What Is the Gig Economy and How Will It Change the Future of Work?

What is the gig economy exactly, and is it opening the doors to a new era of work? We take a look at the challenges, opportunities and the technology involved in this evolving labor market.
Mar 9, 2022 1:00 PM ET
Blog

The Covid-19 pandemic certainly has had a profound impact on both private and work life for many of us. While many businesses are working hard to reach an international customer base, we as consumers have also become more aware of local businesses close to where we live.

The gig economy

Whenever I walk around in my hometown Uppsala these days, I’m always amazed by how many food delivery couriers buzz up and down the streets, and how the pandemic seems to have acted as a boost for these types of delivery jobs. Over the last 18 months, we’ve been encouraged to use food delivery apps as an alternative to in-person visits to restaurants, or to use online commerce instead of physical retail shopping. As a result, the gig economy has received a boost. In fact, a study by Upwork concluded that 12 percent of the US workforce started freelancing during 2020.

The term ‘gig’ is a slang word for a job assignment with a limited duration. While temporary work roles have existed before in the form of freelancers, independent contractors, and project-based workers, for example, the digital platform has enabled gig workers to take the temporary job to a new level. Even if gig work and digital platform-based work are two separate things, digital platforms have come to drive the evolution of the gig work market by bringing together supply and demand for labor into one single, and often global, platform.

Interestingly, and what is maybe not as well-known is the silent evolution of gig work among white collar workers, with platforms such as Amazon mTurk and Fiverr attracting freelance workers from around the globe. This is part of a general growing trend – in fact, the International Labour Organization (ILO) estimates a fivefold increase in the number of digital labor platforms during the last decade. Another example is LinkedIn, which is entering the scene by offering a worldwide gig platform for freelancers.

A possible reason for the recent uptake of gig jobs is that people spend more time online. In addition, many of us now prefer to avoid physical contact in shops and restaurants, something highlighted in Ericsson’s ConsumerLab report, The future urban reality. It reveals that consumers expect to have increased the time they spend online by 10 hours a week in comparison with their pre-pandemic habits.

This also raises questions around what technology, and 5G in particular, can do for the future labor market and internationalization. This triggered us at Ericsson IndustryLab to go out and look for answers. It resulted in the report ‘The dematerialization path to profitability and sustainability’.

Growth of the international labor market

Despite worldwide trade conflicts and the pandemic, our research data shows that enterprises expect to continue to grow internationally. In fact, six in 10 current domestic enterprises expect to have an international customer base by 2030. This will also have an impact on the labor market and four in 10 enterprises agreed that the ability to hire employees globally will be key by 2030. The need for skilled personnel and the internationalization of business as such, are key drivers for this shift.

The role of technology

Traditionally, it has been quite demanding for enterprises to expand their business internationally, since the establishment of local branches overseas for local markets is fraught with legal and practical challenges. Technologies such as cloud and mobile connectivity have however proven to be game changers for internationalization, allowing white-collar employees to work anywhere outside the office, and enabling the set-up of cloud-based e-commerce services or even the remote operation of equipment and facilities over a secure connection.

Our research also confirms the important role of technology for international businesses. Cloud, 5G, VR/AR and IoT technologies are being adopted by enterprises and are regarded by more than two thirds of surveyed decision-makers to contribute to internationalization. This internationalization is, however, calling for ICT solutions, such as IoT, cloud and mobile connectivity, that are independent of geographical boundaries and borders.

This evolution is enabling enterprises to establish an international presence without the need to set up a local branch or workforce.

The changing situation for work

This evolution is calling for a change to how work is organized in the future. It’s clear that jobs and location are being decoupled, which means white-collar employees can select among temporary jobs and projects around the world, while employers can select the best individuals for specific projects from a larger pool than what's available in any given area. Our recent study shows that by 2030, two in three decision makers believe that hiring employees across the world regardless of national boundaries will be key.

Temporary jobs are generally on the rise. According to the OECD, they have already increased by 8 percent during the last 20 years. In our study, six in 10 decision makers believe the share of those who are temporarily employed will increase significantly by the year 2030.

The evolution to more temporary jobs suggests a drive towards more task-based rather than today’s job-based structure. Our report reveals, that 2 in 3 believe the workforce will be structured around projects rather than fixed-job functions by the year 2030.

This evolution certainly comes with its downsides, not least in areas such as company culture and competence. As employment becomes more flexible, but also uncertain, enterprises might also experience a less loyal workforce, as well as loss of social cohesion in the workforce.

Additionally, 44 percent of white-collar employees think that replacing long-term positions with short-term assignments and project-based employment will make life more difficult. The new Urban reality report points out that more than three in five believe the majority will juggle multiple jobs to maintain a decent income.

The lack of financial stability and uncertainty about the availability of paid work tasks are therefore key challenges for future workers, as they possibly struggle to make ends meet or be able to get (and pay for) mortgages and loans. To make matters even worse, the self-employed today normally lack pensions, sick pay, holiday, and parental leave schemes.

As pointed out by ILO research, the flexibility that comes with more task-based work is also a challenge for gender equality. Research has revealed that women undertake three times more care and domestic work than their male partner. This has increased further during the Covid-19 pandemic, despite time spent on care and domestic work increasing in general for both men and women. The evolution to gig work or more home-based work may therefore reinforce some of this skewed distribution of work and pose a risk to the progress already made for gender equality.

The call for regulation and organization

It’s clear that the evolution towards more temporary and international jobs is not without its challenges. Another controversial and ongoing issue is the employment status of platform workers. So far, gig workers’ employment conditions have often been unfavorable or unclear, they’re not unionized or represented and they lack the benefits that employees normally have, such as unemployment insurance, pensions and healthcare. However, in October 2020 a tribunal in the UK ruled that two Uber drivers were to be considered workers and not self-employed contractors, meaning they were entitled to a minimum wage and holiday pay. This set vital precedents for other gig businesses in other countries where policies are being reviewed and studied closely.

Another topic of debate is worker representation in the gig economy. The fact that gig workers are independent means that collectively driving agendas for workers' rights, by forming unions for example, are often difficult. However, digital platforms can also be used to enable the opposite. For example, by finding each other and developing a transnational network of resistance over forums, groupchats, and video calls.

In response to the growing criticisms of workers' rights and lack of representation, a group of gig workers has developed a third-party platform called Turkopticon which allows workers to give feedback on their employers, allowing other users to avoid potentially unfavorable jobs and to recommend employers. Another service called Dynamo was created to allow the workers to collect funds anonymously to organize campaigns to strive for a better work environment.

All this is calling for a strengthening of international policies and cross-national labor and trade organizations. One example is when gig workers from over two dozen countries met in person to form the International Alliance of App-based Transport Workers (IAATW) towards the end of 2019.

Technology has been used to shape a new labor market based on more temporary international jobs, but it has also been used to enable new ways for workers to get organized and cooperate for better working conditions.

Summarizing, we can see that Covid-19 has been a further driver of an already existing upward trend in the labor market, such as the increase of freelance and gig jobs, as well as the increasing amount of remote work and the internationalization of labor, all of which has been fueled by technology development.

Going back to my experience in my hometown – in the future, I expect to continue to see even more gig workers all over the city center, along with huge amounts of people working from home, at least some of the time, while visiting their local restaurants and coffee shops during their breaks!

Learn more

Read how dematerialization is the path to profitability and sustainability.

Read more about Why the future of work is increasingly remote