Rethinking Human Capital in the Gig Economy

The gig economy is emerging as a significant source of income for workers across the country. In fact, over 57 million Americans performed freelance or gig work in 2019, contributing an estimated one trillion dollars to the overall economy.

While freelance work spans a wide gamut, many workers are opting to join digital platforms to earn some extra cash. For instance, workers have the option to join the ridesharing business with Uber, facilitate last-mile deliveries with Doordash, serve as a house cleaner or handyman through Handy, and even care for and walk pets with Wag.

These new gig economy platforms are serving as quick and easy means for workers to supplement their income, or those that want to earn the entirety of their living by completing gigs with different platforms — whenever, wherever and however they want. However, these gig platforms are also introducing a slew of new challenges, from brand-damaging impacts on businesses to labor-related gripes. Today, as technology enhances various aspects of our lives, why can’t it be leveraged to resolve the many perils facing the gig economy?

The Third-Party Conundrum

The concept of gig work is a novel one, but with anything that seems too good to be true – it probably is. For instance, restaurants across the country are tapping the likes of third-party partners, such as Grubhub and Uber Eats, to help them meet the ballooning demand for delivery. Consumers gravitate towards restaurants that offer delivery-as-a-service, as it enables them to enjoy the food they love without ever having to leave their homes. Restaurants also find value in the partnerships. Given the labor shortage our country is grappling with, it would be nearly impossible to meet consumer demand without the help of independent contractors – i.e., gig workers.

However, with these services come diminished profits and the risk of a damaged brand. First and foremost, the platforms impose hefty fees taken on by the restaurants, sometimes amounting to 30 percent of the customer’s bill. Possibly even more detrimental, 62 percent of consumers who receive a bad food delivery experience often blame both the delivery company and the restaurant itself. This means the restaurant operator is bearing the brunt of whatever type of experience the contracted delivery driver imposed on the end consumer.

Lastly, while drivers for these third-party delivery apps undeniably enjoy the convenience of picking up gigs whenever they please, they don’t receive the benefits and protections that would be available to a direct employee of the restaurant. This topic alone is sparking major disdain amongst all types of gig workers – from ridesharing drivers to dog walkers – as Americans fight to be classified as direct employees.

Regulating the Gig Economy

Legislators around the country are answering gig workers’ call for benefits and protections. Most recently, Assembly Bill 5 (or AB 5) was signed into law by California Governor Gavin Newsom. The new law, which took effect January 1, 2020, aims to reclassify independent contractors as employees, and in turn, forces gig economy companies to offer labor rights to their workforce.

Many other states are beginning to follow a similar suit, taking a slanted look at the gig economy and asking themselves: what can we do to better protect gig workers? For instance, New York Governor Andrew Coumo is taking a public stance against the large corporations that have notoriously taken advantage of workers under the guise of gig work, and is eyeing new regulations to end what he sees as economic exploitation.

Most gig workers are thrilled at the prospect of new regulations that will ultimately provide them with the benefits and protections they need. That being said, many others are opposing new legislations aiming to regulate the gig economy, arguing that they will diminish the flexibility they currently enjoy. For instance, according to a recent statement from the Protect App-Based Drivers and Services Act, a coalition of gig workers across California wants to be to exempt from AB 5, as it threatens their ability to work when, where and how they want. California-based freelance writers are also up-in-arms in reaction to AB 5, as they’ve seen their writing and editing opportunities sharply cut back or even eliminated as a result of the state’s new gig economy law.

A Best-of-Both Worlds Solution

It’s clear that gig workers today want flexibility and benefits. Even gig economy companies, who ultimately oppose regulation on the gig economy, would benefit by a solution that enables their workforce to enjoy flexible schedules while still allowing them to remain compliant under new law.

Enter: A new tech-driven solution.

New platforms on the market are offering a best-of-both worlds solution to gig economy gripes. These platforms hire gig workers away from the companies themselves, and then lease them back to said company, so to speak. The employment and administrative burdens are taken away from the company (eliminating concerns associated with new regulations), and the workers are therefore privy to benefits and protections and are able to work when and where they want thanks to AI-enabled scheduling apps.

For instance, a tech-driven scheduling app would enable workers to pick up gigs with various restaurants, whenever their schedule permits. This solution is also beneficial for the restaurant management, who face challenges related to retention and unfilled shifts on a daily basis. By bringing a tech-driven solution into the fold, restaurants – and other companies alike – can enjoy a flexible workforce, without any of the pitfalls that come with it.

As states across the country propose new legislation aiming to regulate the gig economy, businesses leveraging a flexible workforce – from restaurants to media outlets – will need to make massive changes to their business models. Tech-driven solutions that offer the flexibility of the gig economy are stepping up to answer the call by redefining human capital.