The Gig Economy: A Near US$500B Opportunity

How the gig economy will define the future of work

A decade or so ago, a gig would mean a live music performance, played at perhaps the nearest bar or at a concert night. These were bread and butter for new musicians or individual artists who would be paid by the gig.

Now, a gig could mean almost any kind of temporary job, such a cab service provider, content creator, business consultant, or even a deep learning systems developer, forming the crux of the burgeoning gig economy.

The gig economy is the result of the systematization of temporary jobs. Any worker who is not employed full-time but paid per job, and provides those services to different clients as a freelancer or consultant, is part of the world’s gig economy.

It is characterized by independent workers providing their services on a contractual basis, either directly to clients, or through aggregator platforms such as Uber, Airbnb, or Zomato.

The Gig Economy is Catching Up

The gig economy accounts for the second-highest number of work opportunities across the world, after full-time employment. Individuals who have full-time gig roles or part-time gig on top of full-time employment also record higher levels of engagement with their jobs.

Over a third of the world’s workers are employed in the gig economy, with its total transaction volume across the world expected to grow from $204 billion in 2018, to $455 billion in 2023.

Transportation-related businesses, such as DiDi Chuxing or GO-JEK in Southeast Asia form the bulk of these transactions, with a share of 57.8% of gross volume of transactions. Asset-sharing companies, professional services, and home businesses follow in that order.

With 44% of global transaction volumes originating from the U.S., the country is currently a leader in the gig economy. However, rapid digitization and the presence of comparatively younger, tech-savvy populations (Gen Y and Gen Z in the Asia Pacific region are propelling the gig economy forward here as well.

That is why Bangladesh, India, Pakistan, and the Philippines are recognized globally as some of the fastest growing freelance markets worldwide.

Building the Gig Economy

Temporary jobs have always existed, but have only recently come to form a unique and recognized body of work. In a sense, the current gig economy is the evolutionary by-product of several other factors.

  • The growth of social network services, for instance, has helped to create a better networked world. Social media sites such as LinkedIn, or Facebook groups such as Network Capital have helped professionals across industries gain insights for their careers, as well as contacts or leads for potential jobs.
  • The availability of gig platforms such as Upwork and Etsy takes this a step further by creating a digital space that pools specific opportunities for gig workers. These peer-to-peer platforms have been around for a fairly long time–Upwork was founded in 1999, for instance.Moreover, virtual workers have demonstrated a higher level of engagement with their jobs. The more virtual, the higher the engagement.
  • The ‘uberization’ of jobs has led to the emergence of a second type of jobs market, one that fits in the palm of the consumer’s hand. The euphemism refers to the trend ushered in by cab-hailing services app Uber, where jobs such as salon services, food delivery, vacation rentals, and of course, cab services, are tailored to accommodate the call for on-demand services.
  • Rising unemployment has also enabled the gig economy. It is really a no-brainer that unemployment is driving people to work independently. Precipitated by events such as the 2008 sub-prime mortgage crisis, unemployment has put workers in a poor bargaining position for secure jobs, and the gig economy provides them with a viable alternative.
  • Further, Millennial culture has also spurred the gig economy forward. Millennials prefer flexibility in their jobs, as evidenced by the culture of digital nomadism. At the same time, they are keen to take on side gigs that can counterbalance their expenses or provide a second outlet for work in an area of their interest.These jobs come from the gig economy, as evidenced by the fact that gig workers are mostly in the age group of 30 to 44 years. Further, among freelancers, three quarters of total global earnings were pocketed by workers in the ages of 25 to 44.

Moving from a Blue Ocean to a Red One

Blue Ocean Strategy, theorized by academics W. Chan Kim and Renée Mauborgne, provides an apt framework for understanding how the gig economy is currently positioned.

According to this theory, a Blue Ocean refers to capturing unknown or unpenetrated markets, creating completely new industries with ample space for startups to become the big fish in those markets.

That is exactly what the gig economy has done for companies like Uber, GO-JEK, Airbnb, DiDi Chuxing, Ola Cabs, DoorDash, Grab, and OYO, to name a few, spearheading the age of the unicorn.

A Red Ocean, by contrast, is a structured and possibly saturated market, where competition is well-defined and market boundaries are more or less set.

The sharing economy (where assets are shared rather than owned), combined with the trending consumer preference for on-demand services, has created a massive niche for gig economy jobs that is rapidly filling up.

This has placed the gig economy in a transitory phase from what was once a blue market, to a future red one. The neo-jobs market has started to become formalized, and this calls for better policy protection and work benefits for gig workers, and wage brackets on par with formal employment.

Moreover, as this market grows, it will be interesting to see how it responds to technological possibilities in the future, such as aggressive automation, rapid cloud migration, or the upturn in Software-as-a-Service (SaaS) adoption.

As the gig economy shifts gears, its loose rules of engagement and growing appeal can only mean that it is largely going to determine what the future of work will look like.

Header image by Rob Hampson on Unsplash

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