Future Friday: The future worker is a contractor or is it?

by Michael Haberman on June 19, 2015 · 0 comments


The "on-demand" economy or outsourcing has had a set-back.

The “on-demand” economy or outsourcing has had a set-back.

A great deal has been written about the future of work in what has been called the “on-demand” or “gig” economy. The use of independent contractors has been deemed to be the way of the future. It appears however, that not everyone is bought into the concept. Contractors who considered themselves employees have filed lawsuits to have their status changed and governments using 20th century concepts have clamped down on the use of contractors. The “on-demand” economy is getting off to a rocky start.

The upside of “on-demand”

According to Tad Milbourn, writing in TechCrunch, many workers, especially Millennials, prefer the freedom associated with being a contract worker. Freedom to choose assignments and “employers”, even working for several companies at one time appeal to many. It has appealed to me for a long time now. It makes things more interesting.

It certainly appeals to companies. Reduced labor costs, reduced benefit costs and the flexibility to put together project teams makes using contractors much more appealing than hiring employees.

The downside

Naturally there is a downside. If the contractor is not hustling or is not as skilled as the next contractor then they will not work nor earn as much as they might. Positions popular for contracting attract a lot of people and as with any supply and demand situation the more people doing it the higher the competition thus lowering the prices paid.

No company is providing benefits, so that is certainly prohibiting entrants into the field. However, the Affordable Care Act provides a way for contractors to purchase health insurance and there are plenty of options for saving for retirement. You just have to be successful at making money.

Government action

The U.S. Department of Labor and the IRS has taken a dim view of the use of contractors. Just this week in California the Labor Commission dealt the on-demand economy a blow by declaring that Uber drivers were not independent contractors rather they are to be treated as employees. This has implications for many other on-demand businesses including Uber’s competitor Lyft, and companies like TaskRabbit. In Thailand the government has declared Uber to be illegal and has banned the model entirely.

The government definition of an “employee” is rooted in the 20th century model. Until definitions and views of the changing world of work catch up the on-demand economy will be slower to take off than first thought.

What will the future hold?

Although the on-demand economy has been dealt this blow and has staggered a bit, it has certainly not been knocked out. Its roots have been around for a long while and are too ingrained to go away. I don’t think however, that there will be a massive shift anytime soon, at least not in the next five years. Laws will have to change and attitudes about depending on employers for insurance and security will have to bend.

What do you think? Have you joined the on-demand economy yet?


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