The gig economy: hype and reality
Economist Gerald Friedman warns that the much-hyped gig economy is a road to ruin for workers.
Lynn Stuart Parramore
THE media are all abuzz with the changing nature of work. Exciting words like 'creativity' and 'adaptability' get thrown around, specifically in connection to the shift away from steady, full-time employment to a gig economy of freelancers and short-term contracts. Proponents of the gig economy, from the New York Times' Thomas Friedman to bright-eyed TED pundits, tout it as a welcome escape from the prison of the standard workweek and the strictures of corporate America. Working on a project-to-project basis will set you free, they tell us. Wired magazine has called it 'the force that could save the American worker'.
But when you're actually stuck in it, the gig economy looks quite different.
Consider the New York Freelancer's Union: According to a report in The New York Times, 29% of the union's New York City members earn less than $25,000 a year, and in 2010, 12% of members nationally received some type of public assistance. Turns out that life with no health benefits, vacation pay or retirement plan is not a rosy picture.
Writing for Fast Company, Sarah Kessler, who went undercover to hustle for work in the gig economy, put it this way: 'For one month, I became the "micro-entrepreneur" touted by companies like TaskRabbit, Postmates, and Airbnb. Instead of the labour revolution I had been promised, all I found was hard work, low pay, and a system that puts workers at a disadvantage.'
What's really going on is the desire of businesses to chop wages and benefit costs while also limiting their vulnerability to lawsuits, which can happen when salaried employees are mistreated. The burden of economic risk is shifted even further onto workers, who lose the security and protections of the New-Deal-era social insurance programmes that were created when long-term employment was the norm.
I caught up with Gerald Friedman, who teaches economics at the University of Massachusetts at Amherst and has written about the gig economy, to find out how this trend happened and what it means to workers and our increasingly unequal society.
Lynn Parramore: How did the shift away from full-time employment to the gig economy come about? What forces drove the change?
Gerald Friedman: Growing use of contingent workers (in 'gigs') came when capitalists sought to respond to gains by labour through the early 1970s, and in response to the victories capital won in the rise of the neoliberal era. Because contingent workers were usually not covered by union contracts or other legal safeguards, employers hired them to regain leverage over workers lost when unionised workers gained protection against unjust dismissal and courts extended these protections to non-union workers under the 'implicit contract' doctrine.
Similarly, the rising cost of benefits due to rising healthcare costs and government protection of retirement benefits (under the 1974 ERISA statute) raised the cost of full-time employment; employers sought to evade these costs by hiring more contingent workers.
In the early and mid-20th century, employers created careers and job-ladders to lock valuable workers into particular jobs. Job-lock reduced the danger that low unemployment would lead to competition for workers and wage inflation, and would undermine their control over their workers. (The other side of job-lock, as Richard Freeman among others noted, was the organisation of labour unions among workers who could not 'exit' from no-longer-agreeable employments, and could therefore engage in collective action to improve conditions.) Reduced market regulation, the opening of markets to international competition, and a shift in macroeconomic policy focus from full employment to price stability all reduced the danger that workers would quit to gain higher wages or better jobs.
Instead of using job-lock to protect themselves from labour-market competition, employers rely on repressive macro-economic conditions and relatively high unemployment, and therefore do not need to offer job ladders, careers or benefits to attract and to hold workers.
LP: We hear a lot of buzz from trendwatchers on a new wave of 'microentrepreneurs', 'minibusinesses' and empowered freelancers who are changing the nature of work. Why do people find this vision so intoxicating?
GF: Talk of 'microentrepreneurs' presents a favourable view of the rise of the gig economy, one consistent with liberal values of individualism and opportunity, even while ignoring the oppression and poverty-wages many find in the gig economy.
There are certainly some who enjoy the uncertainty of irregular employment. When unemployment rates fell to levels traditionally associated with full employment in the late 1990s, however, we saw how workers really feel about gig jobs: they rejected them and the contingent economy contracted.
Given a choice, workers choose careers and jobs, not freelance gigs.
LP: The reality of the gig economy often seems to be a system that puts workers at a disadvantage. From your research, how do you see the gig economy playing out in people's lives?
GF: The gig economy is associated with low wages, repression, insecurity, and chronic stress and anxiety. Freelance workers fear to complain about working conditions, fear to ask for higher pay, and fear to reject any conditions imposed by prospective employers. By removing any social protection, the gig economy returns us to the most oppressive type of cut-throat and hierarchical capitalism, a social order where the power to hire and fire has been restored to employers, giving them once again unfettered control over the workplace.
LP: How can we create jobs that are flexible and adaptable, but also give workers some security and decent benefits?
GF: We should not romanticise the situation of organisation workers on careers and with job ladders. While providing more security and protection than the gig economy, this was a type of contract established by capitalists to enhance their power over workers. Instead, we should seek to enhance worker security and independence outside of work through systems of income security (enhanced unemployment insurance and guaranteed income and universal health insurance), by establishing worker-controlled guilds to regulate access to gig work through hiring halls and hiring lists, and by extending legal protections to workers' civil rights and health and safety while doing freelance and gig work.
LP: To what extent do you see the gig economy impacting growing economic inequality?
GF: The gig economy has been a giant vehicle transferring income from workers to capitalists. Gig work has become a vehicle not only to drive down wages but to eliminate employment-related benefits (including health insurance as well as retirement pensions and government social security). By undermining labour unions and promoting individualist competition among workers, gig work drives down wages and reduces the possibilities for effective working-class political action.
Lynn Parramore is contributing editor at AlterNet (www.alternet.org), in which this article originally appeared in May 2014. She is co-founder of Recessionwire, founding editor of New Deal 2.0, and author of Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture. She received her Ph.D. in English and cultural theory from New York University, and she serves on the editorial board of Lapham's Quarterly.
*Third World Resurgence No. 319/320, Mar/Apr 2017, pp 31-32