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The Rise of the “Gig Economy” and Implications for Understanding Work and Workers

Published online by Cambridge University Press:  23 March 2016

Kristine M. Kuhn*
Affiliation:
Department of Management, Information Systems, & Entrepreneurship, Washington State University
*
Correspondence concerning this article should be addressed to Kristine M. Kuhn Department of Management, Information Systems, & Entrepreneurship, Washington State University, Pullman, WA 99164-4743. E-mail: kmkuhn@wsu.edu
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Extract

Bergman and Jean (2016) include freelancers as one of the categories of workers who are understudied in the industrial and organizational (I-O) psychology literature. This neglect is particularly striking given the attention paid by the popular media and by politicians to the rise of the “gig economy,” comprising primarily short-term independent freelance workers (e.g., Cook, 2015; Kessler, 2014; Scheiber, 2014; Warner, 2015). This may be due in part to challenges involved in accessing and researching this population, as discussed by Bergman and Jean, but it may also arise from complexities in defining and conceptualizing freelance work, as well as from misunderstandings about the nature of the work now performed by many people who are considered freelancers. Major topics of interest to I-O psychologists such as organizational attraction, job satisfaction, and turnover may seem at first glance to lack relevance to the study of workers who are officially classified as self-employed. But there is substantial opportunity for I-O psychologists and other behaviorally oriented organizational researchers to contribute to our understanding of the growing number of people who earn all or some of their income by freelancing.

Type
Commentaries
Copyright
Copyright © Society for Industrial and Organizational Psychology 2016 

Bergman and Jean (Reference Bergman and Jean2016) include freelancers as one of the categories of workers who are understudied in the industrial and organizational (I-O) psychology literature. This neglect is particularly striking given the attention paid by the popular media and by politicians to the rise of the “gig economy,” comprising primarily short-term independent freelance workers (e.g., Cook, Reference Cook2015; Kessler, Reference Kessler2014; Scheiber, Reference Scheiber2014; Warner, Reference Warner2015). This may be due in part to challenges involved in accessing and researching this population, as discussed by Bergman and Jean, but it may also arise from complexities in defining and conceptualizing freelance work, as well as from misunderstandings about the nature of the work now performed by many people who are considered freelancers. Major topics of interest to I-O psychologists such as organizational attraction, job satisfaction, and turnover may seem at first glance to lack relevance to the study of workers who are officially classified as self-employed. But there is substantial opportunity for I-O psychologists and other behaviorally oriented organizational researchers to contribute to our understanding of the growing number of people who earn all or some of their income by freelancing.

Although the precise definition of the term freelancer is subject to some debate (Fox, Reference Fox2014), freelance work generally connotes short-term employment relationships with a number of different clients and compensation on a project basis, and it has historically been associated with writing and creative occupations. Freelancers are classified as independent contractors. Some independent contractors, however, have a series of renewed fixed-term contracts with the same organization, which is often their former employer (Connelly & Gallagher, Reference Connelly and Gallagher2006), while those referred to as contract workers are often employees of a staffing agency. In the limited extant academic research literature on freelancing, freelancers have been defined as skilled professionals providing expert services, conceptualized more as entrepreneurs (Born & Witteloostuijn, Reference Born and Witteloostuijn2013) or as the “smallest of small businesses” (Kitching & Smallbone, Reference Kitching and Smallbone2012) rather than as workers. In contrast, politicians and activists concerned about the growth of the gig economy tend to view freelancers more as vulnerable workers than as empowered entrepreneurs (e.g., Cook, Reference Cook2015; Warner, Reference Warner2015).

In particular, the advent of online labor platform firms raises novel questions about employer–worker relations and what it means to be a freelancer. Remote staffing marketplaces such as oDesk (now Upwork) and Amazon's Mechanical Turk permit firms to hire freelance workers from around the world for skilled work, such as website design, and also for simpler tasks such as data entry or labeling photographs, which are paid on an hourly or piecework basis. Aguinis and Lawal (Reference Aguinis and Lawal2013) discuss “eLancing” with respect to human resource management research and practice, but to date most academic studies in this area have been conducted by researchers in information systems and economics who are interested in market efficiencies and how workers in developing economies can gain access to clients in rich countries (Agrawal, Horton, Lacetera, & Lyons, Reference Agrawal, Horton, Lacetera, Lyons, Goldfarb, Greenstein and Tucker2013). But classic I-O psychology topics such as performance assessment are also germane to this context, albeit in nontraditional ways. For example, a marketplace firm must decide how best to summarize and display freelancers’ site-based performance history so as to assist prospective clients in making their selection decisions. Some firms now use complex algorithms that incorporate both public and private feedback from clients, repeat contracts, rolling windows of time periods, and adjustments for factors outside the freelancer's control (see Chen, Reference Chen2015).

Moreover, a rapidly growing number of location-based platform firms, including TaskRabbit, Uber, and Wonolo, connect workers to clients for in-person service tasks. Workers on these platforms are classified as independent contractors and are considered freelancers, although some of these firms exercise significant control over their work conditions and compensation (Kuhn & Maleki, Reference Kuhn and Maleki2015), and thus the legality of this classification status is currently the subject of substantial debate. But this business model means that topics such as organizational attraction, satisfaction, and retention are quite relevant even though the workers are freelancers. For example, Uber and Lyft actively compete with one another to recruit drivers, and many drivers who have worked via both platforms have strong opinions about the differences between the two firms (Lee, Kusbit, Metsky, & Dabbish, Reference Lee, Kusbit, Metsky and Dabbish2015; Riesman, Reference Riesman2014).

Although freelance work is seemingly by definition independent and self-directed, it has been argued that service providers can gain a valued sense of professional identity through affiliation with a platform firm (Horton, quoted in Raphel, Reference Raphel2014). Sundararajan (Reference Sundararajan2014) has suggested that platform firms develop “platform cultures” of shared norms and values analogous to organizational cultures and that these will have important effects on the attitudes and morale of their nonemployee workers. There is little systematic empirical data available, however, about platform service providers’ attitudes toward platform firms and their work.

As noted by Bergman and Jean, freelance work status is strongly associated with economic tenuousness, but the vulnerabilities associated with freelance work extend well beyond those they mention. Not only do freelancers lack paid sick days, they are also not covered by antidiscrimination employment legislation or safety net programs. A warehouse worker employed by a temporary agency may not receive much in the way of benefits, but he would at least be eligible for workers compensation if injured while working, while a freelance warehouse worker hired via an online platform such as Wonolo would not be (see Scheiber, Reference Scheiber2014).

In addition to the acknowledged possibility of not being paid for “spec” work (as mentioned by Bergman and Jean), many freelancers report difficulty collecting the payment they are owed. In a survey conducted by a trade association, 40% of freelancers reported being paid late or not at all in the previous year (Freelancers Union, 2010). Low-wage employees are sometimes not paid overtime or are otherwise victims of wage theft (Milkman, González, & Ikeler, Reference Milkman, González and Ikeler2012), but they can file claims with federal or state departments of labor. In contrast, freelancers’ only recourse when they are unable to collect payment is to take a client to court, which many view as impractical (Light, Reference Light2010). In I-O psychology, pay risk refers to variability in pay associated with the attainment of various performance incentives or stock prices (Kuhn, Reference Kuhn, Highhouse, Dalal and Salas2013), not uncertainty about whether or when one will be paid. Thus, pay risk may be an example where a construct takes on a different meaning depending on worker status.

On the other hand, given the nature of at-will employment and frequent layoffs of employees in some industries, a freelance career could be seen as a way to mitigate economic risk by diversifying income streams. A recent survey conducted by a business services firm reported that almost half of full-time independent workers felt “more secure working independently” and that the average respondent had multiple income streams from at least four clients (MBO Partners, 2015). Many people are part-time freelancers and have a regular waged job; for these individuals, freelancing on the side can be a way to reduce economic risk, as well as potentially offering psychological benefits such as increased autonomy and personal growth. In a survey of Uber drivers commissioned by the firm, most respondents had other sources of income and appreciated the flexibility to control and adjust their driving schedules (Hall & Krueger, Reference Hall and Krueger2015). Even among those freelancers performing the same kind of work under similar conditions or via the same platform, there may be substantial variation in terms of their experiences and attitudes depending on how dependent they are on the income generated and the extent to which they have voluntarily chosen freelance work (Kuhn & Maleki, Reference Kuhn and Maleki2015).

As of this writing, there is some controversy over whether the growth of the gig economy has been overhyped. Recently, the numbers of Americans reporting self-employment or multiple jobs have been lower than in previous years (Zumbrun & Sussman, Reference Zumbrun and Sussman2015). Yet the number of U.S. adults filing 1099 tax forms has risen, and economists studying this phenomenon have found that people with regular jobs who also earn significant income from online platform work and other nontraditional freelancing work do not necessarily perceive themselves as having multiple jobs (Katz, quoted in Wile, Reference Wile2015). This suggests that traditional labor force surveys are missing much of the growth in the gig economy. This is a phenomenon with significant implications for individuals and for society, and it raises thought-provoking research questions about the nature of work and what it means to be an independent worker.

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