Shortcuts / 27 April 2023

The gig economy

The rise of the gig economy has had a huge impact on how we live so it’s no wonder it’s gotten the attention of pollies, the media and of course, workers or those who use the gig economy for everything from food delivery to cleaning your home. In this episode of Squiz Shortcuts, we take you through what the gig economy is, how it has grown over the past decade or so, and some of the challenges it is facing.

This episode of Squiz Shortcuts is brought to you by Uber. For more about what Uber and Uber Eats are doing to provide flexible earning opportunities to more than 150,000 people in Australia each month, head to the link here.

First things first – what’s the gig economy?
It refers to a labour market where workers are paid per task rather than hired for a permanent position. The term “gig” originates from the music industry, where musicians book performances. 

And how does it work?
Businesses in the gig economy use apps and websites to connect customers directly with workers and make money by taking a commission or fee from the worker’s earnings.

So you’re talking about companies like Uber and DoorDash…
Exactly. But it also includes a wide range of industries and services, from removalists to music teachers to graphic designers, via platforms like Airtasker and Freelancer.

Got it. When did it start to kick off?
Well, it all began in the late 1990s with the rise of the internet. Companies like eBay and Craiglist used websites to connect customers with sellers and customers. But the real boom came during the 2008 Global Financial Crisis.

Because of all the job losses?
You got it. And high unemployment rates in many countries meant people turned to work that wasn’t full or part-time to make ends meet. And the crisis led to a wave of innovation and it’s when companies like Airbnb were founded.

And Uber?
Yep, it was definitely the game-changer. It was conceived in 2010 and launched in the US in 2011, and started as a ride-hailing service connecting private drivers directly with customers who needed to go places. It wasn’t long before it launched in Oz in 2012, which was a bit of a test case for us.

Why’s that?
Because taxis and hire cars are required by Australian state laws to obtain a licence prior to operating – but Uber set up shop here in 2012 without the required permits. That was an issue pretty much wherever Uber went in the world.

What ended up happening?
Uber countered that by establishing a very loyal customer base and lobbying for laws to be changed. Spoiler alert: it worked…

And that’s how the gig economy arrived Down Under?
We actually had a number of food delivery apps in Oz before Uber came along. Menulog was founded in 2006 as a Sydney-based company. And Deliveroo was the first of Australia’s ‘gig economy’ food deliverers, launching in 2014 after starting up in the US.

Although that didn’t end so well for them… 
No… It’s a very competitive segment of the market, so Deliveroo shut down just a few months ago. That left Uber Eats and others reigning supreme. 

Aren’t there a few other Aussie work platforms?
Sure is – Freelancer is another business that started in Oz in 2009. It allows you to post jobs that freelancers can then bid to complete. Airtasker and Expert 360 are also Aussie-founded and have gone on to do great things.

And those were businesses that existed and grew before WFH became a big thing?
That’s right. Suffice to say, many people – particularly lower-paid workers in industries like retail, hospitality, and entertainment – didn’t have a job to go to during the pandemic. And what reports say is that the gig economy got a big bump at the time as so many people were stuck at home.

So how big is it today?
It’s hard to say… There’s no single agreed way to measure it but we’re talking big numbers – the US Federal Reserve estimates roughly a 3rd of the US workforce is earning money through independent work and the gig economy. And the same goes for the European Union. 

And here in Australia?
The gig economy has also grown rapidly in size. On the demand side – the Australian Institute of Actuaries estimates the gig economy grew by over 900% in market size from 2015 to capture more than $6bn in consumer spending in 2019.

And on the supply side?
In 2022 an ABS survey estimated around 7% of the population had signed up to work on at least one platform. 

Those are some big numbers…
It is, but to be clear, that same paper found only about 0.2% were doing full-time gig work and entirely reliant on it as their sole source of income. And that’s the model – people access gig work as and when it suits them. Students, stay-at-home parents, retirees, creatives and full-time workers have all taken to gig work in a big way.

So anyone looking for some extra cash really…
Exactly. What they have in common is they’re looking for flexibility. You can choose when and where you work, and there’s typically a low barrier to entry. It sounds pretty attractive, but it’s not without its challenges.

Like what?
A big one is many gig workers are classified as independent contractors, which means they have fewer rights compared to traditional employees. It means they don’t get minimum wage, superannuation, workers’ compensation, or paid leave. It can make it difficult to predict how much they’ll earn on any given day or month. 

The job security isn’t great…
No, and it’s led to calls for more protections for the most vulnerable workers in the gig economy, like migrants, people with limited English, and international students.

Wasn’t there a big court case about this?
There sure was – last year, 2 contracted truck drivers who had been working for a lighting company took their employer to court last year. They had been working for 9 hours a day at the company for 4 decades. and claimed they were entitled to employee benefits and entitlements that they had not received.

What happened?
The High Court ruled they were independent contractors instead of employees because of the contract they had signed. That decision in 2022 pretty much confirmed that gig workers don’t have to be treated like regular employees.

What do companies like Uber have to say about this?
They tend to argue that their workers value the flexibility and autonomy that gig work provides. They worry that changing their classification to employees could hurt this, and potentially affect their bottom line. 

Has anyone tried a different approach?
Yep, companies like MilkRun have employed their delivery riders as staff and paid them an hourly $35 wage. But just a couple of weeks ago, MilkRun shut down because it couldn’t turn a profit. So, it’s a tricky situation all around.

So what gives?
Things are still changing in the gig economy. Last year, Uber Australia signed an agreement with the Transport Workers Union to create minimum standards and benefits for those working in the gig economy. It was a landmark deal, and MenuLog and DoorDash have signed too.

And isn’t the federal government getting involved?
They’ve been keeping a close eye on the gig economy and its impact on workers. In 2021, the Morrison Government passed the Fair Work Amendment Act that extended some workplace rights such as unfair dismissal protections to eligible gig workers but some labour advocates argue that these measures need to go further.

So more changes are on the horizon?
There are – the Albanese Government is currently considering increased regulations on the gig economy, including changes to the Fair Work Commission’s powers. Those changes would allow it to set minimum pay and conditions for gig workers and other ’employee-like’ workers.

When will we know more?
The government told gig economy companies to expect that legislation by mid-2023. So watch this space…

Squiz recommends:

Dara Khosrowshahi, Dad of Silicon Valley – NYT

Gig economy laws coming in first half of 2023 – AFR

Squiz Shortcuts - A weekly explainer on a big news topic.

Get the Squiz Today newsletter

It's a quick read and doesn't take itself too seriously. Get on it.