Tuesday, October 4, 2011

The Gig Economy

On multiple occasions over the last several days, I've bumped into discussions -- some online, some live -- about the growing "gig economy".  Described simply, these are people who work from home (or as is often pictured, the nearest coffee shop with free wifi), taking on small projects as independent contractors.  These are not the high-powered contractors that I knew during my time in the telecommunications industry, being paid large amounts because they brought highly specialized skills to a particular problem; these are the hard-scrabble tenant-farmers of the information age.  The consensus of the people I've heard and/or read is that this is inevitable, and perhaps even desirable.

I disagree; I think it will be a disaster in the long term.  I admit to a certain bias, of course.  I spent six years in college learning my craft.  While I was good at it, it took (at least IMO) three additional years to learn enough about the business that I could be trusted without oversight.  I spent 25 years in large corporations and eventually left with a pension and personal savings that are probably enough to support my spouse and I in retirement, assuming that the politicians allow some form of Medicare to operate for another 25 years or so.  I know that things have changed in corporate America, and that I got as good a deal as I did only because I started a long time ago.

There are parts of the economy that don't fit the gig model.  Jobs where people need to show up at a specified place, at a specified time, day in and day out. Policemen, teachers, workers on assembly lines,... it's a long list.  These are jobs that have historically come with benefits: paid time off, pension contributions, group health insurance1.  The gig economy, at least the version that has been described to me, comes with none of those.  There would seem to be two ways to approach the situation.

One of those would be to simply say "tough".  If you can't (or won't, always a possibility) tie yourself to a traditional job, then you're going to have to manage to pay for your own health care, save more for your retirement, and so forth.  This becomes increasingly difficult as you get older, particularly the health care.  Because income is probably intermittent on some scale, it may be difficult to acquire a mortgage or other long-term debt.  There are a variety of problems that arise if you decide you want kids.  In this "tough" case, those working on gigs would seem to be much more marginally attached to the society, and I would expect them to harbor some sort of resentment towards the people with the benefits.

The other way would look much more like other OECD countries.  Single-payer health care, a more generous public pension system, and some sort of minimum income guarantee are some of the pieces of that.  In this case, it seems possible that resentment would run the other way.  People who aren't a part of the gig economy might feel that they are giving up considerable freedom for little gain, or that their more regular contributions towards the services is a subsidy for those whose contributions are more irregular.

The "real" solution, of course, is an economy that provides regular work for everyone who wants it.  Post WWII, the implicit social contract in the United States has been that business would be (relatively compared to most of the OECD) lightly regulated and taxed, and in exchange they would provide employment with benefits.  At least since the 1990-1 recession, this contract has been breaking down.  Non-gig jobs have been steadily replaced by automation or moved to locations where the workers can't follow.  Somehow, we need to fix that.

1 The benefit here is not just the employer's tax-free contribution towards premiums.  There are also the considerations of guaranteed issue, coverage of pre-existing conditions, and premium levels based on the group's luck, not just the individual's.