Change is the only constant thing in this world, and the employment landscape is not an exception. Thanks to improvements in technology, there are now many options for hiring the ideal talent for your business. This is made possible by the gig economy, which is an improvement over the traditional economy.
What is the gig economy? How does it differ from the traditional economy? Let’s tackle these two respective economies’ descriptions and discuss their advantages and differences from each other.
Defining Traditional Economy
There are two definitions of the traditional economy. One, as defined by The Balance, is an economy that relies on barters and natural resources as commodities. It is the economy of our ancestors. For example, the early settlers of the United States of America traded commodities from Europe in exchange for vital resources from the Native American tribes.
However, from an employment standpoint, the traditional economy is the decades-old work setup that Henry Ford first implemented in his car factories in 1926. Ultimately becoming law in the United States in 1940, the work setup called for a 40-hour workweek, which means at least eight hours a day of work for every employee.
The traditional economy called for businesses to invest in a working space for their employees to spend a workday in. For instance, the digital age requires that the company invests in a fast and stable Internet connection and laptop or desktop computers for their workers. This requirement comes in addition to renting an office space.
Another attribute that defines the traditional economy of employment is fixed pay. The employer and the employee sign a contract for a pre-determined monthly salary in exchange for the company’s exclusive services. The employee receives this salary either bi-monthly or once a month and includes deductions for benefits like Social Security and 401k, among others.
Being under the company’s employ, the individual is also subject to rules, regulations, and internal culture. The person has to clock in at a specific time and must not incur tardiness as much as possible. Employees typically clock in at least fifteen minutes before their log-in time or up to an hour before starting their working hours.
Defining the Gig Economy
The gig economy takes its name from the entertainment industry. Jazz musicians first coined the term to refer to musical performances that are usually one-shot affairs and not part of their regular work in the industry. Each gig can be considered as a side hustle in that context and are temporary in nature. The musician is no longer bound to that work once the contract is over.
Now, the term “gig” applies to just about any work that does not fall under the traditional job description. Freelancers can work on these gigs at terms that they are comfortable with. For instance, they can let go of the 8-5 workday and simply work at the hours that take them to complete their obligations under their contract.
So, content writers can only work for two to three hours a day if they can write fast and finish their tasks within that time. Graphic designers don’t have to work eight hours a day to finish a commission, as long as they can meet the deadline that they’ve agreed upon with the client.
Instead of working from an office, workers in the gig economy generally work from home. However, it is also common for freelancers to rent co-working spaces to work from. These are the people who would like the environment associated with a working office and avoid distractions from home. There are also jobs in the gig economy that don’t require an office – these include riders for Grab and Lyft, among others.
It is also typical of freelancers in the gig economy to be working two jobs. This is possible because of the flexible working hours and the number of hours they can work on one job.
Unlike the traditional model of employment, however, the gig economy does not guarantee a fixed income for contract workers. In some cases, payment is per output or how much you’ve worked for the day. For instance, Uber and Lyft drivers are paid only for each ride that they take from the booking system. However, one can easily make up for the gap in income by booking more jobs or projects.
The gig economy also does not provide for the freelancers’ benefits. Instead, gig workers should find ways to pay for their own benefits voluntarily.
The Main Differences Between the Two Economies
The biggest difference between the two economies is flexibility. Traditional employment is, by nature, very rigid. The rules in place are almost always written in stone, and it requires significant action from the workforce to initiate change within the organization. The times and days that employees have to work are also fixed. Changes can only be possible if the human resource department and the worker’s immediate superior agree to any leave of absence.
By contrast, none of this rigidity is present in the gig economy. Gig workers have absolute freedom in choosing their work arrangements, including the time of day that they want to start working. If there are rules, the rules apply only to a couple of hours working on the project. They can take a break anytime they want to, just as long as they can meet their deliverables.
It is this flexibility that attracts the attention of workers in the gig economy. One can choose to be full-time freelance or part-time. They can keep their full-time jobs while using the gig economy as a side hustle providing extra income.
Gig economy workers have the added advantage of not beating the traffic to get to work on time. In other words, the gig economy takes some stress away from the worker, a fact that maximizes productivity.
As mentioned earlier, contractual workers don’t get to enjoy the benefits that full-time employees get from their employers. They aren’t eligible for government-mandated benefits employees usually get, but they do have the capability of making voluntary payments. However, the traditional economy saves workers from processing these benefits themselves because the company HR takes on that task on their behalf.
How Can Businesses Cope With Change
Many factors have led to the eventual rise of the gig economy. Gigs are expected to grow in number in the next few years, as companies have already seen the benefit of hiring contractual workers, especially during the pandemic.
There are many ways that the gig working setup benefits employers. Startups are the best examples. These companies are severely constrained by available capital, which means they cannot yet invest in top-drawer talent on a long-term basis. Thanks to the gig economy and websites like UpWork, startups can hire contractual workers for a start instead. When they’ve grown financially, it’s time for them to start thinking about absorbing their contractual workers or hiring other full-time workers.
In other words, the gig economy allows small businesses to save up on capital expenditures. With a lot of money freed up, these enterprises can focus their investments on marketing and other ways of raising revenues. These are vital to a business that has just started operation, after all.
Even big companies can benefit from the gig economy. Contractual workers are the perfect talents for tasks that are good only for the short term. For example, if a company wants to survey upcoming products and services, it is more economical for them to outsource this task to third parties rather than set up an in-house team.
Last but not least, the gig economy allows the human resource departments to widen their horizons when searching for talents or skills. HR professionals are no longer constrained by distance when hiring people. Remote working makes it possible to hire contractors from outside the company’s city of incorporation. They can even hire from abroad if they want to!
Flexibility Is Key
In a way, the gig economy also provides businesses with flexibility. All the barriers that have governed their employment procedures are removed, thanks to remote working. The gig economy makes exceptional talent more accessible to these companies simply by expanding the size of the pool from which they can choose.
At the same time, businesses also get to lower operating and capital expenditures, especially in setting the contractors up for work. These professionals take care of their own equipment and Internet connection, allowing their clients to save money in the setup.
As they say, keeping up with change is a skill that a person or a business must cultivate to survive in this fiercely competitive landscape. Fortunately, the gig economy provides this capability to everyone, from the employee to the employer.