Future Friday: Is the future of the gig economy more regulation?

by Michael Haberman on June 10, 2016 · 0 comments


The gig economy may need more regulation.

The gig economy may need more regulation.

A great deal has been written about the “gig” economy, including things that I have written such as here and here. It has its proponents and its opponents. The proponents say it is going to free workers to have more control over their lives and add more freedom to their day. The opponents say people get entrapped by in this snare of freedom and end up living substandard lives as a result of the many difficulties of being self-employed. The reality of the “gig” economy is somewhere in between. To make it more successful what may be needed is more regulation rather than less.

The Utopia of the gig economy

The freelance life of the gig economy is sold as the ultimate of work. Workers are told they are masters of their own destinies and can choose to work for whom they want, when they want. Their income is only limited by how hard they want to work. Their time is theirs to choose how they wish to spend it. No taskmasters to watch them work or to pay attention to when they work. Sounds good doesn’t it? Some people have been quite successful at this. After all there were stories of Uber drivers making $250,000 per year living this kind of life. But is this the reality for everyone?

The reality of the gig economy

The reality of being a freelancer is that you have to have a large set of skills beyond what you are good at doing. You have to be a marketer, a sales person, an administrator, a secretary, and more in addition to whatever skill you freelance in. If you make a lot of money you can pay others to do some of that work, but that does cost money and certainly early in your freelance life that is hard to come by.

There is no pay for down time. When you work for a company that pays you a wage there is a safety net. If on a salary you are paid even if you are on a break. Not as a freelancer. If you earn an hourly wage and you work a long day or week you get overtime. Not as a freelancer. The time spent marketing your service is not paid for, nor is the time you spend going from job to job. In reality a good portion of a freelancer’s work week may be spent in non-paid time.

Additionally all the companies that provide opportunities for freelancers usually charge a fee for the service of connecting you with clients, as they should , but this is another cost many freelancers don’t plan on.

There are additional costs to being a freelancer. The 15% self-employment tax makes you pay the entire amount of money due the government instead of having half paid by your employer. Additionally there is no employer paying for your medical insurance. In the U.S. you are required by the government to have medical insurance and this is generally not cheap. That is another cost the freelancer needs to bear.

What can be done to make the gig economy work?

I have written that government regulation may be getting in the way of the future workplace, such as here. Surprisingly however, it may be more government regulation that may be the savior of the gig economy and make it much more viable for more people. Writer and lecturer Steven Hill, suggests such a piece of regulation designed to provide the much needed safety net freelancers are currently missing. He suggests:

“… there are pragmatic policy solutions that could be implemented. One of those would create a ‘portable safety net’ which would stay with a worker who moves from job to job. We could assign to each worker an Individual Security Account, and every business that hires that worker would pay a small amount of ‘safety net’ premium, prorated to the number of hours worked for that business.”

He further says:

“Innovative policies like that would help maintain the middle class and act as an ‘automatic stabilizer’ for the broader macro-economy, better ensuring that technology and innovation would enrich all of society instead of just a handful of winners in a winner-take-all society.”

If you have read any of my work you know that I am no fan of government regulation, but I do admit that it does play a role in protecting workers and companies and I like Hill’s suggestion. Right now in a freelance situation there is no cost to companies only gain. It makes sense to me to have the company utilizing the freelancer, thus enhancing the company’s reputation, to pay a small fee into a system to help that freelancer protect their livelihood. To find further information on Hill’s ideas read his article The Future of Work in the Digital Economy: Promise and Peril. It is an excellent read.

As always I would appreciate your comments.


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