What is the gig economy and why is it growing?

02 Mar 2021

Ingrid Booth

Digital content producer, Investec

The gig economy – a labour market made up of freelance, short-term, on-demand work or side hustles – is redefining the way companies hire and is changing the course of individuals career paths.

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What is the gig economy?

The gig economy is a labour market made up of short-term jobs, contracted or freelance work , as opposed to permanent, in-house jobs. The term "gig" comes from the music world where it refers to a job that only lasts for a certain period of time.
 
The gig economy is nothing new. For centuries, people have been performing temporary or freelance jobs. But what has changed is that technology is now enabling more widespread, flexible and on-demand work opportunities that both companies and individuals can benefit from.
 
Over a third of the US workforce is involved in some form of gig work, and as many as 162 million American and European workers are freelancers. Locally, Statistics SA's employment outlook has found that temporary employment rose from 2.6 million in 2017 to 3.9 million in 2018.
 
Companies are also leveraging this growing trend, with freelancing website Upwork noting that 59% of US businesses are now using some degree of flexible workforces, be it staff working remotely or the use of freelancers.
162 mn
giggers in the US and EU
3.9 mn
temporary workers in SA

What impact has Covid-19 had on the gig economy?

According to Statista’s gig economy data published at the end of 2020, 52% of global gig economy workers lost their job due to the Covid-19 pandemic.
 
Investec's global head of people and organisational development, Marc Kahn, believes that this will encourage not deter the growth of the gig labour market.
 
“The notion of the gig economy disrupting the workplace has just been accelerated by Covid-19. People who have lost their jobs are going to become sole proprietors, selling their labour as gigs."
Further fuelling this trend will be the fact that the way companies hire is also changing. "Companies are going to be reticent to re-employ quickly," says Kahn.
Post-pandemic, companies are seeking out contract workers as a cost-saving and flexible workforce management measure with Gartner finding that 32% of organisations globally are replacing full-time employees with contingent workers.

LISTEN TO PODCAST: Preparing for work-life post pandemic
 
Another Covid-related trend that will spur the growth of the gig economy is the ability to outsource talent to the furtherest corners of the world - something that's already enabled by the adoption of digital communications platforms like Zoom.
 
“We’ve always thought of the job market in a very local way and, based on the fact that we now understand how a remote organisation can operate, I think we will be able to hire people across the world,” says Nicola Tager, head of Careers, Investec SA.

Millennials leading the charge

Someone who is forging a path for the gig economy in the US is Stacey Ferreira, a serial tech entrepreneur and the co-author of 2 Billion Under 20: How Millennials are Breaking Down Age Barriers and Changing the World. Focus interviewed her at the 2018 SingularityU Summit in Johannesburg (watch interview below).
 
At the age of 25, Ferreira has held five different jobs. Currently the CEO of San Francisco-based Forge, Ferreira’s team has created an on-demand labour app that allows giggers to select their own work hours at participating retailers/restaurants in their neighbourhood.
 
Ferreira believes that technology is driving the growth of the gig economy. "I think it's really technology that allows us to get access to so much more information, and allows us to do our work from anywhere, that's really changing the way we work.”This is evident in the proliferation of on-demand labour platforms, like Uber, globally that connect giggers directly with clients, often in real time. Nowhere is this more prevalent than in the digital labour force of freelancers online.
 
Popular online marketplaces for digital giggers include Fiverr, Upwork and Freelancer.com where you can buy almost any service at very affordable rates, from someone to design your company logo to a copywriter who can optimise your dating profile. TaskRabbit in the US connects you to trusted handymen in your local area to help with everything from furniture assembly to packing moving boxes.
 
Like all demand-driven platforms, these sites are based on client reviews that build up trusted profiles and enhance your employability.

Gig economies: redefining the future

Watch the Focus interview with Stacey Ferreira on new ways of working.


What is a side hustle?

While some people are pure gig workers, others have a permanent job and partake in extra work on the side.
 
“A side hustle is generally defined as anything outside your main source of income that adds money to your life,” says Nic Haralambous, entrepreneur and the author of How to Start a Side Hustle.
 
“It is not a side hustle if you've raised funding so it can replace your job, that's a startup. It is a side hustle if it adds to your main and existing income stream."
 
One in three Americans – 34% – have a side hustle and 61.1 million (24%) plan to start a side hustle in 2021, according to a recent Zapier survey.
 
Haralambous believes that in a country like South Africa where savings are low, a side hustle gives you the opportunity to secure your financial future.
 
The beauty of having side hustles, says Ferreira, is the positive impact this can have on your main gig and on your personal development and life satisfaction. "Gigging gets you to think in a different way, it allows you to broaden your horizons; but for the individual, it's also extremely fulfilling to be working on something outside the normal thing they do to pay the bills every day."
 
Gigging lets you fulfil your passion and fuels your curiosity, adds Ferreira, "keeping you pushing the boundaries".
34%
of Americans have a side hustle
24%
plan to start a side hustle in 2021

Unpacking the side hustle

Nic Haralambous talks to René Grobler, Investec Cash Investments head, about making a success of your side hustle.


10 highest-paying US freelance jobs of 2020

Job Rate per hour
Corporate law $85 (R1,270)
Contract law $75 (R1,120)
Financial planner $62.50 (R933)
Management consulting $60 (R896)
ERP/CRM software developer/architect $60 (R896)
Network architect $60 (R896)
Data visualisation $50 (R747)
Machine learning $50 (R747)
Quantitative analysis $50 (R747)
Presentation designer and writer $50 (R747)
Job Rate per hour
Corporate law $85 (R1,270)
Contract law $75 (R1,120)
Financial planner $62.50 (R933)
Management consulting $60 (R896)
ERP/CRM software developer/architect $60 (R896)
Network architect $60 (R896)
Data visualisation $50 (R747)
Machine learning $50 (R747)
Quantitative analysis $50 (R747)
Presentation designer and writer $50 (R747)

Most in-demand gigs in South Africa in 2020

Specialist recruitment firm Michael Page says these three occupations were the most sought after when it came to gig jobs in 2020:
 
IT specialists: "Technology advancements and many organisations' undergoing digital transformation, hiring IT specialists on a project-by-project basis has proven to be a working solution, incorporating the work-from-home flexibility. Having sound processes in place helps because this would avoid the time spent getting the temp workers 'up to speed'. "
 
Change management / turnaround specialists: "Organisations are having to restructure their businesses to accommodate the 'new normal'. For this, professionals with expertise in formulating change strategies are in demand, so that businesses can develop cultures of agility and responsiveness in order to stay competitive."
 
Finance project experts: "With many businesses adversely impacted in terms of their finances, specialists are in demand with forecasting and decision-making experience."

What does it mean to be an employer in a world of gigs?

Investec's Marc Kahn believes the gig economy can be a threat or an opportunity to business, depending on how companies look at it.
 
Commenting on the rise of so-called 'solopreneurs', Kahn says: "People are, in effect, going to be independent self-proprietors selling their labour. So, what does loyalty to a company mean in the future? How do you employ people in the gig economy whom you know if they are not going to be in it for the long term with you? What happens to institutional memory? What about competitive issues and conflicts of interest between people working across and between companies?"
 
Kahn believes the growth of the gig economy will drive a revolution in the definition of what a company is. "A company is real by virtue of those who are employed in it and some of the assets in it. But what if all the people employed in the company are employed as gigs? Where is the company? Where is the culture of the company? Where does the company begin and end? What about the notion of teamwork?"
 
READ MORE: Co-working - how the gig economy is reinventing our workspaces
Marc Kahn

People are going to be, in effect, independent self-proprietors selling their labour. So, what does loyalty to a company mean in the future?

Marc Kahn, global head of People and Organisational Development at Investec

"We could have situations inside the company where the same person can work in four different areas in the same job. We start thinking about capability, and capability becomes detached from an individual and it becomes a commodity; it's moving around in a free-flowing environment."
 
To be the most attractive gigger, you need to see yourself as a little company that offers a range of capabilities, "and then you can figure out how many different types of work you can do within that range and get exposure to very diverse challenges", says Kahn.
 
"So, people need to understand that they're going to relearn new skills as the old ones become defunct, but they also need a wide range of applications and skills for different applications."
 
The competition to attract the best giggers will become fierce. Companies will start to try and win employees almost in the same way they seek to acquire clients, says Kahn.
"So, people need to understand that they're going to relearn new skills as the old ones become defunct, but they also need a wide range of applications and skills for different applications."
"Instead of competing by creating a compelling environment to attract employees, you are competing to create a compelling environment to attract gigs."
 
Ferreira agrees that the whole idea of retention will change in a gig economy. "I might hire someone to work on a project for me in 2015, and then they don't work for me for a few years, but they had a great experience working with me. So, when I have a new project that needs their skill sets in 2021, I can call on them again to work as a part of that project.
 
Kahn envisages a workplace where companies are comprised of giggers: "In the future world of the gig economy, people will cluster together in sensible ways and then uncluster and reconnect in various gigs to deliver a very agile value chain which is loosely coordinated by a leadership function that tries to coordinate it without too much management control, but enough to manage the risk in a very, very fluid environment. That's the future world."

The dark side of the gig

The gig economy conjures up a glossy picture of cool 20-somethings hanging out at WeWork shared office spaces, collaborating on exciting projects for companies. However, the world of gigs has a dark side. Many argue that the gig economy is potentially a recipe for exploitation.
 
A lot of people are forced into gigs with low pay and poor working conditions because of a lack of permanent employment that comes with all the perks of medical aid, training, life insurance and retirement plans.
 
This became apparent in South Africa at the beginning of the year, when Uber Eats drivers went on strike over a cut in delivery fees. In 2020, the Competition Commission issued a scathing report on the passenger transport system in SA, claiming that Uber drivers' earnings have dropped dramatically since 2013, and that some drivers are earning below minimum wage.
 
There are two kinds of giggers, according to James Manyika, chairperson and director of the McKinsey Global Institute, who led research into the gig economy across eight countries. "The first are people who are doing it out of preference, and then there are people who are doing it out of necessity."
Many argue that the gig economy is potentially a recipe for exploitation. Many people are forced into gigs with low pay and poor working conditions.
"The ones doing it out of choice tend to be the ones who want flexibility. They have a particular skill that is in scarce supply, and they know that they can get better returns for it if they can service lots and lots of people, as opposed to being employed by one employer," says Manyika.
 
READ MORE: 5 myths about the future of work
 
People who are gig workers out of necessity can't get the full-time job that they'd much prefer – a job that comes with benefits and training and all the rest of it. "They don't like the wage variability that comes with gig work," he says.
 
In the eight countries that McKinsey studied to compile its report Independent work: Choice, necessity, and the gig economy, the group gigging out of preference was, on average, bigger than the group doing it out of necessity.
 
Another interesting finding, said McKinsey, was that “free agents reported higher levels of satisfaction in multiple dimensions of their work lives than those holding traditional jobs by choice, indicating that many people value the non-monetary aspects of working on their own terms”.
 
People who are being forced into gigging have legitimate concerns that need to be dealt with, says Manyika. "We have to address those issues. But I wouldn’t paint the whole picture with the same brush. Keep in mind that the gig economy is driven by demand, and there's lots of demand."
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    Focus and its related content is for informational purposes only. The opinions featured on the site are not to be considered as the opinions of Investec and do not constitute financial or other advice. The information presented is subject to completion, revision, verification and amendment.

About the author

Ingrid Booth image

Ingrid Booth

Lead digital content producer

Ingrid Booth is a consumer magazine journalist who made the successful transition to corporate PR and back into digital publishing. As part of Investec's Brand Centre digital content team, her role entails coordinating and producing multi-media content from across the Group for Investec's publishing platform, Focus.

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