What it means to work in today’s gig economy

gig economy

A couple of decades ago, the bulk of those in the workforce had some form of a traditional, full-time job.

Whether working the 9-5 cycle or shift work, the common denominator among most jobs was stability.

Fast forward to the present, and the workforce is looking vastly different. Millennials aren’t seeking employment the same way that their parents did, while baby boomers who aren’t ready for retirement are turning to alternative options to stay in the workforce.

Rather than stability, many are pursuing jobs that offer flexibility. That change has given rise to the gig economy.

As the gig economy grows exponentially each year, there has been much discussion on what it means to work in today’s gig economy market.

What is the gig economy?

If the term “gig economy” has you thinking about a rock concert, you’re not far off.

As Wired explains: “The gig economy gets its name from each piece of work being akin to an individual ‘gig’ – although, such work can fall under multiple names.” But the gig economy isn’t just some niche market. It encompasses a broad collection of workers, including independent contractors, part-time staff, and freelancers. And its popularity has exploded since the 2008 financial crisis.

Platforms like Uber and Lyft are often the first that come to mind when referencing gig work, but they are far from the only ones. Gig workers are increasingly doing work for traditional companies who use them to complete short-term contracts that are often project-based.

According to the State of Independence in America 2018 report, the number of independent workers in the US rose to 41.8 million last year, up 2.2% from 2017. And that figure is only expected to keep growing.

By 2023, 52% of the private workforce is projected to have spent time as independent workers at some point in their lives. Those numbers certainly help indicate why so many believe that gig work will completely reshape the workforce of the future.

“The new norm is now more likely to be a mix of traditional and independent experience throughout one’s lifespan,” reads the report. “It’s not necessarily an either-or choice.”

The gig economy is also a significant contributor to the American economy. Independent workers generated about $1.3 trillion in revenue for the US economy in 2017, representing about 6.7% of the country’s gross domestic product.

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Labor Department weighs in

With the rise of the gig economy, there has been a lot of debate about the rights of these workers, namely those who find work via online platforms.

While many gig workers can earn a decent income – the Freelancing in America report found that 73% of full-time freelancers make more than they did at their previous traditional job – the same can’t be said for all independent contractors. For example, some rideshare drivers net around $12 to $15 an hour after expenses, according to one firm’s calculations. A study done by Cornell University found that among those surveyed who find work via apps, only 13% said they could fully support themselves that way, and many said they had to use public assistance.

For a while now, certain groups of gig workers have been fighting to be considered employees, and many labor experts and economists have agreed that more needs to be done to support these workers.

But the US Department of Labor (DOL) recently weighed in on the issue with an opinion that could have far-reaching implications for the gig economy.

The Labor Department provided the opinion after a lawyer working for an unnamed cleaning company reached out to clarify how gig workers should be classified. The department responded with a letter saying it classified the company’s gig workers as independent contractors, not employees. That distinction means the company in question doesn’t have to offer overtime pay, the federal minimum wage, or pay a portion of Social Security taxes.

The department reasoned that because the company in question doesn’t have mandatory training, licensing, or permit workers to file expenses, they are contractors. It also said the workers aren’t integral to the company’s business structure because they “do not develop, maintain, or otherwise operate” the platform.

The department’s opinion marks a shift from the position it took under the Obama administration. In 2015, the Labor Department issued an interpretation of the definition of “employ,” suggesting that under the Fair Labor Standards Act “most workers are employees.”

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The implications

Though the Labor Department’s opinion only applies to the company that requested it, many are anticipating it will have substantial implications for the gig economy.

According to the New York Times, in recent years, various gig-based companies have sought “legislation and regulatory rulings to ensure that their workers are classified as contractors.”

In its filing for a public offering, Uber claimed that having to classify drivers as employees would cause the company to “incur significant additional expenses” and that “any such reclassification would require us to fundamentally change our business model.” Uber drivers went on strike right before the company’s Wall Street debut to protest for better employment conditions.

As Reuters noted, the DOL opinion isn’t “legally binding, but can be presented in court to boost claims by plaintiffs or defendants in cases involving similar issues.”

EU’s ruling on gig workers’ rights

While the debate continues in the US over the rights of gig workers, lawmakers in the EU have taken a different approach.

Shortly before the Labor Department issued its opinion letter, the European Parliament passed a law establishing basic rights for gig workers. The legislation includes compensation for canceled work and mandatory training. It also increases transparency and puts an end to “abusive practices” around casual contracts.

“All workers who have been in limbo will now be granted minimum rights thanks to this directive … from now on, no employer will be able to abuse the flexibility in the labour market,” said Enrique Calvet Chambon, Member of European Parliament, in a press release.

The protections apply to casual or short-term workers, those who work on-demand, and paid trainees and apprentices who work at least three hours a week averaged over four weeks. The new law doesn’t extend to “genuinely self-employed workers.” Member states now have three years to put the new rules into force.

So can we expect the US to follow suit? And should it? There’s been speculation that some states may work to pass legislation with similar protections, but as for a new federal law, best not to go placing any bets for the time being.

One thing you can count on: the matter will draw more attention and debate as the gig economy continues to grow.

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