According to a McKinsey report surveying 162 million people in Europe and the United States, 20 to 30 percent of working-age employed persons have to some extent become involved in the gig economy.
It is essential to approach any such drastic shifts affecting large segments of the working population with caution and consideration for everyone involved. Neither employees nor employers stand to benefit from unregulated or exploitative business practices. The rise of the gig economy has been subject to tremendous backlash from critics concerned about everything from job security to data protection to discrimination.
As such, we have compiled an overview of the eight biggest concerns associated with the gig economy and taken a closer look at the concerns and benefits.
Is gig economy good or bad? 8 prejudices:
- Freelancers are less qualified
- Companies only aim to save money
- Freelancers lack company loyalty
- Gig workers do not have enough professional security
- HR processes have to be extensively adjusted
- Data protection is an issue when working with freelancers
- Companies evade stringent labor regulations
- Increase of gender discrimination
Freelancers or temporary workers are less qualified and young people only want to work in the gig economy because they can not handle the challenges of full-time employment.
Millenials have indeed switched to self-employment. However, this in no way reflects their job performance abilities. The misconception that millennials, or freelancers in general, are less skilled members of the workforce is fed by the media hype around the term gig economy and its association with low-skill job opportunities like Uber, deliveroo, and the like.
Though there are many reasons for millennials to opt for employment in the gig economy, there are two predominant reasons:
They value flexibility and work-life balance over the benefits of secure full-time work
the lack of full-time employment opportunities.
However, this statement is also misleading for another significant reason. According to a study by Mavenlink, it is in fact white collar executives and not millenials who are propelling the expansion of the gig economy. This is largely due to the need for specialized skills for specific tasks.
In fact, 47 percent of business leaders turn to contractors for managerial and executive positions. 29 percent of those business leaders expect ten years or more experience and 35 percent want contractors with specialized degrees.
Furthermore, the digital transformation has led to great strides in the development of knowledge management and training tools for young and inexperienced professionals.
Knowledge management software allows for a comprehensive accumulation of training materials, case studies, firsthand experiences, and real-life scenarios that all employees can access remotely on mobile devices. Augmented reality functions make it possible for less experienced workers to interface with experts and specialists. Artificial intelligence helps employers allocate tasks based on aggregated data like skill set, experience, and more so that the best contractor can be assigned to a job. In short, there will always be more and less qualified workers in any labor market.
What is important is that companies have the tools to mitigate any discrepancies and help novices learn and progress. The question remains: are companies willing to invest the resources and time into preparing the next generation of workers for the labor market?
Companies aim to save money and only hire temporary workers instead of hiring highly-qualified specialists.
As mentioned above, many companies are turning to the gig economy to employ executives with ten years or more of work experience. And their reason for turning to the gig economy is that they are unable to find people with the right skills for the job. According to a study by McKinsey, many companies have to grapple with “geographic mismatches”.
The expertise they need is simply not available in the areas where they are looking to hire. This is in fact the circumstance that has allowed the gig economy to thrive. However, it should not be an excuse to eliminate the expenses associated with maintaining a competent and capable in-house team. It would be imprudent for companies to rely solely on freelancers in lieu of continuing to equip their own employees to address internal issues.
At the end of the day, it is these employees who will have the best understanding of company goals and customer needs. However, the gig economy is also addressing another issue that many industries face: bottlenecks. Companies that waver between peak periods and downtimes are able to fill in the necessary labor gaps by turning to a workforce that is available on demand.
Not only does this make companies more reliable thus increasing customer satisfaction, it also gives full-time employees more time to resolve issues and cultivate customer relationships.
Freelancers lack “company loyalty” and, as a consequence, their output suffers.
On the contrary, gig workers rely on their good name to ensure a regular flow of work and contracts. Since services and people are nowadays often immediately evaluated based on performance and success, it is in the professional interest of gig workers to always provide the best possible service. It is not just your company’s reputation on the line, it is also theirs.
Gig workers do not have enough professional security.
Not necessarily true
There is indeed a lack of regulation in the gig economy. And in many scenarios, gig workers are left to their own devices when negotiating contract and compensations terms.
However, this has been the case with all new technologies and innovations. The Industrial Revolution was in fact no different, and spurred an entirely new legal framework defining worker compensation, workplace conditions, child labor, and more.
According to the World Economic Forum it will become more and more essential for companies to embrace an agile approach to the workforce and work structures. This includes flexible working hours and locations.
Labor organizations are already establishing the framework for clear regulations and digital freelancers’ associations are emerging to accommodate the needs and protect the right of gig workers. And we should not forget, as mentioned above, that the main concern from companies turning to the gig economy is a lack of expert resources and the need to bridge bottlenecks. The priority is not to sink labor costs, but rather to increase customer satisfaction.
Data protection is no longer a given when working with freelancers.
Not necessarily true
A recent survey of German managers highlighted a major concern when it comes to gig workers: data security. Similar to the issue of professional security, there are currently limited structures and regulations in place to address the issue of data security when data is not storedon a central server at company headquarters. And just like professional security, laws and systems will have to be developed to ensure data security.This is not only necessary for adapting to the gig economy, it will also be essential for many aspects of digitalization from smart homes to smart cars to social media and more.
Most SaaS and platform providers already understand the importance of data security and protection, both for their customers and for the longevity of their business models. Strict and transparent security protocols have become less an added bonus and more an expectation forcing providers to make it a top priority in the development of software and apps. Not only are data center and cloud data securely encrypted, but workers are only given access to a minimum amount of data essential for completing their tasks.
Though concrete regulations may currently be lacking, it is clear that businesses are well-positioned to react to the digital transformation and its challenges.
HR processes have to be extensively adjusted to accommodate gig workers.
In a study by Mavenlink, business leaders expressed their concerns about business strategies outpacing the current structures and processes for accommodating such rapid strategy shifts. 69 percent of those surveyed stated that their current processes for managing gig workers were lacking, while 34 percent said there were no policies at all. This is indeed a serious challenge because it is not only HR processes that must be flexible and dynamic, but in fact all processes associated with gig workers: from invoicing to time tracking to vetting and recruiting to document automation.
Once again, this is a challenge that can easily be navigated by ensuring that innovative solutions keep pace with business developments.
In fact, there are already a number of solutions for addressing precisely this issue of integrating gig workers into the corporate work structure.
SAP Fieldglass Digital Network, for example, is an ecosystem that allows for “seamless integrations with digital solution providers” to facilitate engagement with and management of gig workers. With its repeatable integration strategy, SAP Fieldglass simplifies the process of integrating any number of providers within the network: invoicing, taxation, HR, onboarding, compliance, scheduling and more.
Companies fire employees only to rehire them as gig workers without stringent labor regulations.
This is once again an inaccurate assessment. As previously mentioned, most companies look to gig workers to fill in knowledge gaps and ensure a sufficient labor supply in case of bottlenecks.
Furthermore, 70 percent of freelancers actively pursue self-employment because of the freedom and flexibility it allows them. (Source: McKinsey)
There will be increased gender discrimination and bias against older freelancers as well as a lack of proper structures for reporting said discrimination.
There is no reason to believe that age or gender discrimination will become a greater problem within the gig economy, the predominant reason being company sustainability. The emergence of the platform economy has made it easier for freelancers to connect and exchange thoughts and experiences. As such, any company notorious for discrimination can more easily be earmarked as a company to avoid working with. The risk of losing access to valuable external talent is not one most companies want to take.
On top of that, these two groups are growing pools of untapped knowledge and experience. This applies in particular to women who temporarily leave the workforce to care for families and older people set to retire and take with them years of experience. (Source: McKinsey)
In fact, these two groups have the most to gain from a symbiotic relationship between companies. As gig workers they can maintain the flexibility they might need to secure a manageable work-life balance.
In the case of retirees, becoming gig workers gives them the possibility to continue contributing valuable acquired knowledge and skills to the next generation of employees while avoiding a full-time commitment to the labor force.
It is in the best interest of companies to foster a reputation for fair treatment of all workers so as not to ostracize or even deter these Large swaths of the talent pool.
Technology will continue redefine how, where, when and with whom we work
As such, we should approach this fact by readying ourselves for the various challenges but also advantages it will offer. It is unrealistic to imagine that we are not on the brink of another labor revolution. Workforce 2.0 is a reality that companies had best prepare for before it is too late. Shying away from innovation is simply not an option.
Nor is embracing digitalization but ignoring that traditional labor models can not remain the same while everything else advances and develops. The gig economy is about to take off. It would be advantageous to get on board before it leaves the station.