The gig economy is the rising trend of temporary jobs where employers are opting to hire independent contractors and freelancers over permanent employees. Technology has allowed the proliferation of the gig economy because it brings together mutual parties in an efficient manner. With platforms like Uber and AirBnB, you have a property that you want to rent out and you can find people who are looking to user your property in a centralized and easy-to-use platform.
While the gig economy applies to any environment where temporary work agreements are prevalent over traditional full-time employment, we will be focusing on the perspective of the online platform economy, which is a small part but accounts for a lot of the growth.
In a study published in 2018, JP Morgan Chase separates the online economy into the following 4 sectors.
- The transportation sector, in which drivers transport people or goods (e.g. Uber, Taxify)
- The non-transport work sector, in which workers offer a growing variety of services including dog walking, home repair, telemedicine, and many others (e.g. fiverr, Upwork)
- The selling sector, in which independent sellers of goods find buyers through online marketplaces (e.g. bidorbuy, gumtree)
- The leasing sector, in which lessors find lessees to rent homes, parking spaces, and many other types of assets (e.g. Airbnb)
What it offers to South Africans
The gig economy offers a unique set of circumstances when compared to developed nations. South Africa’s unemployment rate currently stands at 26.7%. One out of every four South Africans is unemployed, compared to developed countries like the UK and US where unemployment is less than 5%.
The demand for jobs is much higher and people are willing to work for far less when considering qualifications or experience. Additionally, income expectations are less across the board.
In the US the minimum wage is $7.25 per hour which when working a 40-hour week comes up to earning potential in excess of $1000 or around R14,000 at the time of writing.
In South Africa, the minimum wage is R20 per hour or $1.39 as the time of writing which is 5 times less compared to the US. Additionally, in practical terms, the minimum wage in South Africa is more of a recommendation and is not mandated i.e. it is not enforced and there is little recourse for employees
Many of the online platforms hire globally, which the bulk of their workforce being from developing countries where the potential earnings are far more acceptable in the view of workers
With the romanticised idea of a location-independent job where you can work from a laptop at any location you please, it is easy to see the allure of freelancing and Independent contractor positions.
The gig economy in South Africa
South Africa is not a significant player on the supplier side of the gig economy. A lot of the growth is being driven through internet technology for most of the recent years we have had limitations in terms of infrastructure and availability of the internet to people below the middle class income level.
Prominent platforms are franchises of international companies such as Uber and AirBnB, or upwork for freelancers. Freelance jobs and informal gigs are mostly traded in social media groups and which are informal and lack organizational structure so quality control can be an issue.
One local platform that is making strides and receiving positive user reviews is RentMyRide.co.za, which brings together people who want to rent their car out with customers who can rent the car out through the platform.
Accessibility and Work Availability
Gigs in this environment emphasise skills over qualification. People from all over are allowed to apply and take a test that determines whether you can do the job. Applicants who pass the test get the job, and regular quality reviews unsure that work is being done right.
The part-time/flexible nature of the work means that there can be times when there is no work. A worker will often have to take up multiple positions to achieve the lifestyle that they want.
The online economy is as diverse as its traditional ‘real world’ counterpart. There are jobs for every level of qualification and experience, from minimum wage to skilled professional management type roles. As should be expected, jobs that require the least skill are easier to get into and also pay less.
Better paying jobs naturally see a higher demand and more competition. They therefore have certain qualification or experience requirements to get the best possible candidate. Income expectations must be tempered but there is information available on the more accessible platforms.
Online Gig Examples
At the lowest end of the spectrum are GPT platforms such as those for online surveys. Most of these have no entry requirements at all outside of being able to use a computer or a smart device. Earning potential is around $2 an hour which is in line without local minimum wage. These jobs are popular with retirees who use them as a constructive way to kill time, and for some students seeking pocket money. People have been reported to earn $5 a day or $150 a month working 2-4 hours a day. The amount is within the region of our minimum wage.
Online transcription is considered one of the easiest gigs to get into. Compared to GPT tasks, online transcription does have the requirements of a good grasp of the English language, and a good typing speed. These online transcription platforms are always hiring and are popular in developing countries where they offer a considerable amount above local minimum wage with little barrier to entry. The earning potential for online transcription is above $500 when doing it full time and the highest earners are reported to earn between $1000 and $1200.
Crowdsourcing platforms like Leapforce, Lionbridge and Appen are popular in North America and Europe, with graduates in between jobs or who prefer the location independent lifestyle. They provide flexible working hours with a minimum and maximum number of hours set out to be worked by the independent contractor. The pay for these job is set according to US regulations and is always above that minimum wage. As a result, there is a higher demand for these jobs and they are not as easy to get into. They pay between $10 and $15 an hour with monthly income being $800 or more a month if you work for 20 hours a week.
With these platforms employees can be promoted to reviewer and supervisor positions which earn income that is comparable to full time employees.
Upwork and Fiverr are the most popular freelance websites on the web. They are online marketplaces that bring together freelancers and clients. The variety of work is wide and the income potential will depend on the reputation the freelancer manages to build on the platform.
Pros of gig economy
- More opportunities for more people
- Flexibility – Work from anywhere at the time of your choosing
- Low cost for job searching – e.g. no printing of resumes or transport costs for interviews
- No discrimination – The digital nature of the process emphasise skill and qualification alone. Age, gender, race, religion etc play no significant part in a non-physical environment
- Employers have a wider range of employees to choose from. Online platforms, are not limited by distance between the employer
Cons of gig economy
- Lack of stability – temporary jobs can be ended at any time
- Cheapening of labour because of the high demand. Employers seek to pay the least amount possible
- The knock on effect of the above is that it makes it harder for full-time employees to establish careers through experience when employers opt for temporary workers over full time employees they would otherwise have to train.
- Most independent contractor positions come with no benefits for the employer
With there already being arguments of South Africa being drained of skills, the movement of employees into the online platform economy could further exacerbate the issue. Graduates with scarce skills will bypass the conventional employment-seeking route and can get into work that is irrelevant to their qualification for foreign-based businesses.
A greater movement of workers to the gig economy will also have an effect on local business and service providers. Self employment has always introduced obstacles when it comes to obtaining credit from lenders. With more people being self-employed credit regulators and lenders will have to adapt to the changes that technology brings to the labour environment. Steps in that direction can be seen from the high court ruling in early 2018 that reduced barriers to credit by removing the requirement for payslips when applying for store credit.
The gig economy is growing. As it grows, it the changes that occur will have implications for the wider economy, which raises the question of whether local business and leadership should pay more attention to the sector. While we don’t have any local data, a study by Gallup reports that one third of Americans are part of the gig economy, with the figure expected to rise to 43% by 2020.
With more South Africans finding out about the opportunities that come with this globalized online working environment, coupled with the employment crisis we are in, a similar trend where more people join the serial temporary work environment can be expected.