Clevity Blog - The Bait-And-Switch Gig Economy

The Bait-And-Switch Gig Economy

The Bait-And-Switch Gig Economy

Gig economy, sharing economy, on-demand economy.  These buzzwords have taken the internet by storm and transcended the traditional economy as we know it.  Upstart companies are bucking the trends of past by replacing full-time employees with contractors, greatly reducing their spend on salaries, benefits, and employment taxes.  

The savings do not stop there.  Uber has outgrown traditional taxi services to become the largest driving service without owning any cars.  Airbnb has crushed the hotel industry without owning a single property.  Rather than owning a feet of cars or a portfolio of hotels, they employ contractors who supply their own property for the job.  In short, the gig economy has managed to leverage technology to eliminate the overhead that plagues traditional brick and mortar business.

This very notion threatens to transform employment as we know it.  There are already 53 million freelancers and growing in the United States alone, many of whom are flocking to gig platforms to work on their own terms.  Intuition would suggest that a significant portion of overhead savings realized by the platforms would make their way down to the freelancers in the form of meaningful wages, but here is what these companies will not tell you:  They are keeping the majority of the savings for themselves.  

Gig platforms have already managed to toe the line between contracting work and full-time employment.  Freelancers who embrace the gig lifestyle must also embrace the truth about the leverage they have given to their new pseudo-employers.  For these freelancers, gone are the days of a steady, consistent paycheck with group health insurance and other benefits, which have been replaced with inconsistent hours, downward pressure on wage rates, and expensive, self-paid insurance.  And the platforms are reaping the benefits -- an historic bait-and-switch.

 

20% is the magic number.

Interestingly, no matter what the industry - car sharing, home rentals, consulting, freelance writing - the platforms seem to command a 20% fee on freelancer revenues which, not coincidentally, is very close to the commission you would pay to your own salesperson.  The implication here is that the platforms provide value by replacing your traditional sales force, thus giving you time to focus on the operational pieces of your business.  Of course, this may work in some industries, but to apply the same fees broadly across the entire economy is patently off the mark.

Here is the good news: the gig economy is still young and there is infinite room for improvement.  New platforms like Clevity's SkillSeek emerge every day, and some will find a way to become relevant while allowing freelancers to keep the lion's share.  After all, pigs get fed, hogs get slaughtered.

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