Solving some unintended consequences of the gig economy with blockchain technology

For most of us, our daily activities have never been more convenient than now. Food is now possible in 15 minutes or less. If you are going to attend your favorite match, just hail a ride through the app. We love the convenience of these improvements, but what about gig workers? Have you ever inquired whether your Uber driver benefits from the services they offer? The answer is probably no.


To better understand the problems that gig workers encounter, we will consider a series of articles called “Life in the Gig Economy.” The most outstanding thing from the series is the effect these issues have on the gig economy workers. The gig economy comprises online markets used to manage labor in novel ways — think Lyft, TaskRabbit, Uber, Fiverr, UpWork, etc.  


These platforms function by connecting workers to employees in specific fields. This method has created many opportunities for workers all over the world to make flexible income and work, either as a full replacement of traditional full-time employment or as an extra income stream that complements their primary careers. 


Gig economy at a glance

 44% of gig workers are university graduates and 28% of gig workers are specialists in a professional field, like accounting and law.


62% of gig laborers do it to generate extra income to support their lifestyle and needs. 69% of gig workers are men, while the rest are women. 


The gig economy is rapidly growing as many businesses use this new business model, and job seekers look not just for jobs but for flexibility too. Many people are left wondering what the gig economy is about and whether it has a positive or negative impact on those involved. Randstad carried out a study to establish how the gig economy is affecting job seekers and employers alike.


The prevalence of short-term contracts, part-time and freelance work, rather than permanent or full-time employment, characterize the gig economy. As a gig worker, there is a business culture or work schedule to adhere to, which might bring physical and emotional stress. Laborers can perform their tasks and set their working hours, rather than the 9-5 working schedule, enjoying high flexibility. Some analysts view this as a significant contributor to low wages, insecurity, and poor working conditions. However, some people feel that the gig economy offers them a chance to organize their lives and work as it suits them.  


The Randstad survey further established that 70% of people love the security of being a full-time employee over the flexibility offered by the gig economy. From the above statement, the gig economy is not for everyone, but there is disregard for some of the benefits it provides. The gig economy is most likely to remain phenomenal for the conceivable future, but it is already deeply embedded in the labor market and influencing how millennials approach work.  


Commodifying human talent

In most online marketplaces, we view the commodification of goods and services as a positive development that drives the global economic value. Though the economic value creation takes place in the gig economy, we still lack a full appreciation of the impact of the commodification of social skills. As these platforms become more productive, there is negative pressure on wages for the laborers trying to make a living from them.  


For instance, a study conducted by the Economic Policy Institute established that ride-hail drivers in the U.S. earn just $12 per hour after deducting car expenses and fuel. $12 per hour is comparatively lower than what many online marketplaces often claim their workers receive. 


Besides, gig workers are also accountable for shouldering their high start-up capital, such as providing the tools required for a job. Remember, we are not talking about a hammer or a screwdriver; we are talking about capital-intensive vehicles that offer little or no liquidity. These economic and social needs have caused an upsetting statistic: gig laborers make an average earning of $36,500, almost 58% less than full-time employees. The above statistics show why these workers are so anxious. 


The labor disconnect

Cutting-edge technologies, such as Artificial Intelligence (AI) and automation, have impacted the way people work, causing more specialization, subcontracting, and outsourcing. This tendency has been prevalent in consumer services because of online eCommerce sites and mobile apps. Now, businesses can easily acquire labor without necessarily hiring workers, enabling them to price services considerably less than traditional players. 


For merchants and customers, the impact is minimal. Chicken fliers don’t require their fleet of delivery drivers; a house manager can find a plumber on a 30-minute notice, and taxis are no longer the only means to get around a town on demand. 


For the gig workers, however, the experience is not always as positive. Since these online marketplaces have attained large-scale international traction, jointly managing markets for hundreds of millions of laborers, technology has cut off the advantages that usually come from employment from workers. 


Labor disconnect is particularly real in gig markets that rely on comparatively commodified functions, like delivery drivers, but is also increasingly impacting gig markets that depend on knowledge, like freelancing. For instance, with relatively little effort, I can hire a copywriter through UpWork Marketplace from any part of the world, and have them handle my content needs. But how much will that copywriter receive in return? And what ratio of their compensation will they get as income, after work-based costs are deducted (charges to use the platform, commissions paid to the agencies, etc.)?    


The reality of the gig economy

People who are willing to offer their skills and expertise facilitate the gig economy. They include people from various demographic groups- single mothers making supplemental income, immigrants, students, and retired individuals trying to supplement their pensions- and they comprise of different ages and races.


The common denominator among the gig workers is that they are mostly left to fend for themselves for anything beyond their basic earning. They are likely unable to access loans, carry their work profile, and reputation with them when they shift to other career paths, and they do not enjoy workplace insurance and health benefits. Additionally, they are not offered employment perks, nor are they supported in career growth and personal goals.


The legislative option

Concerning these issues, government authorities have started to take action, with the State of California experiencing the most current work under a newly passed law known as AB5. Below is a summary of this law:


“The proposal included a clear and strict definition of contractors. Those workers have to be free from “direction and control” in doing their jobs. They have to be doing something “outside the usual course of business of the employer.” And they have to be contributing some specialized skills, like a trade or profession.” 


The AB5 law aims to compel big gig economy platforms to start considering their workers as employees. Though I do not doubt the positive intention of this law, it fails to consider the economics of these platforms fully, and it provides solutions that are too simplistic and unlikely to solve the issues of the unintended consequences of the gig economy. 


Such laws can sometimes end up being a hammer in search of a nail. For instance, Uber and Lyft are not the enemies. But it is easy to understand why their workers sometimes feel that way; most of the advantages are channeled to the marketplaces (profits) and the clients (convenience). These workers are left with flexible working hours only, which is excellent but not for someone who cannot make ends meet. 


So how do we design a model that is beneficial to everyone? Uber’s central business system makes it ill-equipped to manage their workers’ financial demands, such as access to credit, debt, savings, and insurance.  


A blockchain-based open platform solution

A firmly believe technology can help solve these problems, via an open platform that uses cutting-edge fintech ideas and features, coupled with more elements of blockchain technology to return benefits and power to the gig workers. If the workers can come up with their digital profiles, they will be able to see the sum of their efforts with time and across different markets. Open platforms will hand them ownership of their experience, reputation, and earning history. 


Soon, we will experience a scenario where blockchain technology will be applied to offer gig workers access to all the benefits of traditional employment, with the extra advantages of flexibility and autonomy- all focused on helping gig laborers grow in their careers and obtain more stability, earning power, and individual fulfillment. 


Conclusion

Better financial stability, ownership of data, access to insurance, and credit to finance equipment will not only benefit gig workers. After all, by making gig careers more attractive, and a genuinely sustainable employment option in the modern labor economy, gig markets will also benefit greatly. Eventually, the effect of that convenience will far outweigh its costs. A solution built through an open platform, leveraging on the power of blockchain technology, is the best prescription that can solve all the unintended consequences of the gig economy.

 

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