The gig is up – the growing reliance of the labour market on temporary and part-time positions has been aided by technology, but what does it mean for future economic resilience? | Content Partnership
Uber drivers, Airbnb rentals, CityHop vans, takeaways from DeliverEasy or DoorDash. They've all become mainstays in the lives of many Kiwis.
It’s all evidence of the rise of the gig economy – services provided by temporary workers, with buyer and the provider linked by an app or website acting as a kind of technological marketplace.
In Japan, the world’s third-largest economy, more than a third of all workers are temporary, while in the USA there are 14 million workers in the rapidly growing gig economy.
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The numbers aren’t in for New Zealand, but global trends suggest the gig economy is here to stay.
So what does it mean for New Zealand, where the war for global talent has left a dire need for highly skilled workers and difficult economic straits have left the market wondering about future stability?
Like many changes ushered in so quickly by technology, the rise of the gig economy is a double-edged sword, promising resilience and flexibility to the country’s labour market, but also carrying warnings around tax evasion, workers' rights and the disruption of established sectors.
Brandon Jackson is the General Manager of Growth Sectors at Bank of New Zealand.
Part of his role is keeping his finger on the pulse of changing markets as the economy marches forward into a future where technology plays an ever-increasing role.
He said the pros and cons of the gig economy are mostly entwined – advantages living on the other side of the coin to a counterpart disadvantage.
Instability can be the dark side of flexibility and independence, while cheaper and more convenient services can also mask tax avoidance and employees missing out on key benefits.
“It may be too early to say what the impact in New Zealand will be,” he said. “But the regulators are watching to see what is happening.”
Jackson said a common misconception of the gig economy was that it’s made up solely of Uber drivers delivering people or food to their destinations.
He said highly qualified workers like lawyers, graphic designers or copywriters were also flocking to apps like Unicorn Factory, Fiverr or Upwork, online freelancing platforms that allow businesses to contract out piecemeal for professional work.
It allows smaller companies to compete without having to have their own in-house legal counsel or video editing suite, and gives all businesses access to highly specialised labour they might otherwise not have had.
“I can see smaller companies using this more and more,” Jackson said. “Over time, more people are going to be comfortable accessing skills from various providers like an app on their phone, rather than thinking they need all the skills in-house all the time.”
Jackson said market shake-ups like the pandemic could see more white collar workers prioritising flexibility and independence.
“There are definitely benefits to creating such a marketplace. It means more work for people who want to have control over their life and want to work when they want,” he said. “The cons are the risks of not having enough work.”
Gig economy worker income is tightly anchored to potentially fluctuating demand – an ebb and flow contracted workers are usually insulated from to an extent.
“There have been less issues around workers' rights for the higher skilled people – as always,” Jackson said.
Independence doesn’t travel hand in hand with better wages. Data from Japan showed 63 percent of gig economy workers were dissatisfied with their income.
It also means workers are at the behest of an emotionless algorithm, rather than a human manager with the soft skills and qualitative knowledge conducting a performance review.
For companies, this means whittled-down labour costs, absent of benefits and normal employee protections they’ve had to cough up for in the past.
Jackson pointed out the original ‘giggers’ – creative professionals – earn much less than average and have to supplement their income with other work.
Research commissioned by Creative New Zealand and New Zealand On Air in May showed creative professional median income was $37,000, compared to a median of $61,800 for salary and wage earners.
Meanwhile, 44 percent of those creatives bolster their income with a side hustle, as the median income from creative pursuits alone was just less than $20,000 a year.
But although financial rewards may often be lower, there’s a lot to be said for opening up opportunities for varied remote work, especially in the age of working from home and high house prices in the cities.
Jackson said for professionals and internet-based creatives, the gig economy could offer new and alternative opportunities to existing career paths, with the potential to do more varied work and to earn more.
He gave the example of people exiting law firms but continuing to work, or the end of geography as a limiting factor for small town lawyers or other remote professionals.
But while the opportunities will be enticing for workers in such positions, the Government is already turning its eye to the gig economy and questioning whether it needs more of a leash.
Last year, Cabinet Minister David Parker commissioned a report exploring whether the gig economy is dodging GST.
It was determined more information was needed – but nevertheless, it shows the attention of the Crown is on this space.
Gig economy companies have been found wanting overseas when it comes to tax law. Uber was ordered to pay $100m in back taxes in New Jersey last year when it was found it had misclassified its drivers as independent contractors.
New Jersey Labor Commissioner Robert Asaro-Angelo accused the ride-hailing company of utilising a business model that erodes long-standing protections for workers.
Uber fired back through the media, saying its treatment of workers allowed them to drive when and where they wanted.
Asaro-Angelo said the idea employee status stifled flexibility was a “false premise”.
“There is no reason temporary, or on-demand workers who work flexible hours, or even minutes at a time can’t be treated like other employees in New Jersey or any other state.”
Meanwhile, Uber’s food delivery arm Uber Eats entered into a similar dispute with the Tokyo Metropolitan Government last year as well, stepping in to classify gig workers as employees entitled to protections under the Labour Union Act.
Jackson said it was an “inflection point” for legal changes to the gig economy, and there were big questions that would likely be answered by regulators in the next few years.
A 2020 report from the Productivity Commission recommended employment law be updated to target harms, rather than the technology itself.
The report said gig work makes up a small segment of total employment and much of it consists of people supplementing other incomes.
It said while employment law should be updated to better reflect current technologies, this needs to be done carefully so worker exploitation can be stopped without forgoing the benefits to the labour market.
Jackson said it was just a matter of time before regulation caught up with new tech.
“The regulators are watching,” he said. “Regulation lags but eventually, it catches up.”
However just as soon as the pros and cons of the rising gig economy are laid out empirically, it seems a new form of tech will arrive to muddy the waters.
In this case it could be the ever-increasing prevalence of AI technology, which could replace many of the high-skilled opportunities for professional gig workers.
“AI is definitely looming in the background,” Jackson said. “It’s less likely to be digging holes in the ground or fixing your plumbing, so interestingly those are the sorts of areas that are less at risk.”
For freelancing copywriters, graphic designers and content marketers, however, big changes may well be on the way.
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