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Crowdstaffing featured as Rising Star and Premium Usability HR platform in 2019

Crowdstaffing has earned the prestigious 2019 Rising Star & Premium Usability Awards from FinancesOnline, a popular B2B software review platform. This recognition is given out annually to products[...]

May 13, 2019

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Why We Need a New Social Contract to Ensure the Gig Economy’s Success

The gig economy is no longer a novelty or a passing fad. It’s become a familiar mainstay, with its presence firmly entrenched in the day-to-day mechanisms of modern society. And yet it remains as divisive a topic as politics. Proponents laud the freedom, additional wealth opportunities, and flexibility that the sharing economy affords its beneficiaries. Detractors, meanwhile, caution against the instability, lost tax revenues, transience, and potential income inequality they perceive. There’s no simple answer. There is, however, one prevailing truth: the on-demand economy shows no indications of fading away. In some fashion, it’s an agent of progress. Few wars, history teaches us, have ever been won by those attempting to fight the future. I believe tremendous advantages exist. I also recognize the need to draft a new social contract to ensure that the gig economy lives up to its promise. Here are some ways we can begin to accomplish that important task.

Independence: Autonomy, Not Abandonment

Independent talent don’t embody a new or unprecedented approach to business in this country. The origins of the U.S. labor movement can be traced back to the nation’s earliest settlers. The rudimentary workforce was largely artisanal and inspired by values that relied on the virtues of independent citizens to provide exceptional wares and services. This attitude inspired an entrepreneurial spirit where the accountability placed on each individual tradesman drove a high quality of goods.

It wasn’t until 1938 that America truly witnessed the shift to what we now consider the traditional employment arrangement. Yet in this century, ideals of independence and entrepreneurialism represent a departure from bygone eras and offer a fresh perspective – one that ensures the prosperity of talent, commerce, and economic growth together, as data and analysis suggest.

As Nathan Heller wrote in the New Yorker, the gig economy is working for many of the free agents he interviewed, who “see unrealized opportunity wherever they go.” It also marks a natural evolution that was famously captured by Charles A. Reich in the 1970s. Reich, a professor of law at Yale, was also a social scholar who became best known for authoring “The Greening of America,” a paean to the counterculture movement of the 1960s. Whether intended or not, Reich’s philosophies forecasted the non-traditional employment arrangements we’re witnessing. His outlook on the workforce of the next age predicted the rise of the sharing economy.

Casting an eye across modern history, he traced a turn from a world view that he called Consciousness I (the outlook of local farmers, self-directed workers, and small-business people, reaching a crisis in the exploitations of the Gilded Age) to what he called Consciousness II (the outlook of a society of systems, hierarchies, corporations, and gray flannel suits). He thought that Consciousness II was giving way to Consciousness III, the outlook of a rising generation whose virtues included direct action, community power, and self-definition. “For most Americans, work is mindless, exhausting, boring, servile, and hateful, something to be endured while ‘life’ is confined to ‘time off,’ ” Reich wrote. “Consciousness III people simply do not imagine a career along the old vertical lines.”

Reich’s idea of Consciousness III people embodies so many facets of the millennial generation -- their values and approach. It further speaks to the growing trend of independence in the workforce. According to McKinsey Global Institute, up to 30 percent of working-age individuals are engaged in some form of independent work. The study, “Independent work: Choice, necessity, and the gig economy,” found that up to 162 million people in Europe and the United States had tapped into the opportunities made available by gigs. The number of talent who chose free agency outweighed those who saw it as a necessity.

  • Close to 50 million people embraced gig work as their primary source of income.
  • About 64 million performed side hustles as supplemental earnings.
  • For individuals who turned to gigs out of necessity, only 14 percent reluctantly accepted it as a primary source of income; 16 percent considered themselves cash-strapped and used gigs to augment their finances.

”Working nine to five for a single employer bears little resemblance to the way a substantial share of the workforce makes a living today,” McKinsey observed. “Millions of people assemble various income streams and work independently, rather than in structured payroll jobs.” And still, we can’t ignore the ongoing legal battles and media scorn that have plagued gig companies like Uber and Handy. More recently, GrubHub entered the fray, leading California courts to open the first trial in state history to decide whether freelance talent should be classified as contractors or employees.

GrubHub v. Lawson pits two ex-GrubHub drivers against the food delivery/tech company -- and its outcome could potentially change the business models of companies like GrubHub, Uber, and DoorDash,” The Hustle reported.

Speaking before the New America Foundation, Sen. Mark Warner (D-Va.) declared: “It’s fairly stunning to me that this much transformation has already taken place but virtually nobody in Washington is starting to ask policy questions.”

Prior to the last 10 years, upticks in “alternate work arrangements” and “involuntary part-time” talent were generally the byproducts of economic instability. Yet as Government Accountability Office (GAO) data show, the desire for flexibility, self-employment, on-call arrangements, supplemental income opportunities and overall independence from traditional management structures are new factors -- new nuances -- in the conversation. A deeper dive into the data reveals that 86 percent of independent contractors and contingent workers are not only satisfied with their roles, they would never think of returning to traditional employment.

Today’s free agents, unlike those of the past, tell success stories of working harder, earning more, controlling their own destinies and being more fulfilled. And this is the precise nuance that Sen. Warner and others are invoking: what about all the talent who no longer want to be employees of a company? While there’s no definitive solution, there are many ingenious and innovative proposals that could help us support the gig economy by creating a new social safety net to protect talent.

Striking a New Social Contract for the Sharing Economy

In January of this year, I discussed a few areas where thought-leaders are conceptualizing solutions to benefit companies and talent who want the on-demand economy to thrive. For example, Obama’s former wage-and-hour enforcer, David Weil, told discussed the idea of portable benefits with Fast Company’s Ben Schiller. As Schiller explained, these are “systems that could make switching between jobs and projects easier, allowing workers flexibility while prorating contributions based on hours put in. (New York politicians have been exploring such ideas and could bring proposals to vote this year.)”

Steven Hill, a senior fellow with the New America Foundation, drafted a compelling plan for Individual Security Accounts (ISAs), predicated on existing models such as the multiemployer plans already in place for construction workers, health care professionals, miners and even some Silicon Valley independents between projects. Already mandated statutory costs are still covered, and the program would incentivize insurance companies to participate as providers of ISA plan elements, further reducing costs as economies of scale come into play.

Multiple employers pay a few dollars per hour that’s invested in the ISA. The amounts are prorated according to the number of hours worked, or a percentage for contracts based on the completion of work. All statutories are accounted for in the ISA, ensuring that the IRS receives its share.

Another idea involves introducing a new category of talent into labor regulations. Countries such as Canada and Sweden have already conquered it. In those countries, a new class of worker exists -- the “dependent contractor.” This concept is gaining traction. Technology leaders are already working to build the foundations for state legislators and Congress to consider. A dependent contractor status would empower talent who are seeking independence while preventing organizations from taking advantage of that relationship.

All of that said, one of the boldest and most intriguing pitches is a universal basic income, which tech giants such as Elon Musk and Mark Zuckerberg have notably supported. And a new analysis suggests that it could give the U.S. sharing economy a much needed jolt, as Fast Company Ben Schiller explained.

Universal Basic Income

“Introducing a universal basic income (UBI) would give a huge jolt to the U.S. economy, according to a new analysis, one of the first to consider the wider effects of giving everyone in the United States a regular, unconditional cash payment to meet their everyday needs,” wrote Schiller.

The rationale behind UBI is to help streamline government while giving people more control over their vocational destinies and consumer purchasing power. The income would represent a limited stipend, not a full salary in lieu of work. Economists agree that giving people money bolsters the economy because spending increases. However, the funds must remain small enough to ensure that talent continue to look for employment and perform work.

The new analysis, from the left-leaning Roosevelt Institute, considers three main scenarios: paying every adult $1,000 a month, paying all adults $500 a month, and paying $250 a month just to kids (a child allowance). In all cases–including different ways of paying for an UBI–the impact would be positive, economically speaking, the analysis says. If kids received $250 per month, GDP would grow 0.79% per year over an eight-year period; $1,000 for all adults would expand the economy by a whopping 12.56% over the same time frame. That would mean at least $2 trillion in additional wealth as the spending feeds down to businesses and individuals.

India experimented with unconditional income in Madhya Pradesh. The trial was launched in 2010. Researchers discovered substantial improvements in dwellings, health, nutrition, education, and work. In fact, the report stated, “Cash grant households were twice as likely to have increased their production work as non-transfer households.” Here in the United States, the outcomes remain uncertain.

“Frankly, the kind of changes envisaged by Roosevelt and Stern don’t seem likely in the short term, whatever the economic effects,” Schiller said. “But smaller-scale UBI trials are underway, including in Oakland, California; Kenya; and Finland, and, assuming positive results, they may help build momentum for the idea over time.”

Sunil Bagai
Sunil Bagai
Sunil is a Silicon Valley entrepreneur, thought leader and influencer who is transforming the way companies think about and acquire talent. Blending vision, technology and business skills honed in the most innovative corporate environments, he has launched a new model for recruitment called Crowdstaffing which is being tapped successfully top global brands. Sunil is passionate about building a company that provides value to the complete staffing ecosystem including clients, candidates and recruiters.
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