Sharing, Gigs, On-Demand: Opportunities and Risks of the New Digital Economy
The old classifications of employed or self-employed seem not to fit in the new growing digital economy. If we do not address the role of the employers, the status of the workforce and the status of wage-dependent work in general, inequality in Europe and the US could become more pronounced. Digital labor might become a strain on the welfare system as well, when young digital workers do not contribute to the social security and health care systems.
Today, everyone is using the internet and their smartphone on a daily basis, even excessively; It is everywhere we go, anytime we want it. Based on the new technological advances and these changes in consumption, a whole new range of digital businesses has developed. Examples are Uber, Airbnb, Kickstarter, Lyft, Udacity or TaskRabbit. These platform-based businesses have turned into some of the most valuable companies of the new digital economy. With the assent of these actors, they have started to affect our daily lives, the workplace and society.
In the US, data shows that about 72% of all Americans have already participated or used some form of what we often refer to as the "sharing economy," "on-demand economy," or "gig economy" and that they usually have a positive attitude towards. Yet, the new digital economy comes with baggage. With the possibility of a worldwide workforce, businesses are tempted to switch to an on-demand workforce or crowdsource their work digitally. Workers themselves are facing more and more competition on a worldwide scale, without the securities and benefits that a once-stable job offered. Established markets are disrupted, standing legal and tax codes might be circumvented.
However, the new digital economy also offers opportunities. A growing portion of the workforce is not interested in the old 9-5 job. Jobs in the gig economy are flexible, leaving it to the people themselves, when, where and how long they want to do work. Digital businesses may also offer a way to gain work experience, test new fields, or bridge a time of unemployment or financial squeezes. Moreover, the new businesses often claim to provide the possibility to use resources more effectively and tackle problems like hyper-consumption, pollution or poverty.
Right now, the share of the new digital economy is still relatively small compared to the overall economy in the US or the world. Yet, there are hopes for tremendous growth of the gig economy. The political responses in the US and Germany however, remains one-sided.
Too much focus is put on the issue of access to the internet or the opportunities for business and industry. But issues of a growing digital labor force need to be addressed as well. Once again the trend towards digitization seems to be accelerated in the context of the US economy and labor market. More and more young people are working in digital business or through online platforms, quasi-acting as self-employed. Businesses are keen to hire these often highly-educated specialized workers and are cutting back their stable workforce. This saves businesses labor costs, however, this development towards self-employment puts extreme pressure and insecurity on this workforce. In the US, they are often burdened with debt and are without benefits, which are mostly tied to a stable job.
Policy-makers should therefore think about more flexible ways to carry benefits from employer to employer or as a self-employed individual. In Europe, benefits are not necessarily tied to your job, but self-employment also makes it difficult to pay into the standing social security systems and health care is often more expensive for self-employed (see Germany). In general, policy-makers should think about another classification for the new workers, who are indeed caught in between employed and self-dependent. The old classifications of employed or self-employed seem not be fit for the new world of the digital nomads. Otherwise, workers will be confronted with insecure or precarious situations in the future, while employers are ducking out of any responsibility towards their hired workforce. Additionally, digital labor might become a strain on the social security nets as well. A young, able workforce that is not contributing to the social security systems and health care systems seems to be a waste for all sides involved.
Natalie Rauscher studied English, Political Science and American Studies at Heidelberg University. She now pursues a PhD in American Studies, looking into the influences of digitization on social inequality in the US. She is situated at the Heidelberg Center for American Studies (HCA) and also works as a teaching and research assistant.