The gig economy is creating a new class — the precariat

The ‘gig economy’ is a term coined to describe a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs. It has become politically controversial because it is seen as either a working environment that gives people flexibility about when they work, or a form of exploitation which provides workers with few benefits and little workplace protection. The term precariat describes these workers and the concept explains why during the post-2007 recession and the ensuing ‘austerity’ regimes of Western governments, economic activity slowed but overall employment increased.

The gig economy evolved long before the Internet went mainstream or the tech giants existed. Historically it’s a creation of neoliberal economic policies which prioritised markets and weakened union power as the process of globalisation integrated China and other low-income countries into the world economy, thereby adding two billion workers to the global labour supply.

Digital technology did not create the precariat, but it facilitated the explosive growth of the gig economy — first by making it possible to have intensive managerial control over off-shored production, and later by making it possible to create digital platforms like Uber, Lyft, Deliveroo, et al that link demand for services with ostensibly self-employed ‘contractors’ who are free to accept or reject commissions.

Although in principle the gig-economy people the freedom and flexibility to work when they choose, in practice working in it also has significant downsides. An MIT study of Uber and Lyft driver economics conducted by collating results from a survey of over 1100 drivers with detailed vehicle cost information found that, per hour worked, drivers made a median profit from driving of $3.37/hour before taxes, and that 74% of them earn less than the minimum wage in their state. 30% of drivers are actually losing money once vehicle expenses are included. On a per-mile basis, the median gross driver revenue was $0.59/mile but vehicle operating expenses reduced real driver profit to a median of $0.29/mile. For tax purposes the $0.54/mile standard mileage deduction in 2016 meant that nearly half of drivers can declare a loss on their in their income-tax returns.

Further reading

Guy Standing: The Precariat: The New Dangerous Class, Bloomsbury Academic, 2011. Amazon UK: http://amzn.to/2yJ9jhr

Guy Standing, “Meet the Precariat”, World Economic Forum, 9 November 2016. https://www.weforum.org/agenda/2016/11/precariat-global-class-rise-of-populism/

Employment Practices in the Modern Economy, Report of the Independent Review of Employment Practices in the Modern Economy commissioned by the UK Prime Minister in October 2016 and chaired by Matthew Taylor, Chief Executive of the Royal Society of Arts. https://www.gov.uk/government/groups/employment-practices-in-the-modern-economy

Stephen M. Zoepf, Stella Chen, Paa Adu and Gonzalo Pozo, “The Economics of Ride-Hailing: Driver Revenue, Expenses and Taxes”, MIT Center for Energy and Environmental Policy Research, March 2018. http://ceepr.mit.edu/files/papers/2018-005-Brief.pdf

Jaime E. Christley, “A Day in the Uber Life”, Village Voice, 27 November 2017. https://www.villagevoice.com/2017/11/27/a-day-in-the-uber-life/