Rough Notes

A few days ago I tackled the common pushback against gig economy platforms (or talent aggregators as I refer to them) from a macro-perspective. Today, I want to focus on the micro level in a b2b environment¹.

One of the biggest issues currently discussed with regards to the gig economy – as it currently presents itself, one ought to add – is that it forces people into precarious conditions. Instead of being hired to a regular employment contract which offers stability, the argument goes, people are forced to take one-off jobs. Let’s examine what actually goes on:

Gig-economy platforms, by means of aggregating and coordinating fragmented markets of (mostly service) labor, came up with a far superior user experience on both sides of the freelancing market. It has become a lot easier for both, suppliers and buyers, to connect with one another.

Indeed, this creates an incentive for companies to increasingly rely on project-based contractors. From their point of view this makes sense, at least to a degree: They can manage their payroll more flexible (which is amplified in markets with very employee-friendly regulation). It is particularly useful for one-time, experimental projects. One might even argue: Some innovative (at least from the company’s perspective) projects wouldn’t happen at all if the company would have to do it with regular employees only. Additionally, you can look at it as a means of risk-distribution. In a VUCA world, that is of increased importance for every company.

However, heavily relying on gig-economy workers comes with a downside too. As most companies’ structures aren’t set up and finetuned for this type of work, there are all kinds of friction (contractors have no access to internal systems/data, no established network within the company etc.). Even more detrimental: Every contracted person isn’t an employee. The more critical a skill is, the more problematic this becomes. There are two possible scenarios from a companies perspective:

1. Contractors stay on board for a very long time, often eventually being offered an employment contract (which the person might or might not want to sign). In either case s/he is a de-facto employee.
2. Contractors change a lot which results in decreased efficiency in most cases because you need to repeat the onboarding process several times; there is value in knowing each other when it comes to working together.

As a result the company needs to care about the (for lack of a better word) ‘customer experience’ of its contractors². Of course, the rarer a given skillset is, the more valid this concept becomes.

The result: If companies continue to rely on a growing number of gig-workers, they’ll have an interest in creating a better experience for them. This will most certainly include some mechanisms that offer increased stability to contractors.

(Note that I don’t argue this will solve all the issues. It’s only one piece of the puzzle. I hinted at others here and here.)

Alas, I’m more pessimistic when it comes to b2c services (rides, housework etc.). There, I believe the greater responsibility falls to the aggregators. After all, they have a very real self-interest in building and maintaining healthy ecosystems which definitely involves a sustainable supply-side.

Update 16/11/06: I just came across this interview with TaskRabbit CEO Lauren Goode. Her argument is basically among the same line:

Will support beyond minimum wage, things like benefits, change for contractors in a significant way in the next five years?

There are already smaller companies out there that are trying to separate the benefits that we get from traditional employment with the actual employment. If you separate the benefits, you can look at them individually and determine how you want to offer those services. We’ve partnered with some of them to make some of them available.

… There are already early signs that businesses are being built around setting up portable benefits that I, as an individual, can extract and use, and build retirement, do tax planning, create a health care structure for myself.

I think over time those things will naturally continue to grow as the work force grows. The businesses will follow. I hope that the structures, from a public sector standpoint, will evolve by the time we build great companies around it.

¹ A distinction often overlooked by popular criticism. B2b and b2c are very different ecosystems where different dynamics are at work!

² Your impulse (as was mine) might be to limit this to the condition that a company eventually needs a given contractor and her/his respective skillset continuously. But there are two counterarguments: First, if that’s the case is often only clear in hindsight. Namely, once you know if something turns into a regular component of your business. Second, companies love standards. If they introduce certain processes, they will simply apply them to any contractors more often than not.