Addressing the Backlash: What's an Accurate Picture of the Gig Economy?

Ignore the misconceptions out there. The gig economy is more beneficial than you think.

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By Tx Zhuo

Opinions expressed by Entrepreneur contributors are their own.

As the gig economy rises in both its prevalence and power, detractors will continue to come out of the woodwork. The latest backlash has arisen over the release of Spare5, an app that allows people to make extra money during their free time by performing quick tasks for businesses, such as tagging photos or writing descriptions for products.

And then there's the labor-rights aspect: A detractor, writing for Alternet, labeled the lower income gig workers earn (because they're paid by the hour) as the "nanoization" of labor. The resulting exploitation of "the 1099 economy," this writer argued (the 1099 being the tax form contractors use), serves only to raise profit margins for corporations.

Yet, while exploitation certainly does exist, the main problem with this argument is that it misunderstands the very nature and purpose of the gig economy.

Flexible independence with gig work

There's an assumption that contractors working as part of the gig economy always regard these jobs as full-time opportunities. Instead, many workers actually use these gigs to supplement to their 9-to-5 jobs, and don't resent doing "nano tasks" in between phone calls and meetings, or during their commutes.

With gig work, you're often working as an independent contractor in your spare time. This provides a massive amount of flexibility regarding when and how often you work. You're in control of your cash flow and constricted only by the number of hours you're willing to put in (and capable of).

With more and more jobs in the gig economy, contractors also have the advantage of writing off many expenses related to their gig work, which can go a long way toward recouping what was spent at the outset. In some cases, tax deductions can partially cover expenses from the purchase of a new car (if it's used heavily for freelance work) or an office space, which is the epitome of exploiting idle resources.

The business offshoots of the 'sharing' part of the gig economy

Another problem with the argument against nanoization is the failure to mention the businesses that develop as a result of it, certainly an added benefit of the initial service itself. Airbnb, for example, has created an entirely new market where competitors such as Pillow and HotelTonight create value for both consumers and workers across a wide spectrum.

Related: 5 Reasons You Should Join the Sharing Economy Revolution

In addition there are the indirect benefits of the gig economy. Consider, for example, how Uber and Lyft have reduced traffic, carbon emissions and the number of accidents related to drunk driving as a result of their services.

Avoiding the dangers

Of course, the sharing part of the gig economy is not without potential pitfalls. There will always be situations where contract positions are better suited for W-2 status.

Related: W-2 or 1099? Why It Pays to Classify Your Employees Correctly.

That's why it's important to ensure that every company work fairly with 1099ers -- again, referring to those independent contractors who work outside the standard W-2 mold. Gig businesses looking to thread the needle must strive to:

1. Ensure build-in transparency. Write all key terms of your employee agreement into the gig worker's contract, and make sure he or she understands these terms. When possible, sit down with 1099ers to explain the terms in person. It's important that they understand the limitations, suggestions and exclusivities that fall under the gig work you offer. No one should have any surprises once an agreement is put into place.

2. Make culture a priority. Culture isn't just for full-time workers. It also applies to those with a 1099 status. Including these outside workers as part of your company culture makes for a happier work environment for all, and many 1099ers may become proponents of their employers' brands -- even advocates.

3. Optimize contract time. Your 1099ers want to maximize their profits just like everyone else, so try to optimize their time. While drivers get upset when Uber cuts rates to improve business, those lower fares may theoretically make drivers more money in the long run. The company's vision is to reach the "perpetual ride," where drivers always have riders in their cars (thus, there's no down time, which leads to happier drivers).

4. Walk in the contractor's shoes. This can occur in small ways, such as an employer understanding what comprises the best payment cycle. For high-value contractors, such as designers or developers, lay out payment schedules in advance and offer to pay partial amounts upfront. As a result, your contractors will feel more confident, because trust has been established early on.

The message overall is that it's important for companies to cultivate trust and community around their workforces -- both those who are W-2ers and 1099ers. Without trust and community, after all, how can anyone expect people to give the most to the task at hand, so that the gig economy offers all the good things it should?

Related: How to Foster Company Culture with Remote Employees

Tx Zhuo

Managing partner at Karlin Ventures

 TX Zhuo is a managing partner of Karlin Ventures, an L.A.-based venture capital firm that focuses on early-stage enterprise software, e-commerce, and marketplaces. Follow the company on Twitter.

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