The gig economy is changing the way we work. Now regulation must catch up

Major technological forces are reshaping business models and changing the nature of work. The speed of change has led to a conflation of different trends and increased fear, and confusion among workers and employers alike. It’s worth unpacking what these changes mean for today’s workforce and what the response of employers, employees, students and policy-makers should be.

Technology is leading to three major changes to the workforce.

First, technology and socio-economic trends are changing business models, and consequently the types of jobs that are needed. This is leading to major job churn for the nearly 2 billion people who are currently employed. Nearly half of all jobs are predicted to be at risk of automation, while at the same time wholly new jobs are emerging, and our current systems for skill development are often too slow-moving to adapt appropriately.

Second, most “stable” jobs are also going through skills churn, as one bundle of required skills is replaced by a new one. This exacerbates the talent and skills gaps faced by employers, and creates uncertainty and insecurity for workers – unless they are willing and able to rapidly reskill or upskill for their roles.

Third, technology is changing how work is organized, with new platforms connecting consumers of human capital and owners of human capital in ways that were not possible in the past. For example, platforms like Uber are connecting drivers with those who want rides, Upwork is connecting knowledge workers in IT-related fields with those who need their skills, and Care.com is connecting care workers with families who need their services.

A polarized debate has emerged around this last trend in particular, the so-called “gig economy”. For example, there are extreme views on whether these are wholly new earning opportunities or whether these platforms are creating a new, insecure, “precariat”. The truth lies, as is often the case, somewhere in the middle. Most importantly, where we end up in the future is not a forgone conclusion – it is our actions today that will determine how well we use opportunities while minimizing risks. To do this, it’s important we bust some myths – using data.

The latest Human Capital Report brings together both public international data and private data from some of the largest on-demand platforms to shed light on the gig economy. We find:

1. Simply being a freelancer is not new – nearly 13% of the global working age population is already engaged in own-account work. In economies like the US, much of the recent job growth has been through alternative or freelance work arrangements. More than a quarter of all workers in countries like Bhutan, Vietnam and Colombia are own-account workers. However, the way in which these workers are now able to connect with their markets has started to change. Freelance workers traditionally used to seek out and enter into agreements with their clients directly or through traditional talent platforms, including staffing firms, to provide their skills and services. And this is still the majority of own-account work in most countries. But emerging digital platforms have begun to provide previously inactive, unemployed, underemployed and own-account workers with easy access to an online marketplace – in effect, a newly digitized labour market.

2. The jury has been out on whether these platforms are creating wholly new opportunities or whether they are simply bringing online previously fragmented, offline gig work. The reality is that they are doing both. They are in part creating new opportunities where there were previously none, especially in those markets where both organized commercial activity as well as public infrastructure have been lacking. The hyper-accelerated growth of mobility platforms such as Didi Chuxing in China, which has 13 million drivers, or Grab in South-East Asia speaks to the unmet demand they have been able to fill both for workers and consumers. Similarly, in previously fragmented markets such as the care economy in developed and developing countries alike, platforms like Care.com connect those who provide childcare, eldercare and pet care services with families who need these services. And as these platforms become established hubs they also attract new players, both workers and consumers, providing new opportunities to both.

3. There is concern about how these platforms are disrupting traditional work. Some tasks that were met through traditional, full-time employees are being replaced by a more fragmented, on-demand workforce, often due to cost pressures or a need for agility and speed. But equally, these platforms are providing businesses with the talent that they are unable to find through traditional means, especially in job functions where there are major skills gaps, such as IT and digital skills. For example, nearly 12 million freelancing knowledge workers serve 5 million clients, including both start-ups and Fortune 500 firms, through Upwork. For those with the most in-demand skills, the opportunities offered through these platforms can often surpass any potential earnings they could have through more traditional employment.

So is the gig economy good or bad for the future of employment? Like most technologies it is neither inherently good nor bad. Digital work platforms can span a range of both high-skilled, high-paid work and low-skilled, low-paid work. They can be localized or cross borders, not unlike the outsourcing that has occurred between developed and developing economies in the past. They have the potential to create enormous opportunities for the developing and developed world. The data from these platforms can provide the basis for smart regulation and agile safety nets, just as it can be used to sell more services.

Governments will need to take the lead in understanding and regulating new models of work. Responsible platform businesses will need to be a core part of shaping new labour markets and designing a new social contract. Educators will need to harness these very same technologies to develop skills throughout our lives. The World Economic Forum’s platform aims to provide this space, complementing analysis with a space for building trust and promoting dialogue and action. It’s the actions of our leaders today that will determine whether the future growth of platform-enabled work maximizes opportunities for all of society or whether most of us become online drones searching for our next gig.

The World Economic Forum’s Human Capital Report can be found here.

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