Gig workers were among the hardest hit the business segments as a fallout of the COVID-19 pandemic, lockdowns around the globe. Gig workers earn when they work, and hence most of them saw their earnings come to a grinding halt as large segments of the world went under lockdown and stay-at-home orders in March and April.
Gig economy startups like Uber, Airbnb, Lyft, Etsy or TaskRabbit, food and package delivery startups and others attracted individuals who were attracted to flexible schedules and the ability to drive their earnings at their personal pace. This sector employs millions of people across the globe. The Bureau of Labor Statistics in the US reported in 2017 that 55 million people in the U.S. are “gig workers”. In Europe, 9.7 percent of adults from 14 EU countries participated in the Gig economy. Asian giants like India also added millions of flexi workers in the past few years. The official estimates aren’t very accurate since many people also moonlight as gig-workers to complement their regular jobs.
Until the pandemic stuck, the gig economy was heralded as pathbreaker that could upend existing business models. Enabled by well designed digital platforms, many of these consolidators prompted individuals to explore opportunities as self-employed drivers, task and service providers. Gig consolidators attracted individuals who didn’t want to be shackled by corporate norms with an ability to choose assignments that make the most of their talents and reflect their true interests. However, as the global economy slowly limps back, many industry leaders wonder what the ‘new normal’ and social distancing could mean for the gig-economy.
Most companies and governments classify gig-workers as freelancers and not full-time employees. These don’t have protections like guaranteed wages, sick pay and health care, which corporate workers take for granted. According to a recent World Economic Forum report
- Gig workers are quitting jobs due to a fall in demand and safety concerns.
- The majority of gig workers now have no income due to COVID-19.
- Almost 70% of gig workers were not satisfied with the support provided by the company they work for.
Image: observer.com
Airbnb effect on Gig economy
The Gig economy darling, Airbnb Inc. announced that it is cutting a quarter of its workforce (about 1,900 jobs) while reducing investments in noncore operations.
Airbnb’s Co-founder and Chief Executive Brian Chesky told employees about the cuts in a memo Tuesday, adding that the company’s revenue forecast for this year is “less than half” of last year’s level. “We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill,” Mr. Chesky told employees in a memo Tuesday. “Airbnb’s business has been hit hard.”
Rideshare giant Uber is considering layoffs of 5000 of staff (about 20% of the workforce). Its big rival Lyft also announced it would be reducing the employee count by 17% (about 982 employees) and furloughing an additional 288, due to the effects of the COVID-19 pandemic and its impact on its business.
These layoff announcements are just the tip of the iceberg since they only count full-time employees employed by these firms directly in support, IT and operations management. These announcements don’t count the number of gig-workers who either drop off the platforms or are unable to continue to make a living as uber drivers or Airbnb hosts.
Longer term lessons on sharing economy startups
The success of sharing economy hinges on a healthy ecosystem that includes
- Independent workers paid by the gig (i.e., a task or a project)
- Consumers who need a specific service, for example, a ride to their next destination, or items delivered
- Gig consolidators including app-based technology platforms connect the worker to the consumer
The announcement by the gig-working giant is likely to send ripples among other gig-economy giants. Startups have been innovating in business models across a wide cross-section of the economy trying to upend traditional businesses in travel, hospitality and supply chain segments. In a post-COVID world individuals will be hesitant to become gig workers without a social safety net. Likewise, consumers will be slow to get back to their old habits.
Fewer people are likely to travel till the end of 2020, and the few people who venture out may be hesitant to get on a stranger’s car or home without adequate safeguards. All of this will put additional cost burdens and expenses on gig workers, service providers and home hosts.
Startups, entrepreneurs and gig consolidators will have to factor in the new normal while re-designing newer sharing-economy models. Gig companies will also have to address the additional financial risks gig workers take while engaging with the platform.
Other References
- Thriving in the Gig Economy – Harvard Business Review
- Gig workers among the hardest hit by coronavirus pandemic- World Economic Forum report
- Lyft is laying off 982 employees, furloughing a further 288 due to COVID-19 pandemic – techcrunch.com
- Pandemic Erodes Gig Economy Work – The New York Times
- The Great Rideshare Crash: Uber, Lyft, and More Plan Layoffs as Drivers Flounder– Observer