What is the Gig Economy and How is it Disrupting Traditional Business?

July 3, 2016 – Today’s guest blogger is Alex Clark-McGlenn. This is Alex’s second posting here at 21st Century Tech Blog.  He is currently studying for his Masters of Fine Arts in creative writing at Northwest Institute of Literary Arts. He has been published in eFiction Magazine, Inkwell at Evergreen, Slightly West Literary Magazine, and appeared in Smokebox Literary Magazine July, 2014. He currently lives in Seattle, Washington.

His topic describes a phenomenon that is disrupting the way new technology is being developed. The bricks and mortar world we have known for much of the Industrial Revolution and even prior to it when artisans set up their own shops and guilds operated in towns and cities is vanishing. And where the talent to develop these new technologies comes from is far larger than the local employable pool of young, smart people.

The world is getting much smaller these days as good concepts get married to talented innovators from anywhere. When Alex talks about 1099 and W-2 workers he is describing a unique U.S. designation. But other companies in other countries are also drawing on international talent to help build disruptive new technologies. It’s just the way the world is going these days.

I hope you enjoy Alex’s contribution.

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One of the most popular competitions for Silicon Valley startups is TechCrunch’s Disrupt in San Francisco, where innovators and entrepreneurs vie for the chance at a funding grant that could take their idea from small startup to global corporation.

The name “Disrupt” is fitting for such a gathering because that’s exactly what these startups do to business as we know it today — disrupt the status quo. And one of the fastest traditions to start crumbling is brick and mortar commerce. While America is still flooded with shopping malls and rows of stores along our streets, certain industries are deconstructing the brick and mortar model. Just take Blockbuster as an example. It used to be a staple for home movies and now, thanks to Netflix, is as old a relic as the touch-tone home phone.

While Netflix is a famous example for digital disruption in a particular industry, there’s a more widespread change happening to the brick and mortar model and it has less to do with what’s being sold and more to do with the model of its employment — the gig economy.

What Is the Gig Economy?

The gig economy is comprised of temporary contract workers as opposed to full-time or even part-time employees. To explain the difference in the sense of taxes, gig economy workers get a 1099 at the end of the year and traditional employees get a W-2. The main difference is that payroll taxes are automatically deducted from the paycheck of W-2 workers and 1099 employees calculate and pay their payroll taxes every quarter.

While some industries like copywriting and graphic design have used the gig economy for years, the practice is now sweeping genres that have relied on full-time employees for decades. The gig economy isn’t limited to San Francisco, either. Copywriters, graphic designers, software developers, construction workers, handymen and crafters are working on gigs in their neighborhoods across the country. While some may find their own work through their community, many use online and remote companies like Elance, oDesk, Task Rabbit, Lyft and more.

Uber & Advantages of Gig Work

Uber knows all about the gig economy. It’s turning the taxi industry on its head by using contracted drivers instead of full-time employees associated with yellow taxis. And while some accuse Uber of shortchanging drivers with the loopholes of contracted employment, the practice has advantages for workers too:

• Gig workers can choose their own hours
• Gig workers can choose their own jobs
• Outside of any contractual obligation, gig workers can leave any job for new employment
• Gig workers typically can choose where they work
• Gig workers can negotiate wages as they go

Gig Economy & E-Commerce

The gig economy doesn’t just benefit workers, it can also create new owners as well. Because e-commerce is now so easy and popular, anyone with a new product or idea can take it to market virtually instantly. That’s one reason why network marketing is taking off in the 21st Century. Associates of companies like Amway can run their whole business online and through social media.

E-commerce brands like Chubbies Shorts, which also has a huge social media presence, uses brand ambassadors to get its name out there. While these ambassadors do work for free (they’re usually given free products, discounts and social media recognition), they do contribute to the gig economy that many companies are adopting. Another example of this is social media influencers, where people with thousands or millions of followers are paid by new companies to promote products on their Instagram pages.

How will you benefit from the gig economy? There are owners who benefit from affordable workers, workers who benefit from flexible jobs and entrepreneurs who benefit from the best of both. But one way or another, traditional commerce as we know it is declining.