consumer base that also expects fluidity in the purchasing experience. Thus, digital platforms whose sole purpose is to act as a giant network or exchange, have to build their companies keeping this in mind.
A 2016 report by the Brookings Institution points out the role of the internet in this change: "Overall, there has been a clear surge in nonemployer firms' business activity in the last decade, which almost certainly reflects, at least in part, the rise of online platforms."
Beyond the gig economy
As the resources for independent contractors continue to multiply and more companies become interested in working with them, we're going to see a significant expansion of the fluid economy. But we're also going to see a transformation.
While many small businesses have been priced out of online markets by their larger competitors, digital platforms give them an opportunity to compete. We also assume many of the risks that would normally be passed onto consumers, such as the responsibility to assess property damage and hold contractors accountable for failing to complete a job.
We're entering an era of economic fluidity unlike anything we've seen before. Although labor mobility has fallen in recent years, the digital economy has produced unprecedented opportunities for consumers, businesses and independent contractors. The best way to take advantage of those opportunities is to embrace change. Established companies don't have to fear the fluid economy -- they can be a part of it.
Matt Ehrlichman is the CEO of Seattle-based Porch.com, the home improvement network. Prior, Ehrlichman was chief strategy officer at Active Network responsible for 85 percent of the P&L. Ehrlichman joined Active in 2007 and helped grow its revenues from $65 million in 2006 to $420 million and a 2011 initial public offering. Before joining Active, Ehrlichman was co-founder and chief executive officer at Thriva, which was acquired by the Active Network in March 2007 for $60 million.