The gig economy: Disrupting the traditional 9-to-5

Dec 29 2016 10:01
Ciaran Ryan

Software developer Marco Ryan* lives in Johannesburg but “works” in the US. Four years ago he answered an online advertisement from a US company looking for developers.

The pay wasn’t that exciting at the time, and the rand was a lot stronger than it is now. He started off working a dozen or so hours a week for the US firm, which is involved in the entertainment industry, and the pay – and the number of hours – increased steadily. 

Prior to this he had been a full-time employee, first at a Johannesburg-based software development company servicing the mobile networks, and then at a recruitment firm. When the financial crisis hit in 2008, the job market fell apart, so he decided to venture out on his own as a software developer.

One of the downsides of working for a US firm from Johannesburg is keeping the same office hours as the US. This means he usually gets to bed around 4AM, which can play havoc with family life.

But the upside wipes out the negatives: he earns US dollars at a time when the rand has been sinking, and now works for a string of US companies. He is part of the so-called “gig economy”, which is reshaping the way we work and live. Technology and high-speed internet access have opened up work possibilities that simply weren’t there a decade ago.

There are estimated to be more than 4 000 Uber drivers in SA. With nothing more than a car and a smartphone, they are feasting on the guts of the dinosaur taxi business, which seems destined to go the way of the VHS player. Airbnb is having the same effect on the accommodation business, with more than 21 000 listings in SA and R210m in revenue from the country last year. 

Uber drivers can set their own work times, and for many this is a part-time gig to supplement incomes earned from regular jobs. Airbnb has opened up income-earning possibilities for thousands of South Africans with spare rooms to rent. Airbnb now rents out 2.3m rooms in 191 countries. Its inventory makes it bigger than the three largest hotel chains – Hilton, Marriott and InterContinental – combined, according to Bloomberg.

The gig economy is most virile among tech-savvy millennials, and accounts for the rise of freelancing sites such as Upwork, Freelancer.com and People per Hour, where virtually any skill imaginable is now on offer, from nursing to architecture, accounting, writing and web design. 

The gig economy is nothing new: since the first motor car, mechanics would work on friends’ cars in the evenings to supplement their incomes, and doctors would tend patients privately. What is new is how technology is ripping across geographical and sectoral boundaries. Why employ a full-time accountant with all the regulatory and cost headaches this implies when someone halfway around the world can do it more efficiently and cheaper?

There are downsides for both employers and freelancers. The employer has to test the freelancer’s competence in specific tasks before engaging them – but can also drop them in a heartbeat if the work is not up to scratch. Freelancers receive few of the perks or benefits available to full-time employees – but this is something both parties understand from the outset. 

A study by McKinsey Global Institute (MGI) entitled Independent Work: Choice, Necessity, and the Gig Economy, found that 20% to 30% of the working age population in the US and Europe engage in some form of independent work. 

“Working nine to five for a single employer bears little resemblance to the way a substantial share of the workforce makes a living today,” says MGI. “Millions of people assemble various income streams and work independently, rather than in structured payroll jobs. This is hardly a new phenomenon, yet it has never been well measured in official statistics – and the resulting data gaps prevent a clear view of a large share of labour market activity.”

MGI reckons online talent platforms such as Upwork will grow the world economy by 2% over the next decade, creating the equivalent of 72m full-time jobs. These workers fall into four categories: free agents, casual earners, those who are forced to work out of necessity – the “reluctants” and the financially strapped.

By far the biggest of these are the casual earners, representing 40% of the gig economy, says MGI. With roughly half of SA’s youth officially unemployed, the gig economy offers one of the few avenues open to them. Casual earners include a large percentage of retirees with specific skills, such as engineers and architects.

MGI says other forces could fuel growth in the independent workforce: the stated aspirations of traditional workers who wish to become independent, the large unemployed and inactive populations who want to work, and the increased demand for independent services from both consumers and organisations. 

*Marco Ryan is a close relative of the author. 

This article originally appeared in the 15 December edition of finweek. Buy and download the magazine here.
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