The Marginal Gig Economy

The New York Times has noticed that the much-vaunted gig economy is not exactly taking over the world. While the statistics are rather sparse, it turns out that since 2005, the number of people in “alternative work arrangements” has dropped a little, and certainly isn’t showing any upwards trend.

As the article recognizes, the entire concept of a world where people perform only “contingent work” is over-hyped. The media (and the left in general) love a good apocalypse, and especially one that makes people more reliant on the government. Whether it’s global warming or neo-Malthusian food shortages, there’s nothing more satisfying to the left than the idea that we’re all about the pay for our sins. The end of traditional work went along with that pattern, and even better, dovetailed nicely with their misguided version of a basic income. On top of that, you had Silicon Valley, with their usual self-absorption, assuming that nothing existed beyond their own circle:

“A lot of this hype has been driven by the tech world believing that they are the center of the universe,” Mr. Mishel said.

But there is a bigger problem with the gig economy: many of its business models are based on the twin fallacies of scaling marginal suppliers and permanently avoiding regulatory costs. Uber, for example, has economics that make sense if you already own a car and are able to ignore the fixed costs associated with acquiring one, and if you can avoid the licensing costs associated with being a taxi provider. Airbnb likewise works if you already own an apartment and want to generate extra revenue, and if you can avoid hotel taxes. But neither is all that convincing if you look at fully-loaded costs, and neither can survive if it becomes big enough to attract the kind of regulatory attention that traditional players encounter.

For all the hype and for all light they shine on the regulatory regimes that existing businesses must navigate, the impressive growth of Uber, Airbnb and the like will not translate to a fundamental change in ways of working. While the flexibility provided by the gig economy might be a boon to some, traditional models of work will remain fit for purpose and well-suited to the broader economic environment.


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