Employment Enterprises Blog

The Gig Economy in 2017: A New Work Ecosystem Comes of Age

Posted by John Boudreau on Jan 20, 2017 2:59:54 PM


The emergence of a gig-based work ecosystem brings plenty of controversy, with many leaders convinced that the shift away from regular full-time employment as the norm will lead to failure. But such controversies are the inevitable growing pains that accompany any innovation’s coming of age. And rather than herald decline, they usually highlight experimentation and growth. These controversies—and evolutions—are particularly evident in the contractor-based ride-sharing industry.

The Evolution of the Engagement Model

In early 2016, Lyft settled a proposed class-action lawsuit in San Francisco federal court. The suit was brought against Lyft by contract drivers in California who sought to be classified as employees. As part of the settlement, Lyft agreed to pay $12.25 million to its California drivers but will continue to classify them as non-employees. At the same time, though, Lyft will offer more worker protections (in particular, regarding driver deactivation from the service) and agrees to pay workers’ costs for arbitration in disputes about compensation and deactivation.

A one-day strike of Uber drivers in New York City at the start of February 2016 revealed not only worker dissatisfaction but also the need for better communication about rideshare remuneration. The strike was motivated by Uber’s decision to reduce fares by 15%. The company claimed that “lower fares spur demand so drivers don’t have as much down time between trips . . . [and therefore see] a 20% increase in hourly earnings.” Drivers disagreed and pushed back. A few months later, in May, Uber announced a partnership with the newly formed Independent Drivers’ Guild (“a joint project between Machinists Union District 15 and [Uber] platform drivers”). Although New York City Uber drivers who join the guild will have “access [to] monthly meetings to discuss issues, representation from the guild if they believe they were wrongfully deactivated from Uber's service, and other benefits,” they will, however, remain classified as contractors, not as employees.

These changes aren’t the only signs of evolution in the engagement model that defines how companies and outside vendors work together. Because both Uber and Lyft have policies that prevent them from giving rides to unaccompanied minors, parents have been unable to use those services to shuttle their unaccompanied children to and from school, sports practices, music lessons, and other activities. In response to this need, entrepreneurs in California have created two contractor-based ride-sharing companies that cater specifically to families with children who need transportation to their activities: HopSkipDrive and Shuddle. These companies may be leading the evolution of new approaches that draw on the flexibility of the gig economy to address other transportation dilemmas.

Beyond Ride-Sharing

Such innovations and lessons can also have applications outside the ride-sharing industry. Some companies have to figure out how to address workers’ expectations of being able to work (or not work) whenever they like—an arrangement that many of those organizations haven’t embraced. The chief human resources officer at beer conglomerate MillerCoors, for example, observes, “Talent wants to opt in and out at their leisure. It's the ultimate convenience. It's something on the hearts and minds of every HR professional."

At the same time, though, more and more businesses are incorporating aspects of the gig economy. For example, PwC recently launched its own platform to attract freelancers and extend its workforce beyond its full-time consultants. And the consulting firm Eden-McCallum is built entirely on freelance consultants.

A close examination of the gig economy reveals an evolving system of service providers that seek to fill in the traditional "missing" elements of the contract work relationship, all across the talent life cycle. The UK-based PeoplePerHour uses broadcast television ads to recruit freelancers, for example. Shared Economy CPA (founded by a former associate at PwC and Deloitte) provides accounting services to gig workers. One one former successful Uber driver now sells a ridesharing course and offers advice on his blog and podcast, the Ridesharing Guy.

Growing Pains Are Part of Evolution

The gig economy is here to stay. Executives, managers, workers, and owners would be ill advised to dismiss these new work arrangements hastily, especially with some experts estimating that “by 2025 they could add $2.7 trillion to global GDP and begin to ameliorate many of the persistent problems in the world’s labor markets.” Savvy leaders know that controversies and difficulties aren’t signs of extinction but of evolution in action.

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John Boudreau is a professor of management and organization in the University of Southern California Marshall School of Business. He studies the future of the global HR profession, HR measurement and analytics, decision-based HR, executive mobility, HR information systems, and organizational staffing and development. He can be reached at john.boudreau@usc.edu.

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Topics: Labor & Industrial Insights

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