Independent Contractors in China and Beyond: The Limitations of the Gig Economy

Before reading this article, we would strongly recommend taking a look at our post about the gig economy in general on the one hand and on the other hand, at our more recent article about the gig economy in the context of the COVID-19 pandemic. To (over-)simplify, let’s just say the pandemic put the gig economy in the spotlight even more so than it already was: from gig economy-related occupations which did very well over the past months such as delivery-related ones (for obvious reasons) to instances where gig economy-related opportunities facilitate the transition to a model that revolves more and more to the point of even exclusively around working from home.

Can the gig economy be considered a “winner” from a strictly economic perspective in the context of the 2020 pandemic?

The sector as a whole most definitely outperformed compare to quite a few other sectors over the past few months but on the other hand, it is imperative to analyze the phenomenon at a more granular level as well before setting a verdict in stone. Let us leave the sector as a whole aside and analyze the gig economy from the perspective of the average individual so as to answer one important question: does it represent the Holy Grail of employment in light of 2020’s developments?

The answer, unfortunately, is a resounding “no” for the simple reason that we get stuck right from the very articulation of the question: what employment, exactly?

The overwhelming majority of gig economy opportunities revolve around the individual being an independent contractor rather than an employee and while things may very well look better when it comes to a strictly revenue-oriented perspective, there is more to a person’s career than revenue, for example:

1. Various benefits such as medical insurance are frequently left to the individual. When things are going well, the fact that one doesn’t have stellar medical insurance may not seem like that significant of a deal-breaker. Many gig economy enthusiasts are more than happy to lock in additional revenue and simply shrug insurance-related concerns off but unfortunately, they risk being only one debilitating accident away from a most unfortunate game-changer
2. Job security being oftentimes precarious and with various moving parts involved. From being banned from one platform or another due to various glitches or growing pains of the company in question to not being able to adapt to gig economy dynamics and standing by as your performance as well as ultimately revenue plummet
3. The situation of many platforms being shaky at best from a legislative perspective and as such, independent contractors (without being the least bit to blame) find themselves one legislative “paradigm shift” away from losing it all. An eloquent example to that effect is represented by ride sharing platforms such as Uber and the constant war they are in with taxi drivers, who were forced to comply with various regulations so as to conduct business and expect independent contractors who work with Uber and other platforms to be on the receiving end of the same treatment
4. Even leaving the legislative volatility dimension aside, “platform security” represents a major factor that generates concern among independent contractors due to the fact that company-specific changes can turn a previously profitable (for the independent contractor) platform into one that is no longer worth it. As such, independent contractors find themselves forced to diversify in many cases (for example switching to newer platforms that entice them with perks such as guaranteed hourly revenue) and while it sounds simple enough in theory, it can turn into a nightmare practically speaking and the overall climate is not necessarily conducive to peace of mind

These are just four examples of aspects that make it clear it is anything but sunshine and rainbows in the gig economy world. On the other hand, it is true that various platforms are trying to make improvements on these fronts by embracing a wide range of solutions, for example offering various deals on necessities such as medical insurance so as to make up for the lack of benefits discussed when mentioning issue #1.

Still, this much is certain: the gig economy is most certainly not for everyone and the limitations of various platforms become more than apparent upon closer reflection. While issues such as the ones we have mentioned are not necessarily deal-breakers for young and flexible individuals, the same cannot be stated about for example someone nearing retirement, someone with pre-existing medical conditions and the list could continue indefinitely.

Is the gig economy scalable?

It depends on how we define “scalable” in the first place.

If the definition is to simply encompass a business model that can end up working for millions upon millions of individuals, the answer is yes. On the other hand, those who state that the gig economy will turn “employment 1.0” into a relic of the past are being over-optimistic… to put it mildly.

This is especially obvious in countries with stark divides between social classes such as China, where there is a world of difference between highly-educated urban citizens who are both willing and able to adapt to the needs of the gig economy on the one hand and on the other hand, an equally significant segment of the population that is barely literate or even functionally illiterate and as such, does not possess the minimum skill set required for gig economy-related opportunities to make sense.

Is the gig economy an excellent option in China as well as elsewhere?

For a certain segment of the population, most definitely but certainly not for everyone due to reasons such as the ones outlined throughout this article and… at the end of the say, simple logic and common sense.