How Tech Startups Redefined Gig Work (and Where It Goes From Here)
January 29, 2021
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We’re living in the golden era of the gig economy. At least, some of us consider it golden. Regardless of how you personally feel about the gig economy, there’s no denying that it has reached peak popularity for consumers, employees, and businesses – thanks in part to the amazing tech startups that led us here. 

But where exactly did the gig economy come from? And where does it go from here? 

What Is the Gig Economy? 

Let’s start with a primer on the gig economy. The “gig economy” refers to a number of trends related to the issuance and availability of “gig work.” In other words, a lot of people are freelancing and a lot of companies are willing to hire and work with freelancers. 

Freelancers aren’t technically employees. They aren’t protected or bound by the same laws and regulations that traditional employees are. For example, minimum wage laws, workers’ compensation laws, and maternity leave laws may not apply to freelancers. 

Employers benefit from this because they get to save money and hire more flexibly. They don’t have to pay as much money for employee benefits, they don’t have to spend time or money complying with complicated laws, and they can hire people on a flexible basis – and only for the work that actually needs to get done. 

Employees can also benefit from this arrangement. As a freelancer, they’re generally not bound by non-compete clauses, which means they can work for multiple employers/clients at the same time. They can also work as much or as little as they want, creating their own schedule and enjoying the benefits of a practically unlimited income. 

However, there are some downsides to the gig economy as well (as we’ll see). 

A Brief History of Gig Work

Gig work has been around for a long time. The term “gig” itself was coined by jazz musicians looking for a way to describe shows and concerts for which they were hired. Over the years, businesses in certain industries employed temp workers and freelancers when they had short-term, temporary, or frequently changing needs. 

However, the gig economy itself didn’t develop much until a handful of powerful tech startups stepped in.

Early Apps and Connective Tissue

The gig economy began to grow as the internet began to see widespread adoption. Craigslist, one of the earliest classified-ad-style websites, emerged to connect employees and employers, and allow people to make temporary arrangements with one another. If you needed a fence painted, or if you needed someone to do a reading for your audiobook, or if you needed a professional model to show off your company’s latest fashion, you could find them on Craigslist. 

In turn, a number of other connection-based sites arose and the gig economy began to flourish. 

The Uber Effect

Things began to change in the early 2010s, with the advent of Uber and similar tech startups. In case you aren’t familiar, the Uber app functioned like a ridesharing and taxi hailing service in one. With Uber, you can hail a ride from an Uber driver, get to your destination, then pay your driver, all within the app. As a driver, you won’t work directly from Uber, but the Uber app can connect you to individual riders in need of a ride. 

In the wake of Uber’s early success, we saw the rise in popularity of a number of similar apps, all of which allowed buyers and sellers to efficiently find each other. These platforms made gig work both more possible and more popular for a variety of reasons: 

  • The emergence of new markets. Some of these apps created new markets where there were no opportunities before. Uber itself forged a kind of middle ground between calling for a taxi and asking a friend to bum a ride. Airbnb allowed homeowners to rent a room efficiently to new tenants in a way they couldn’t before. Other apps invented entire mini-industries from the ground up, like renting power tools or providing grocery shopping services. 
  • Convenience for buyers. Buyers, including both individuals and companies, could find professionals easier than ever before. If you have temporary needs, you can’t afford to hire someone full-time, but these apps made it possible to find a kind of temporary employee. 
  • Convenience for sellers/producers. These apps were also convenient for sellers and producers. Rather than going through the trouble of starting their own business and marketing themselves, or finding a restrictive full-time position, they could take on jobs whenever and however they wanted. 
  • Minimal interference and natural development. Most tech startups following this formula created small-scale free market conditions. Pricing, worker availability, and consumer demand found a way to balance each other out in a way that became favorable to all parties. 

Collectively, the rise of these tech startups helped change the image of gig work from a “last-ditch effort” of someone who couldn’t find a “real” job to a viable economic opportunity for enterprising individuals. It helped to transform the gig economy into a landscape of value and empowerment. 

Remote Work Options 

The options available for freelancing and gig work have only increased with the rising trend of remote work. New technologies like streamlined video chatting and robust project management platforms have made it possible for a wider range of professionals to work independently from home. 

With no need for an in-house workforce, companies are increasingly open to the idea of managing a team of freelancers. And individual workers are seeing the benefits of working remotely for a handful of different clients, rather than pouring everything into a single employer and going to the same office every day. 

The Obstacles in the Way of Gig Work

Of course, the gig economy isn’t purely advantageous, and it isn’t loved by everyone. There are some key threats that could jeopardize the future of gig work, including: 

  • Regulations. Politicians are increasingly pushing for stricter regulations surrounding gig work. Employees are currently protected by a number of fairness and safety laws, which prevent employers from taking advantage of them or putting them in unsafe conditions. Currently, gig workers have little to no protection in this area. While new protections could put gig workers in a more favorable situation, it would also reduce some of the natural advantages of the arrangement, potentially reducing the number of gigs available for freelancers. 
  • Demand for benefits. One of the drawbacks of being a gig worker is that you generally won’t have access to employer benefits. You won’t have health insurance through your employer and you won’t be able to tap into a retirement program like a 401(k). If a greater percentage of gig workers grow dissatisfied with this arrangement, they may make a conscious push to change the norms within the gig economy (or pick up a full-time job instead). 
  • Worker dependence and mistreatment. Over time, a gig worker may become dependent on a client, platform, or employer; for example, an Uber driver may not feel able to leave Uber because they’ll be without a steady income. This type of environment can lead to abuse on the part of the employer; knowing their workforce is dependent on them, they can cut pay, slash benefits, and impose stricter performance requirements with reckless abandon. Of course, in a free market, these types of actions would be unsustainable. 

What Is the Future of Gig Work? 

So what does the future have in store for gig work? It seems like new technologies and increasingly flexible environments are favoring further developments for employers and freelancers. But at the same time, there are bigger political pushes to impose new regulations and restrictions on the world of gig work. Public demands, gig worker satisfaction, and corporate lobbying will collectively determine whether the gig economy will continue to grow or whether it will be permanently reined in. 

 

Nate Nead

Nate Nead is the CEO & Managing Member of Nead, LLC, a consulting company that provides strategic advisory services across multiple disciplines including finance, marketing and software development. For over a decade Nate had provided strategic guidance on M&A, capital procurement, technology and marketing solutions for some of the most well-known online brands. He and his team advise Fortune 500 and SMB clients alike. The team is based in Seattle, Washington; El Paso, Texas and West Palm Beach, Florida.

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