Is the Gig Economy Sustainable?

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The pundits have spoken. We are headed for the “gig economy.” The Boston Globe reports that by the year 2020, as many as 40 percent of Americans will be working in a gig economy. For the uninitiated, a gig economy is where workers don’t have employers; they instead perform a series of short-term projects, or gigs, for larger firms.

Entrepreneurs often find the allure of the gig economy irresistible. Imagine a world where you set your own schedule, determine your own dress code, and work when -- and only when -- you want. Your income potential, ostensibly, is limited only by your ambition. Also, as your entrepreneurial company grows, you don’t get saddled with the expense of payroll insurance, employee benefits, sick leave and vacations. You pay only for the work when you need it.

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All and all, it sounds like a winning proposition for everyone, but is it sustainable? Proponents of the gig economy say yes, and point to other parts of the world where the gig economy makes up a much larger percentage of the national economy -- and those countries are thriving. Opponents argue that these countries have very different social structures that make the gig economy more feasible.

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There’s an old joke that goes “what do you call a musician without a girlfriend? Homeless.” Regardless of how you feel about the joke, its message aptly describes the dark side of the gig economy. It presents some very real sustainability issues:

Gigs offer no benefits. Paid time off? Forget it. Sick pay? No way. Paid vacations? In your dreams. I know many of you are thinking -- they chose this life? Maybe they did and maybe they didn’t. It doesn’t really matter because the result is the same. This is an issue that threatens more than just the giggers. Consider dentistry. The increasing loss of dental benefits means that many in the gig economy decide to stop going to the dentist or, at the very least, reduce dental visits. Now consider vision coverage and the implications that holds. Dentistry, optometry, pharmacies, tourism -- the list goes on, but you get the point.

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Gigs replace full-time jobs. A common practice among many larger companies allows a long-term employee to retire on Friday and start work as a consultant doing a gig on the following Monday. The same person doing the same job with no benefits or overhead costs. Instead of backfilling the position, the company simply moves one of its employees into the gig economy.

Gigs are often the result of larger companies outsourcing the most dangerous jobs to individuals. Most individuals lack the resources to acquire proper regulatory training, and what’s more, many small companies are actually exempt from regulatory protections for workers.

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Larger companies find the prospect of transferring large blocs of their workers into the gig economy attractive, but realistically, it's a different story. With the loss of the social safety net typically afforded by employer-provided benefits and without a corresponding increase in governmental replacements for these benefits, the gig economy is not sustainable or desireable.