The gig economy is booming, benefiting both employers and gig workers. What are the factors shaping the impact of the gig economy on your future workforce?
Freelance work. Side hustle. Contract work. Gigs. Whatever name is given to independent work – and the workers engaged in it – the gig economy is booming. Once associated with low fees and little opportunity, “gig work” has been claimed by a younger, modern workforce as the ultimate in flexibility.
Employers, too, appreciate the flexibility of temporary and on-demand workers to close short-term skills gaps or to complete a project. And, while gig work may appear to be a win-win both for employers and gig workers, there are complex decisions to consider before companies dive full-speed into the gig economy. Here are some factors shaping the impact of the gig economy on your future workforce.
Who Are the Gig Workers and What Are They Doing?
First, here’s a quick look at the workers – and the work – of the gig economy.
Because independent work is not consistently captured in official labor statistics, the total number of people engaged in the gig economy is difficult to measure. A 2022 McKinsey survey found that 36 percent of employed respondents – the equivalent to 58 million Americans – identify as independent workers.
Gig work is on the rise. CNN reports that the total number of people who collected money from platform gig work, such as driving for Lyft or delivering for Grubhub, more than tripled between 2017 and 2021.
Younger generations, Generation Z and Millennials, are more engaged with gig work – and are making more money – than their older counterparts. CNBC reported that 46% of Gen Zs – and 37% of Millennials – have a full- or part-time job in addition to their primary job. This Insider article notes that 45% of Gen Z and 44% of Millennials are making at least $2,500 monthly, compared with 36% of Generation Xers and 30% of Baby Boomers, who are more likely to earn $1,000 or less monthly.
BenefitsPRO.com outlines four tiers of gig workers:
- Multiple shifts, multiple jobs: This person is seeking flexible working hours and work that doesn’t require specialized training or educational degrees. They may work multiple shifts for multiple companies.
- Career pivot: This person may be a stay-at-home parent who, during the pandemic, reassessed their life and career goals. They opted out of a traditional corporate job to focus more on family and now take on influencer marketing contract work, content writing, or administrative assignments.
- The nomad: This person embraces the gig economy to fuel (and finance) their nomadic lifestyle. They can take work as much (or as little) as they want, when they want, where they want. After one assignment, they may opt out of work for a month to travel.
- Side hustle: This worker may already have a full-time position and seeks a side hustle for extra revenue. This could even be more passive revenue in the form of maintaining a real estate portfolio and serving as an Airbnb host.
Impact of the Gig Economy on Employers – And Their Workforce for the Future
Unemployment is low, younger generations prefer flexible work hours, remote and hybrid work has become the new normal, and a preponderance of gig job platforms are available at the tap of a phone. It’s no wonder that the gig economy is booming.
For business leaders, gig workers present both opportunities and obstacles – for today’s environment and tomorrow’s workforce.
- Skills and Expertise. Especially when skilled talent is scarce, skilled gig workers can provide employers with the expertise they need, when they need it – from wherever in the world they are. There is little expectation that the employer is responsible for helping to build the skills of contracted workers, who must maintain marketable skills to secure each job.
The flip side of this benefit is that companies could become over-reliant on contractors for skilled workers, missing opportunities to build the skills and experience of their full-time workforce. Over time, business leaders will need to ensure their workforce has the skills the company needs to thrive.
- Scalability. For companies with project work or seasonal fluctuations, contract workers can help scale their workforce up and down to meet customer demand. This “pay-as-you-go” model helps companies align revenue and expenses.
Mind, though, the fine line between employee and contractor. That line is closely monitored and defined by HR and legal regulators, recognizing that employers have frequently misclassified their employees and independent contractors. Such a misclassification excludes those employees from company benefits and some legal protections. Be sure your legal and HR team monitors this risk, if you are using contract workers.
- Flexibility. Many employers embrace the flexibility that gig workers afford. Both parties agree on the scope, timing, and place of the work. Most are not “burdened” by ensuring that contractors participate in team-building exercises, all-hands meetings, performance reviews, and other activities expected of full-time employees.
That said, managers will need to be clear about expectations about where and when work is performed – for both their gig workers and employees. Can employees, too, work flexible hours and remotely? Are managers focused on the work output of their employees in the same way they evaluate the work of contractors? Does your company have a policy about whether and how your employees can engage in gig work themselves, as a second job?
- Engagement. Part of the draw to gig work is that people have freedom to choose their schedules, select interesting work, and complete tasks in their own way. Companies and their freelancers can choose, though, to include gig workers in meetings and collaborative exercises (if the engagement is part of the agreed-upon scope). Work groups that include full-time and gig workers can benefit all parties, pulling the best ideas, skills, and solutions into a shared successful output.
Workforce engagement is more complex than that, of course. When deciding whether and how to engage contractors, company leaders and managers will need to strike a fine balance of inclusiveness and independence. This is true for gig workers and employees alike. After all, a gig employee may later join the company as a long-term employee and employees who leave may come back as contractors. The gig economy is one more prompt for employers to build a culture that supports employee engagement — with learning opportunities, flexible career paths, and flexibility practices that help attract and retain talented employees.
There’s no doubt that today’s workers have tremendous choice and flexibility in the work they do — and how and where they do it. Employers, too, are benefiting from a growing gig economy. How long the trend lasts and what remnants remain in an economic downturn that reduces customer demand is not yet known. Whatever happens next, company leaders need to be prepared to support the changes — and support a skilled workforce for the future.
If your team is facing decisions about where and how to find and build skilled workers, explore a skills-first approach to your decision-making. Download our Competency Management Toolkit and contact us to find out how Avilar’s WebMentor Skills™ competency management systems could support your next steps.
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