From Rabbits to Ubers: What the ‘new’ gig economy means for employment, education and politics

November 7, 2016

The ‘#gigeconomy’ has rapidly transformed how people work. Professor John Bryson, Professor of Enterprise and Economic Geography at the University of Birmingham, traces the evolution of these transformations and their effect on the capitalist system, while setting out how education and political structures need to respond to ensure long term benefits.

A new term – the ‘gig economy’ – has emerged in the US that is part of an old process that is central to the operation of capitalist economies. The gig economy reflects the on-going adaptation of work and workers to digitalization and developments in information communication technologies (ICT) including smart phones. The application of technological and process innovations are central to the operation of capitalism as new ways of creating use and exchange values are developed and applied to the economy. These new ways may lead to completely new business models, products and services transforming lives, but may just replace existing processes and technologies while enhancing productivity.

During the 1970s, the crisis in mass production led to the emergence of more flexible ways of organising production based, in part, on the replacement of full-time employees with part-time or temporary workers. This led to the emergence of a group of advantaged full-time employees with benefits and a disadvantaged and more precarious group. Thus, from the 1970s many economies such as the US have, indeed, witnessed a steady growth of ‘contingent’ labour, i.e. involuntary part-time jobs, a process that has heralded the birth of the ‘working poor.

During the 1980s and 1990s the on-going development of the global economy further exposed employees to overseas competition leading to a transfer of employment to lower-cost locations. This was part of the offshoring of economic activity that initially involved only manufacturing work. During this century this led to the ‘second global shift’ in which 20% of service work located in developed market economies potentially could be offshored to countries like India and the Philippines.

The current threat to work and workers involves not offshoring but digitalization and ultimately the substitution of labour by software and artificial intelligence. The gig economy can be considered as a stage in a longer term process that has displaced full-time employees and increased the number of employees in precarious jobs. This doesn’t mean disadvantaged, but ‘differently advantaged’ as it involves an alteration in the ways in which some individuals are able to control and co-ordinate when and where they work.

The gig economy could mean emphasising the growth in temporary positions with companies contracting with workers for short-term engagements. It could also mean stressing the decoupling or dislocation of work from location through the application of digital technologies. In this latter case, the office or the shop becomes mobile and is relocated to the home, pocket, car or motorbike. This is perhaps a return to home working and the role that this played during the early years of the Industrial Revolution.

The gig economy is also part of the so-called ‘sharing economy’ or collaborative consumption in which consumers rent or borrow goods rather than purchase them outright. This is transforming physical goods into services in which there is no transfer of legal title. Individuals have the opportunity to convert assets they owned for their use value into assets that provide them with exchange values. The onset of pervasive computing via smart phones means that assets that are not fully utilised can be monetized; the technology enables peer-to-peer temporary linkages to occur facilitating a monetary exchange. But, participants in this part of the gig economy must be advantaged as they must own or control assets that have the potential to be monetized. This part of the gig economy is very visible as it includes eBay, car-sharing services and Airbnb.

The key questions are what does the gig economy mean for employment, education and politics? First, the gig economy is creating new business and employment opportunities that are different from older forms we are used to. The winners in the gig economy will be well-educated, flexible and with specialised skills and/or assets that provide them with an advantage. This does not mean that all work will be transformed by the gig economy as existing forms of production and work organisation will continue alongside gig-enabled work. Entrepreneurs will benefit as the new technologies reduce the barriers to establishing new businesses. For many entrepreneurs the gig economy enables them to establish ‘born global firms’; firms that from the moment of start up are international businesses.

The losers are those without the expertise or assets to benefit from this part of the economy. Nevertheless, there are other benefits from the application of ‘gigs’ to the economy. The recent UK court case concerning Uber taxi drivers complicates matters as it transforms self-employed drivers in to ‘workers’ with benefits. Uber’s taxi drivers work under similar conditions to most taxi drivers – low pay and limited benefits – but Uber provides an alternative opportunity for individuals who want to control how much they work and when they work.

This is similar to other gig companies using business models based around on-demand workers. Task Rabbit, for example, provides a same-day service platform that instantly connects someone with a need for a skilled ‘tasker’ to help with odd-jobs and errands. Workers have low pay and limited rights and protection and peoples’ motivations for working for such companies remains unclear. They could either be precarious workers; they could prefer the ability to determine the extent of their involvement with work; or this might be a survival strategy.

Second, between 1980 and 2012 per capita world output increased, on average, by 1.7% corresponding to cumulative growth of just over 60%. This represented a major transformation in lifestyles, consumer behaviours and in labour markets. A relatively modest annual growth rate over a thirty year period involved transformational technological changes including the Internet, mobile computing, smart phones, health care, transport and digital services. The most interesting aspect of the gig economy is the relatively rapid development of new business models combined with the application of digitalisation to existing forms of work.

More important is the increase in the acceleration of process or operational innovations linked to the creation of new products and services. On-going innovation continues to transform local labour markets, meaning forecasting future skill needs is difficult and perhaps impossible, but it implies that excellence in a country’s educational system is a mandatory requirement to maintain and enhance national competitiveness and to ensure better long-term outcomes for every citizen.

Third, for government the primary concern should be a focus on the wider framework conditions that support economic competitiveness and that are critical for maximising the life changes of all citizens. Central to this is a focus on ensuring high quality education provision combined with investments in infrastructure. Investment in skills must be balanced to reflect current and future needs of local and national labour markets. This is difficult as it involves debates over what type of education is needed to support what type of economic activity. It is worth noting that not all parts of the UK have the opportunity to participate in the gig economy due to the presence of ‘not spots’ in access to broadband and mobile phone coverage.

The Uber court case highlights how important it is that government do nothing to prevent gig-style employment opportunities from emerging as they provide another mechanism for people to engage with the labour market, but also opportunities for entrepreneurship. Governments’ role should be to facilitate and protect those exposed to precarious employment, but not to over-regulate.

The gig economy is part of a much longer term process that can be traced back to the beginning of industrial capitalism in which new process and product innovations transform labour markets. The application of computing and digitalisation to work can be traced back over the past three decades. There is a danger that government over-regulates the application of digital approaches to the economy and by doing so undermines the role the UK can play in the development of new business models that might have the potential to become major transnational corporations. For workers, the emphasis must be on education and acquiring the skills required to be adaptable and resilient in labour markets that are increasingly expertise or knowledge focused. For governments, there must be a refocus from old forms of infrastructure – air, rail and roads – to education, skills and digital infrastructure investment.

For the future, the only known is that product and process innovations will continue to radically alter the nature of work and worker and that the only survival strategy is based around education. Education still matters, but matters more as the economy is transformed through the development of gig-style business models. But, it is important not to over-emphasise this shift as labour markets will still consist of a balance between employees, workers and the self-employed and some work will be knowledge-based, some more focused on people-based skills and some will be undertaken by robots.

News Focus articles are the views of the author and not necessarily those of the Campaign for Social Science.