New Gig?

September 3, 2015

As reward driven creatures, the invention of monetary systems may represent the single most transformative moment in history.  Beyond food, shelter and family, perhaps nothing drives humans more.  As individuals in societies moved beyond simply bartering with each other to employer/employee based relationships, a new type of compensation – one that could not be quantified in specific units had to be invented as well.  To field an army, to retain governmental or religious officials, leaders needed something different, a form of compensation that was not defined by a specific unit of work.  This was the birth of the “salary”.  The word itself is derived from “salt” – a precious mineral (and food preservative) and one of the earliest forms of payment in the Roman and Persian empires.  Thousands of years later this history remains in our idioms, “being worth one’s salt,” as the saying goes.  To be salaried was coveted by all, but available or achieved by only a select few.

In the U.S., much of what we rely on today was codified in the Fair Labor Standards Act (FLSA) of 1938.  In it, the law articulates the distinction between salaries and those receiving an hourly (with a minimum) wage.  Only in certain roles – executives, administrators, professionals, outside sales (and then added in 2004 some computer workers) – were to be eligible for a salaried position.  For each of these, a specific test was to be applied and justified, along with a minimum compensation required.  Being paid a salary was thought to be an exception, rather than a rule.  However, as the nature of our economy has dramatically shifted over time, the fraction of individuals being compensated with a salary has exploded.

Recently, the social contracts between employers and employees have come under intense and renewed scrutiny.  The nature of employment, the concept of a fair wage and range of additional benefits (vacation, unemployment insurance, retirement savings, incentives, etc.) have all built the foundation of the American middle class and are at risk for an increasingly large fraction of these new workforces.

Today, many seek to suggest that the nature of work is formally changing.  With the benefit of new technologies, car owners can become on-demand taxis or delivery services.  Home and apartment owners are said to be the newest threat to the hotel industry.  And each of us can offer our specific skills in roles as diverse as cooks, to coders, to cleaners to carpenters – all on demand – at a fixed preset price and offered at our availability and discretion.  Some call it the “shared-economy” while others refer to it as the “gig-economy”.  In some settings it’s been deemed “crowd sourcing.”

What’s new?  Perhaps one significant difference is the level of connectivity.  Services have been offered and rendered since the earliest of times.  There’s certainly nothing new about “doing gigs.”  Before the telephone (and the phone book!), the network between buyers and sellers was driven by who we knew and where we lived or travelled.  Today, we have access to globally available talents and potential clients/customers all interconnected by seamless digital technologies.

The individuals involved in the “gig economy” are being classified as “self-employed,” accepting a job and taking on the responsibility and risk as an individual.  The conventional employer has been replaced by a technology-based intermediator, be it Uber, Lyft, Task Rabbit, AirBnB or others.  Vast numbers of workers are jumping in, and in so doing, are becoming self-employed.  As remarkable as this can seem – careful consideration of the compensation and benefits will leave one concerned.  Gone is the employment safety net, the benefits and opportunity for growth and promotion.  All having been traded in for the freedom and ability to have it your way, to be presumably “entrepreneurial.”

It is the entrepreneurs that are building our new world.  Their willingness to take the risk – to begin and to act before a clear path or certainty is available is what distinguishes them and their behaviors from others.  They take the risk – they “step forward, go first.”  But for these risks they also have remarkable upsides and often the additional skills needed not only to be self-employed per se, but to become employers themselves.

The contributions to GDP made possible by this new economy are poised to be robust.  But for the gig workforce, our original social contract is at risk. A simple digital technology replaces their employer.  These new “entrepreneurs” earn no time-and-a-half overtime pay, accrue no sick days or vacation days, and accumulate no pension or 401(k).  Whilst many seek to think of them as entrepreneurs, few have any real upside in the businesses that their efforts enable.  As the “sharing economy” may truly be the future of work – an economy of work, but not “jobs”— it is incumbent for us to have composed new covenants that provide them elements of a social safety net.

As we seek to empower more and more workers in the new economy, we must remain mindful of the reward and provide new innovations to support their future and their families.  We must ensure that they live and function with the confidence that they have a long-term plan.  Being “free” to do it your way, work when you want and only for whom you want is rarely a sufficient reward to drive the excellence that we seek from them, nor enough to give them the confidence in their future.  We need to provide additional paths to grow and succeed for these new sharing economy workers in order for them to help improve the world and secure a place in it for themselves.

Enjoy your Labor Day!