The Gig Economy and Entrepreneurship
A number of big businesses nowadays are based on digital platforms. As TechCrunch says,
Uber, the world’s largest taxi company, owns no vehicles. Facebook, the most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the largest accommodation provider, owns no real estate.
These huge industries generate hundreds of billions of dollars in revenue every year, and are referred to as collaborative, sharing, or gig economy businesses. They are coming into the fold with the rise of mobile applications.
These types of businesses are definitely expected to comprise a huge portion of the economy in the future, having considerable effects and implications as they continue to disrupt traditional, long-standing businesses.
They do have a positive forecast to actually help the economy rather than hurt it with all that disruption with the newfound ways of entrepreneurship.
In this article, we ask the two questions:
- What is the effect of the gig economy on the amount of entrepreneurial activity?
- Why do they matter?
The gig economy’s effect on entrepreneurship
Evidence seems to point that the gig economy hasn’t really changed entrepreneurial activity that much. This is probably due to the fact that traditional businesses have safeguards in place and their transition is indeed slow, making it difficult for any major manifestation of change to happen.
However, everyone seems to have conflicting opinions about why this is so or why it isn’t so. More importantly, the clear conflict of opinion also highlights how the gig economy can or can’t be good for the economy and overall entrepreneurial activity.
Some say the flexibility of the nature of the business may lead to the betterment of entrepreneurial activity, while on the other hand, the statistical impact (or lack thereof) of the platform is just isn’t that considerable enough to be a huge factor.
One thing is for sure though, the platform has provided individuals with the ability to pursue entrepreneurship easier than ever before by providing them ways and means to have flexibility on their schedule and how much time and resources they can invest on the business depending on how intense they want to pursue it.
Economists are continuing to struggle in their pursuit to analyze the gig economy. They have encountered countless difficulties in the definition and identification of the gigs and those who work on them. That employment data is severely lacking in most studies is what creates all of this uncertainty.
Yes, the gig economy does matter
Gig workers or freelance workers are largely self-employed, and there are a few possible explanations as to why these self-employed individuals have proliferated with the use of new and popular technology.
For instance, the United States has just experienced a recession in the recent years, resulting in the loss of thousands of jobs. The loss of these jobs motivated this large pool of potential workers to become self-employed.
This, along with the rise of smartphones and its software counterparts, paved the way for a whole lot of opportunities when considering becoming self-employed.
So, why do they (the gig workers and freelancers) matter?
Well, the pool of self-employed individuals is a great source of ideas, information, and innovation. Having a huge increase in that pool tends to create better chances on new innovations being born, thus, benefiting most of society.
The freedom that these individuals have in comparison to a regular corporate worker is one of the key elements in the creation of radical and innovative ideas.
Furthermore, each of these gig workers is forced to stand out in order to succeed. The need for standing out and being actually useful rather than creating a fad or a novelty only increases the possibility of innovations to happen.
They aim to provide new goods and/or services as well as using different production, marketing, or delivery methods and processes in order to compete within that market. Because of that, one can see that these gig workers are actually micro-entrepreneurs — they respond to local conditions of the economy and try to fill a particular niche.
Now, the question of whether or not these micro-entrepreneurs can be successful, is easy enough to answer. Yes, they can be!
The gig economy provides information about the actual conditions of the market to already existing entities. Even if a micro-entrepreneur fails, that information is still valuable in that others will know what can or can’t be done in that particular area.
The sad fact of the matter is that there is a lot more failure than success in these markets, as these micro-entrepreneurs have uncertain income and flexible hours that may not provide consistency. These uncertainties result in them accepting more risks and less benefits than usual in comparison to the average worker.
Another advantage of the gig economy
Another reason why the gig economy and gig workers do matter is by the way that work is being restructured across the board by large, single organizations. They are straying from the usual long-term employment and giving way to contractual arrangements.
This may or may not be a good thing depending on who you ask. However, in order for the transition to be successful, there are some things that have to be considered.
- Training and skills
- Social protections, and
- Regulatory transitions.
We need to answer questions such as: what kind of infrastructure is needed? What kind of skills training is required? Should we invest more in technology education then?
Also, will contractual arrangements allow for social protections to be there in the first place? Or will that just inhibit on the flexibility that is part and parcel of the nature of the job?
As for regulatory transitions, this will inevitably see a lot of debates whether or not there should be some type of protection in these types of markets.
The future in an era of technological advancements in the world of gig economies remains uncertain. In this ever-changing environment which is dictated by technological change, and shaped by unpredictable social reactions, the only way to move forward is to decide on how we ultimately believe how markets should be structured.
We posed two questions early in this article. The answers to them, unsurprisingly, is still as much of a mixed as the current situation the gig economy is facing.
There will always be a ferocious debate about whether or not the future lies with the gig economy, there will always be uncertainties to their value, and there will always be room for improvement.
But such is the way economies work, and we can only cope and hope that it goes into the way that benefits us all. One thing is sure though; the outcome will depend on the kind of technology deployed and the attitude we bring with it.