A study conducted by Intuit recently predicted that 40 percent of American workers may be independent contractors by 2020. That is about 60 million people. It is much higher than the last count we had back in 2006 when another report indicated that the proportion was 30 percent of workforce. The number of independent contractors—contractors, temps, and self-employed—is definitely on a major upward trajectory.
Is this a new trend? Not exactly, if we look at historical cycles. According to Joe Labianca, a professor with the University of Kentucky, this is a case of what is old becoming new again. Historically, there was a time when all workers were “contingent”, who hired themselves to employers to perform a job or service. That changed with the industrial revolution, when organizations began to hire employees to work exclusively for the business.
“The introduction of the assembly line really starts to accelerate the move away from contingent workers to a structure in which people are fully employed by their organization,” Labianca said. That work model reached its peak in the post-World War II period, when the United States became the globe’s leading industrial power.
Now we have the memory of the recent past, but our understanding of workplace is very skewed from when typically worked for the same employer for a lifetime. Starting in the late 20th century, globalization began to undercut the dominance of companies in the U.S., who had to respond to competitive threats from around the world. First this competition came in the manufacturing sector from Japan, and then China. Recently, it is coming from white-collar job outsourcing in IT and other fields to countries like India.
“Now, companies can’t have long assembly runs like they used to,” notes Labianca. “And as soon as they need to have flexibility, then companies start to want to have a workforce that is more flexible, that can be more contingent.”
There are other factors leading the shift to a contingent/gig economy beyond just the forces of globalization. Many of today’s employees just don’t feel personally fulfilled working for a corporate entity. They like to have more control over their time and use their skills on their own terms. The ubiquitous availability of Internet and mobile technologies further empower individuals to follow their passion and become standard-bearers of the gig economy.
The transition from an employer-employee economy to a gig economy is tumultuous, as can be seen from numerous lawsuits against Uber, Airbnb and others. The main issue seems to be whether to consider freelancers as regular employees. This is the wrong way to look at the issue, according to the panelists in American Law Journal TV, who have remarked that “This train has left the station” and “the efforts to reclassify gig workers as employees is like fitting the square peg in the round hole”.
The real question though should be how to modify the current employment rewards such as healthcare, worker compensation, and unemployment benefits to apply to a gig economy as well. The passage of the Affordable Care Act is a good example of taking a step forward from the old shackles of employer-mandated healthcare to that in which individuals take responsibility for their own coverage. More needs to be done, however, to further promote modern worker support frameworks that fit into the gig economy.