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The implications of the pandemic on the gig economy

The implications of the pandemic on the gig economy

By SMU City Perspectives team

The growth of the gig economy is one of the many changes that have arisen due to the pervasive reach of new technologies over the past decade. Jobs such as the Grab driver and Foodpanda delivery person arose due to the launch of new digital platforms. In numerous other industries, the growing hyperconnectivity of various communications channels has also spurred companies and workers alike to become more receptive to the business model of paying and being paid per project or task, rather than the fixed monthly wage of a fulltime employee.

As a result, the share of the US workforce in the gig economy rose from 10.1 per cent in 2005 to 15.8 percent in 2015. In March 2020, the South China Morning Post reported on a study which found that 65 per cent of global hiring managers felt the gig economy was becoming the new norm for businesses’ workflows, and that 84 per cent of hiring managers in the Asia-Pacific region outsource to freelancers.

In an article published in February 2020, Richard Smith – Professor of Strategic Management (Practice) at Singapore Management University – noted: “The McKinsey Global Institute suggests that by 2025 we might see gig or contingent workers representing up to 40 percent of the global workforce.”

With the COVID-19 pandemic hitting this contingent workforce exceptionally hard, providing better support and protection for gig workers has become a pressing issue for companies and governments all over the world.

In April 2020, the World Economic Forum reported on a survey which found that over 50 per cent of gig workers said they had lost their jobs, over 25 per cent had seen their hours cut, almost 70 per cent said they now had no income, and only 23 per cent had some savings.

“The very nature of gig workers does make them more susceptible to shifts in the economy, especially those with consumer-related roles,” says Prof Smith. “As consumers either shift or slow their spending, the gig work can also slow or shift. We see this quite directly as a result of COVID-19 — as travel and transportation have slowed, passenger drivers and other tourist support work has also slowed.”

Many companies that are highly reliant on the gig workforce have been very open about the changes and impact to the business, he points out. Companies and governments have also provided some assistance to badly affected gig workers.

However, “the evolving nature of the pandemic has made it difficult for many companies to formulate a clear plan and address the varying needs across the countries in Asia”, says Prof Smith. “Some organisations have had to reduce their workforce size, and ask workers to take leave or take pay reductions. Some global firms have set aside funds to support their workers, while others are providing assistance to people to access government support systems.” Others are calling for more long-term measures, such as for gig workers to organise so as to more effectively engage with governments and companies; and for labour policies that introduce protections for these workers, such as mandatory insurance and medical benefits.

After all, even before the pandemic, there had been a growing acknowledgement of the inequities of the gig economy, and a percolating movement to achieve better rights for gig workers in several countries.

“This fight for workers’ rights is grounded in a growing recognition that the expansion of the digital economy does not simply reflect the triumph of an unstoppable technological change,” writes researcher and author Aaron Benanav. “Behind Silicon Valley rhetoric, much of what appears to be technological innovation turns out to be a means of circumventing legal regulations, including minimum wage laws.”

In his article, Prof Smith also pointed out that given the growing size of the gig economy, “it seems critical for HR leaders to have a clear sense of how to best manage this talent segment”. Some needed changes included cultivating an inclusive company culture that embraces such independent workers, better communication with them, and a company structure that has clear reporting lines of authority and accountability for these workers, he highlighted.

COVID-19 could well catalyse these positive changes. And there are other possible silver linings to the crisis as well. “Several companies have expanded their use of freelance contractors, part-time employees, interns, and other variable workers to keep labour costs variable while also addressing short-term business needs. This is especially true in the areas of digital business that have grown significantly this year as a result of the pandemic,” says Prof Smith.

The pandemic has also opened many new doors in terms of remote work arrangements, he adds. “With the broad acceptance of remote work, new opportunities exist to perform work from other locations. For example, a highly skilled digital professional in Vietnam might be able to secure remote gig work in other countries, which may not have been possible previously. Other gig workers involved in the physical distribution of people and materials may find new opportunities with contactless delivery, which may have longer-term potential as a consumer-centric service.”

Prof Smith says, “While the number of gig workers has been on the rise, the pandemic has raised a number of critical questions in some sectors. Looking forward, it seems that the gig economy is here to stay, but the pandemic may shift the growth areas… for now.”


Originally published at https://engage.smu.edu.sg/implications-pandemic-gig-economy