Small businesses are starting to rely more on “gig economy” workers over traditional 9-to-5 employees, an expert testified during a congressional hearing Wednesday.
“The good news for these independent workers is that small businesses, which already employ half of American workers, show increasing demand for qualifying gig workers,” Betsy Dougert, communications director for SCORE Association, which provides mentoring to startup and established small-business owners, said during the hearing.
“This expels common assumptions that sole entrepreneurs are running their businesses by themselves, and shows that employment statistics that only count traditional employees may be underestimating the full economic impact of non-employer firms,” she said.
The growing gig economy uses digital technology to match consumers with on-demand services like Uber, Airbnb and Upwork, but how it subverts traditional business models and employment has prompted a fierce debate.
The House Small Business Committee tackled the debate by asking how the shift by millennials towards gig economy careers has affected traditional small businesses. Dougert answered that small businesses are actually driving some of the shift as they rely more on gig workers.
The SCORE Megaphone of Main Street report found last year that 37 percent more business owners hired gig workers over the previous six months, compared to 13 percent for full-time employees. The report also found that 19.8 percent of businesses replaced employees with independent workers during that time.
“What we’re seeing is, more and more companies are seeing the value in hiring freelancers,” Anne Kirby, a gig economy entrepreneur and founder of The Sweet Core, testified. “They’re saving time, money, on boarding and all that. That’s one reason we’ve seen for why it’s growing so rapidly. And the benefit it can have for small businesses, as a whole, is being able to bring that small contractor in.”
Younger workers are choosing gig economy work for a variety of reasons, such as the increased flexibility, additional income, and lack of employment opportunities elsewhere. Millennial Action Project founder Steven Olikara believes the increasing number of younger gig workers shows the need to update how such work is tracked.
“The unemployment rate for millennials remains above the national average to 8 percent,” he said during the hearing. “At the same time we are seeing gig work growing. The growth rate for gig work is outpacing regular employment growth in this country, and millennials are disproportionately taking on this work.”
The Millennial Action Project is a national nonprofit advocating for millennial policymakers who oppose traditional ideological divisions in the government. Legal protections afforded to gig workers also needs to be updated to reflect the new type of work, instead of lumping them in with regular contractors, according to Olikara.
How gig economy workers are classified has been a central focus of the debate. Those workers are technically contractors as opposed to traditional employees, which provides them greater flexibility but fewer employment benefits and protections such as the right to unionize as one collective bargaining unit.
Seattle has been at the forefront of advancing policies that specifically target gig economy ventures. The city has implemented regulations to better control the industry and make its participants more akin to employees. Those opposed warn the approach could undermine what has made the model so successful.