The gig economy: capitalism at its most brutal?
The latest wave of crowdsourcing apps is bringing consumers and providers together. But the gig economy’s benefits are inherently weighted towards companies.
By Diesel C.
The internet handed clients a direct line of communication to international workers. Long before the term ‘gig economy’ had been coined, businesses offered piece-meal tasks to digital workers over the Internet.
Elance, a freelancing platform, sprung to life in 1999, followed by oDesk in 2003. Freelancers of the day specialised in Internet marketing and early e-commerce. It didn’t take long for the scope of client job posts and the services offered by freelancers to widen.
The freelancer/client marketplace model emerged as a definitive global phenomenon during the height of the 2007-2009 global financial crisis. It has since grown so rapidly in some pockets of the workforce as to warrant the ‘economy’ label; the gig economy.
The normalisation of outsourcing and cost-cutting has been the gig economy’s driving force
According to a 2018 report by KellyOCG, a consultancy group, 65% of global managers surveyed said that the gig economy is fast becoming the standard for how organisations manage their workflow, with the cost reduction the primary impetus behind the practice’s growth.
By 2020, 25% of businesses will employ a workforce comprised of at least 30% contract workers. As younger generations value fluidity and flexibility, contract-based role are highly appealing.
In line with corporations’ outsourcing practices, SMEs seek to reduce labour costs when hiring freelancers online. The global freelancer gig market has become an outsourcing free-for-all resulting in tectonic structural changes to global labour supply.
The ASEAN region has emerged as a freelancer hotspot. Digital marketing agencies in the West, responsible for delivering content marketing articles for businesses, can save up to 400% by hiring freelancers based in Southeast Asia.
Technology and fintech gave new life to the global gig economy
The early freelancing platforms that gave birth to the gig economy, including Elance and oDesk, encountered a common obstacle. While the platforms connected clients to workers from all around the world, those without access to traditional banking or PayPal, struggled to receive payments inside the platforms.
If caught making transactions outside of a platform, the repercussions were swift; clients and freelancers could be banned for life.
While PayPal and traditional domestic bank transfers were readily available and had already encouraged freelancer participation in the region, the maturation of Payoneer in 2009 was a turning point for the region’s gig economy and the global gig economy on the whole.
The digital payment service partnered with the major platforms to streamline payment services, allowing freelancers to rapidly access funds via their online account and a Payoneer MasterCard debit card.
Payoneer allowed those without access to a bank account to enter the emerging gig economy, bringing emerging markets into the online workforce and increasing participation in previously engaged economies.
The Philippines is at the front of the freelance and gig-economy pack
As Dan Breslaw of Payoneer stated: “Asia cemented its status as a gig-economy hub (of the world) in Q2 of 2019.” Freelance revenues in Pakistan, the Philippines, India and Bangladesh were among the ten fastest-growing annual gig economy revenues and collectively recorded an increase of 138% compared against Q2, 2018, figures.
Payoneer’s 2019 Global Gig Economy Index ranked the Philippines as the sixth-fastest growing gig economy market in the world, with a massive 35% growth in total freelancer earnings.
Filipinos have been particularly attractive for international clients because of their ability to communicate well in English. Filippino independent online workers reportedly make up 18.9% of the global remote workforce.
Filipinos are also experiencing the drawbacks of the gig economy
The Philippines’ position at the forefront of the international gig economy has not come without woes. As 2% of the population (1.5 million Filipinos) turns to freelancing to earn an income, stress is emerging as a hot-button issue.
Gig economy workers ply their trades without the security net of mandatory employee benefits. They have to invest in their retirement themselves, sign up for healthcare plans themselves and are not entitled to sick pay.
Contractors also have no guarantee of long-term work. A whopping 92% of surveyed Filippino freelancers stated that job stability was a major concern. When clients no longer require their services, work dries up and they must begin a search for a new client.
Compounding the issue is the predatory practices of freelancer platforms. 84% of Filippino freelancers use a major freelancer platform such as Upwork and Freelancer to find jobs. Much like the gravitational force of black hole giants, the predatory nature of these platforms is not always apparent.
These platforms know that once freelancers have established reputations on their platforms, walking away is not an option. As a result, their practices have gradually become more predatory, as their users have become more dependent on their platform for work.
Upwork’s purchase of Elance and oDesk handed the platform market dominance. It has wielded this dominance to increase the fees taken from freelancer earnings.
Where does the competition end?
The nature of the freelancer/client gig economy generates incredible competition in itself. For example, new Filippino freelancers without ratings or recommendations getting started on Upwork or Freelancer find landing clients extremely difficult. Newer workers are forced to take work at lower rates to get their first jobs. They often become trapped working long hours to earn enough to get by.
With a constant stream of new freelancers entering the gig economy, where does race to the bottom stop? Alternatives are scarce when a few platforms dominate the market.
By definition, the gig economy is designed to increase competition and cut worker earnings. Businesses turn to freelancers and independent contractors to reduce costs and shirk employer responsibilities.
Nations cannot find domestic solutions to global problems
ASEAN governments are fearful to tinker with regulations around the gig economy. With the region carving itself out as a startup-friendly regulatory sphere, governments are reluctant to introduce regulations that could stymie profits and lead to a startup exodus.
By definition, the gig economy is a race to the bottom. It feeds off the competitive excesses of global capitalism. Industry growth has now reached a tipping point where national governments are unable to protect gig economy workers out of fear of extensive economic destruction.
Venture capitalists financially nourish startups that can avoid employee liability and worker rights. This puts responsible players on the backfoot, effectively incentivising firms to become malign social actors.
How can firms sell this blatant erosion of employee rights to the masses? Shroud it in economic jargon and give it a slogan; the gig economy, the sharing economy- an unsubstantiated dream.