The new gig economy allows anyone who is entrepreneurial to work on-demand. However, critics of the gig economy argue that it enables companies to squeeze workers by denying them benefits and regular, stable income.

There is some truth to these criticisms but companies can create gig opportunities that fairly reward contractors while generating profits and providing great, affordable service.

There's two sides to every coin. When companies replace full-time workers with contractors it helps them save money, but at the expense of incomes and benefits for workers. Fair enough. At the same time, many gig opportunities offer a high degree of flexibility. The most obvious example is Uber. Many drivers use Uber to earn supplemental income, putting in a bit of work on the weekends or when they're not in the office.

Still, Uber has frequently found itself under fire for allegedly exploiting workers. Back in 2017, Uber drew criticism for raising its booking fees but not giving drivers any more money. Meanwhile, an MIT study found that Uber and Lyft drivers are actually earning less than minimum wage. The results of this study have been challenged.

Competition Makes Everyone Better

Markets bring competition. Without competition, gig companies can raise rates for customers and contractors alike, eventually maximizing their profits and reducing income for contractors. Still, as long as there's competition it's harder for Uber, Airbnb or any big company to solely dictate the market.

Let's look at one of Airbnb's newer "experience" category of services. Airbnb smartly decided that they weren't going to stop at places to stay. Why not offer tour guides, curated dining experiences, and other value added services? Just as rooms and properties are rented out, locals can offer curated and guided tours and experiences.

Except, Airbnb usually takes somewhere between 15 to 25 percent of the cut. Tour guides will also have to cover various costs with their fees, such as food, wine, drinks, and the like. So let's say you're a tour guide in New York City, and you take people on wine tasting tours. Let's assume you charge $100 for the trip. You'll start by handing over $20 of that to Airbnb. Next, you'll have to pay for all of that wine. By the time you're done, you're not going to have much.

Now paying money out to Airbnb can be considered an advertising expenses. they are bringing you the client. Again why I mention that there are two ways to look at anything. And having flexible income like driving for Uber can free you to pursue something bigger. It's just important to know what you need out of the experience and not go in to the gig economy blindly. 

If Your Business Is Built on Gig Workers, Keep Them Happy

And there is competition. Competitors are already in the market, offering better rates. With tours, for example, FoodieTrip charges 5 percent, allowing tour guides to keep a lot more of their cash. The gig economy is still much the same as the "old" economy, we all want to earn as much as we can for our work.

If the gig economy is going to work, it has to benefit all parties. It's not just about customers getting the best rates, or companies producing the most profits. The contractors themselves have to be making a good income as well. If not, the whole thing could come crashing down.

And if you're a startup built off the gig economy you need to be acutely aware of this. If the workforce pendulum swings to people thinking gigs don't pay enough, your business model suddenly won't work. So there is a collective reason why this balance has to work. 

Take Lyft sometimes, instead of Uber. Use Foodietrip instead of Airbnb. It's not because bigger companies offer a bad experience, but instead the simple fact that competition is good in and of itself. It keeps the companies honest. If we're going to create a gig economy that works for everyone, we're going to need a healthy dose of competition and choices.

Published on: Jul 26, 2018
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