Although on-demand apps like Uber, Lyft, Handy, Task Rabbit and Deliveroo have been the most conspicuous examples of the rise of the gig economy, the gig economy itself has, in fact, been operating for as many as three decades in industries such as oil and gas, engineering, technology and scientific research.
The difference we’re seeing now is the accelerated, wide-spread adoption of a contingent workforce model across blue-chip and mid-market companies, and governments, which encompasses a much larger proportion of the total workforce.
EY recently conducted a Contingent Workforce Study, which surveyed both major employers and contingent workers in the US on the topic of the contingent workforce. Of the employers we surveyed, one in two reported increasing their use of gig workers over the last five years.
This fits with recent research from two Harvard economists, which showed the number of workers engaged in alternative work arrangements rose by 66% in the 10 years to 2015. This compares with just 6% growth in the overall US employment over the same time period.
There are several reasons for this rapid increase in the use of contingent workers, not the least of which is the lasting effects of the 2008–09 global recession. This period created a sharp focus on cost control, which ultimately resulted in a contraction of full-time employment.
EY analysis shows that the rate of hiring of full-time employees among S&P 500 organizations since 2009 has slowed sharply versus the pre-recession period. Annual full-time employee headcount growth slowed to 2.7% from 2009–15 versus 3.9% during the five years before the recession.
In the absence of full-time work, many workers opted for contingent work first as an interim and now a more permanent solution. Behavioral, regulatory and policy shifts, and changes in expectations meant that both workers and organizations adjusted to and embraced the flexibility that contingent work arrangements provided, while technology served to facilitate a more seamless interaction.
In the EY Contingent Workforce Study survey, US employers reported that their organizations are, on average, made up of 17% of contingent workers. At the same time, 20% of organizations reported that their workforce comprised at least 30% contingent workers in 2016.
Across the Atlantic, a similar story is emerging. In the UK, the number of self-employed has touched record highs at 4.8 million, growing 28% over the 10 years to 2016, against only 6% growth in UK employees in the same time period. There are similar stories of rapid growth in the self-employed workforce in the Netherlands, Belgium, France and Australia. The rise of the gig economy is increasingly a global phenomenon.
More than a passing fad, the gig economy looks as if it’s here to stay
Is this a cyclical trend that comes from the need to trim costs following the global financial crisis? Or a fad that will fade with the rise of automation and artificial intelligence?
The evidence suggests no.
According to the EY Contingent Workforce Study, on average, by 2020, almost one in five US workers will be contingent — the equivalent of 31 million people. If part-time workers are included, a wider definition of contingent work used that captures a range of “alternative work arrangements”, as much as 40% to 50% of the workforce could be in non-permanent employment by 2020.
Giggers allow organizations to flex their capabilities and control costs
Regardless of how we define it, the gig economy will continue to grow as more organizations expect to make greater use of contingent workers. The natural next question, then, is: why? What’s driving the growing use of contingent workers?
Evidence from EY’s survey of employers shows that organizations are using contingent workers to flex and bolster their capabilities. Contingent workers help employers control labor costs, and respond to the peaks and troughs in demand that come with seasonal trends.
Meanwhile, access to virtual portals and other technology advancements have made it possible for contingent workers to gain access to job opportunities in ways that weren’t previously possible. There is also a more strategic and change management element to drawing on contingent workers: organizations are using contingent workers to overcome resistance to change within legacy workforces.
A contingent workforce can help drive and accelerate change. It can also support rapid scale-ups in business models where dramatic growth can occur overnight. Given the extraordinary pace of technology change, contingent workers provide a critical bridge to integrating new products, services, technology and more into operations, without having to expand full-time equivalent headcount.