The European Gig Economy

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The Gig Economy

“Gig Economy” is among the most widely used terms in the business world today.

It generally defines a market that relies on short-term informal contracts according to which workers are paid, conditional on the accomplishment of a determined task or project, by a company, usually an online platform.

In the past decade, the gig economy has radically changed the way people are engaged at work and has brought a fundamental shift in how our economic system operates.

Factors such as the mass adoption of the internet and increasing penetration of smartphones as global trends have been fundamental in the spread of platform-based companies like deliveries, ridesharing apps and personal services such as beauty care and wellness. That trend can mainly be seen in developed countries such as Europe and the United States.

In their effort to understand the motivation behind the participation in such an economy, the McKinsey Global Institute interviewed 8.000 independent workers across Europe and the United States.

Questions focused on wages, income-generating activities and encompassed professional satisfaction and work aspirations.

They found that 20 to 30 percent of the working-age population engages in some form of independent work. Interestingly, in this portion of the working-age population there are 4 types of individuals. Those who choose to work independently and gig working constitute their primary income, namely free agents. Casual earners, who use it as supplemental income by choice. Reluctants, who unwillingly derive their primary income from such work and financially strapped, who do supplemental independent work out of necessity. The share of the working-age population engaged in independent work can be seen below.

Pros and Cons of the Gig Economy

While the Gig Economy has allowed millions of people to approach work in a completely new and empowering way, it does come with its downsides.

The advantages of working in the gig economy are related to flexibility. More specifically, there are low barriers to entry as regardless of skillset, anyone can easily find an occupation in the gig economy.

Another advantage is that it provides for adjustment of the work-life balance of individuals. That happens as the worker is given the opportunity to work at the time of his choice and hours are flexible as well. Interestingly enough, it gives the ability to work from anywhere in the world, allowing for better living standards, if one is flexible enough.

However, these advantages come with their downsides.

Gig workers usually trade flexibility for social security. Gig workers are vulnerable to longevity risks (outliving their savings for retirement), they are not usually covered by health insurance, are not entitled to paid holiday, are not allowed a sick leave and are not covered by any scheme for unemployment benefits.

What are the Main Issues with Gig Workers

Related to the disadvantages, there are many issues regarding the organisation of the Gig Economy.

Many scholars agree that the main issue of the Gig Economy, also true at a European level, is the inability to form a coherent and consistent legal framework to include gig workers.

The Dublin Foundation tried in 2018 to map differences in meaning and national context of the term “Gig Economy”. The term Gig Economy is mainly used in Anglo-Saxon countries as a reference to on-demand services and app-based occupations while in Denmark, Italy and the Netherlands it is more closely related to physical tasks.

In the following table, we see all the alternative