The US Gig Economy is Growing And Why The Tech Industry Is Loving It

Richard Fang

60% of the US workforce will be independent by 2027.

There is no doubt that Covid-19 has caused havoc on the global economy as well as many industries. Many companies have suffered from challenges presented, and for many employees, it meant they were either let go or received reduced hours of work.

However, for tech companies, many have found solace that much of their operations can be run remotely. Companies like Amazon and Zoom have seen their growth skyrocket in 2020, while others like Microsoft remained stable throughout the year.

With unemployment soaring, however, many have sought external work, especially within the gig economy.

Let’s quickly define what a gig is

Gig work defined today means any temporary job that could range from basic delivery to complicated application development. For those with more technical skills, you could call them a freelancer or even a consultant.

These independent workers are scattered globally and utilized by the biggest tech companies in the valley, including Uber, Airbnb, and even Google. Many of these companies worth billions today were built by a workforce of temporary workers littered across the world.

Covid-19 has accelerated the growth of the gig economy

The gig economy in total accounts for the world’s second-highest number of work opportunities. To put this in perspective, a third of the world’s workers are employed within this economy, with transactions looking to rise from $204 billion to $455 billion in 2023.

By 2027, the US will see 60% of its workforce as independent professionals. This is an incredible number to fathom and showcases how much growth we will see in the next few years as companies look to hire even more contractors into their business.

This will especially be the case for tech companies that demand a large variety of skillsets and have a culture of adopting contractors into their business. In fact, over the last decade, the tech industry has fast-tracked the growth of the gig economy.

How early tech adopters of the gig economy leveraged the situation

Let’s take a look at companies like Uber, which benefited from hiring contractors into their business early on.

Firstly, their business model would have never worked if they could not quickly onboard millions of drivers into their network. Secondly, these contractors are actually not treated as proper employees of the company and thus receive no benefits that a regular employee would receive (which caused many controversies).

This, of course, means Uber (and other ride-sharing services like Lyft and Ola) saved potentially millions or billions by structuring their company this way and enabled its explosive growth.

For gig drivers like Alva, it’s of course, a considerable risk.

“You are constantly on the verge of losing everything,” he said. “One accident, something that happens wrong, and suddenly you don’t have the money to pay for your rent and you’re homeless.” — Alva, a Lyft driver

For other startups like Airbnb, they utilized these workers in another way. In 2016, I was personally a gig worker for Airbnb and my goal was simple: bring more hosts onto the platform.

This sounds fine on paper, but I wasn’t actually paid a salary or wage to do this. Instead, I was paid a commission fee for every person I brought on and was free to do whatever I could to achieve this. In a way, this is similar to Uber, where drivers are not actually paid any wage but instead charged based on the drives they do.

Although Airbnb and Uber are known as the tech companies that utilized gig workers from the start, they are definitely not alone.

So why are other tech companies loving this?

Over the years, we’ve seen other tech companies utilize independent workers. Interestingly enough, even without Covid-19, most gig projects (72%) worldwide were actually found in large enterprise and professional services companies.

For companies like Google and Facebook, contractors are hired not only for the moderation of its platforms but also for technical work.

One of the obvious reasons why the growth of the gig economy will benefit the tech industry is, of course, the cost of hiring. We all know that being able to hire for tedious operations work and outsourcing it to countries like India and the Philippines is a common practice, but what about more technical workers?

Taking a quick comparison of contractors vs. full-time work at Google, we see a significant discrepancy between the two.

For Google, even though these contractors are doing similar work to full-time employees, they are actually not classified as one. They don’t even receive all the generous perks Google offers its employees and have very little job security. These workers at Google are termed as TVCs (Temps, Vendors, and contractors) and make up more than half of Google’s workforce — with 135 000 TVCs vs. 115 000 Google employees.

This means, with a higher supplier of contractors in the market, tech companies will have the opportunity to seek out the best quality freelancers at the same cost.

Secondly, many tech companies need to get up to speed with new projects, digital transformation, and set up new workplace procedures. This could take months and years of training new employees, so instead, many of these tech companies will look to hire contractors instead.

With many tech companies remote working already, setting up the right infrastructure to enable new contractors will be an easy transition.

Bridget Loudon, founder of Expert360, an employment marketplace, stated that many companies are looking to scale with contractors, especially on projects with undefined timelines.

“Off the back of several quarters of hiring freezes, with a huge amount of transformation work to do, companies are telling us they will look to scale up with contractors for speed [and] to access hard-to-find-skills, but also [they are] not willing to take the risk to scale up with permanent workers,” — Bridget Loudon at Expert360

All of this is benefiting the tech industry

From running off the cloud infrastructure required to power a gig economy to hiring workers for their technical skills, we’re about to see tech companies reap the benefit of the growing number of contractors available.

Especially with Covid-19, many tech companies are looking to hire remote workers, especially due to the exorbitant cost of developers within the valley. Many of these remote workers will end up being contractors or gig workers. Facebook has already announced that if employees work outside the valley, they will most likely see their salaries reduced.

On the other side of the fence, these new opportunities will also support nimble freelancers, especially those with valuable skillsets. With the growth of segments like machine learning and AI, tech companies are looking all across the industry to find contractor talent.

As 2020 continues onto the next decade, we will see the gig economy increasingly become an efficient working model that challenges the traditional employer-employee arrangements that have lasted for the last century or so.

Tech companies will most likely be at the forefront of adopting this new way of working, especially those based in Silicon Valley.

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Editor at CornerTech and Marketing @richardfliu on Twitter


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