Friday, April 15, 2016

Jobs and the Gig Economy – Or Do I Mean the Sharing Economy? – Part 2

Last week I wrote about a new expression – the “gig economy” and proposed it be used not as a synonym for sharing resources other than labor, but for employment of sorts through a chain of one-off work assignments.  I noted in passing that these propositions have “generally weaker prospects” than those in which labor was secondary to providing the likes of vehicles, housing, and equipment for their customers.  Why is that the case?

First, for employees, working small gigs is classically, in economic terms, an inferior good.  That means it is something that people use less when times get better, such as payday loans, margarine, or the lowest grade of beer.  When transitions between opportunities are included, it is clear that individual ones need to pay well over the minimum wage for even that level to be reached over the course of a week, month, or year, which is often not the case.  That is why Steve Tobak wrote in Fox Business that depending on these engagements for income is “no substitute for a career.” 

Second, the problem of poorly accounted-for expenses, on which Uber almost depends from its drivers, raises its head with individual work assignments.  That takes the form of setup and preparation time which shrinks net hourly receipts, as well as travel and needed-resource-acquisition costs.  Other things being equal, those are higher than for regular employees, due to workers having insufficient time to determine the most efficient solutions and to the variable nature of assignments preventing many economies of scale.    

There are three good things, however, about employment in the gig economy.  These income propositions can provide experience, not only valued by regular-job employers but allowing workers to find out how much they like and can do something, and get paid a bit at the same time.  They allow those who can’t find a regular job to earn money.  And, maybe best of all, they constitute a partial repealing of the minimum wage. 

Now on to the business side.  There is strictly no such thing as an industry requiring occasional employees, but authors of articles on the gig economy have discussed a number of new, and not so new, business ideas along with it.  Some never did well in the past, such as providing delivery of low-priced items – author, entrepreneur, and radio talk show host Bruce Williams said, decades ago, “you can’t deliver three dozen doughnuts” – but are being tried again, usually with similar results.   A great mass of them have potential but have not succeeded yet, mainly because their managements so far lack the experience to know how best to run them – of this grouping, most will fail but some will get there before their venture capital runs out.  One especially good principle is still to cater to the 1%, as money is concentrated to the point where those with large amounts of it will outsource almost anything they don’t want to do in person and may be willing to pay very high hourly rates for goods and services brought to them.  Who knows, the idea of selling extra-fresh milk from Omaha dairy cows, as Steven Hill mentioned in Salon last month, could work, as might an infinite number of other propositions; when the market has time to do its magic, winners will remain. 

Overall, we can expect that individual work assignments will provide money for many people.  Maybe not as much as they would like, but enough to make a real difference in their lives.  That is a superb thing.  It rises to the level of a possible comprehensive solution to the jobs crisis, along with guaranteed income, reduced work hours, assured government employment, and payment for providing online data and content. 

Five ideas, one for each year I have been writing on this subject.  If you can add to this list, please let me hear from you.

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