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Why "Gig Economics" Will Fail

Updated on November 18, 2018
Ewent profile image

Eleanore Ferranti Whitaker is a published author of two suspense genre novels and a short story fiction and non-fiction writer.

The Failure of a Gig Economy

What is a "GIG" Economy?

In order to accurately define "Gig" economy, a trendy word that hides the truth and facts of employment in the US. today, it is necessary to understand that the word "gig" traditionally referred mainly to musicians who were hired for a specific engagement.

When it is applied to labor in the U.S., it really isn't a "gig" so much as a replacement for the word "temp."

So the question to ask is, "Can labor in any country survive ONLY on temps working part-time and cobbling together 3 or 4 "gigs" to earn what a full time job used to pay?

It is certainly true that automation has given rise to loss of jobs. However, automation cannot replace your broken water heater or repair your automobile's transmission. Leaky roof? Call a robot?

You can see why "gig" economics has been manipulated, not for improving the status of labor in the U.S., but to create higher profits for business owners.

Today, employees are hired for shorter periods of time, which means excessive employee turnover. Does that cost employers? No. The reason is that business owners don't hire emplouees. They hire a recruiter who is also an employer who provides temp workers, thereby relieving employers of paying employee benefits and contributing their portion of employer taxes.

Since the rule of thumb in industry has been to cite anyone who works less than 30 hours a week as "part-time," relying on part-time employees hired by a recruiter who pays their wages, business owners no longer have the job of paying wages, benefits or corporate taxes.

You can see already why this cannot last. The more business owners pay less and less taxes and their employees must work multiple "gigs" and pay the lion's share of taxes to the federal and state governments, the closer the economy gets to a serious reduction in financial support that can only come from enforcing business regulations and taxation.

From the corporate sector, there is the whining that businesses pay too much in taxes. Do they? Check again.


Employees and customers pay more than most business owners in taxes out of wages that have been deliberately stagnated using the excuse, "It's a gig economy."

Employers and customers also hand over massive federal tax cuts and cold hard dollars in tax subsidies, often to state and federal governments.

In the U.S., the Government Accountability Office tracks the amount of return each state receives for the federal taxes they pay. It should surprise no one that according to the State University of New York's Rockefeller Institute of Government, "just 13 states subsidize 37 others."

As such, this means that employees in 13 states are earning more and getting a far less return for their wages. They worker harder and are still struggling to keep their heads financially above water.

The Downside to Gig Employment

The downside to "gig economics" is that these recruiter/employers can only earn their incomes through high job applicant turnover. Thus, they hire and as soon as their client's contract for employees run out, they fire job applicants/employees and replace them to increase their commissions and profits.

The hallmark of "gig economics" is "short term" workers In some industries like construction, chemistry and engineering, short term projects are expected. What goes with "gig economics" is this: When multiple jobs are held short term, it almost always means working longer hours for the same wages a full time job once paid.

Longer work hours means less time for personal needs and quality time with families. It also means an increase in the cost of travel to and from jobs, not to mention the loss of time involved.

Another consideration is "job uncertainty." It's easy to explain gigs being plentiful due to the need for increasing jobs during holiday seasons. But, as most individuals know, holidays pass and there is that "down time" in businesses when customer spending drops off until the next big holiday.

Where is the reliability in earnings then?

Today, 57 million Americans work in gigs. This includes multiple job holders and those whose arrangements are short term.

Ref: https://www.forbes.com/sites/tjmccue/2018/08/31/57-million-u-s-workers-are-part-of-the-gig-economy/

Decline in Gig Enthusiasm

When the job market is weak, gigs are plentiful. This is due to employers' need to cut their losses. Is labor the best way for an employer to cut their losses? Most labor expert says "No."

The reason is that when labor is the first item to the cost of overhead, the work of the business remains the same. With fewer workers, the work of the business must then be completed by fewer workers at the same wages paid to the prior full staff.

When employers use cuts to labor as their first reduction in costs, the disruption to their daily business productivity is the first thing to suffer.

Ref: https://hbr.org/2010/05/when-youve-got-to-cut-costs-now

The Most Serious Consideration of the Gig Economy

How stable can an economy be if working longer hours for stagnated wages in multiple jobs poses a serious health risk?

It has long been recognized that working longer than 8 hours, in non standard work shifts and unregulated work schedules can impose health risks that include:

. Sleep deprivation

. Potential injury

. Loss of appetite

. Fatalities

For employers, the risk is higher levels of insurance and government compliance liabilities due to increased injuries, loss of productivity and poor worker attention to safety in the workplace.

Ref: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4926781/

Conclusion

The actual economics of a gig economy is shorter term profits, health risks to employees and greater business uncertainty.

In conclusion, U.S. workers who realize their personal losses may replace working in multiple jobs for creating start up businesses.


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    • lovemychris profile image

      Leslie McCowen 

      3 weeks ago from Cape Cod, USA

      Yes, I read that Trumps farmers aide is a disaster.....only 983 million of the 12 billion has been allotted.

      Soy bean farmers lost 94% of their trade with China! And it’s not coming back.

      This ridiculous tax policy of destroying the country to let rich people hoard money is also a disaster.

      It’s top heavy and we will fall.

      But I will watch shows on Wall Street.....sometimes I watch Bloomberg or CNBC....I don’t really get it, but I know it’s a barometer of our health as a country.

      Right now, Trump is at a pretty good pace to tear it down. And when a cabinet member requires secret service protection, you know you’re dealing with gangstas.

      Who needs someone with such enemies?

      Thank GOD we got dems in the House. The Trump Train of Thievery is done.

    • Ewent profile imageAUTHOR

      Eleanore Ferranti Whitaker 

      3 weeks ago from Old Bridge, New Jersey

      I strongly suggest, even if it is not one of your favorite ways to spend TV time that you pay strict attention to what Wall Streeters are saying.

      I watched the program, "Consuelo Mack, Wealth Track," last night and her guest was Alexander "Tony" James, executive vice chairman of The Blackstone Group, a New York-based global asset management firm, having previously been president and chief operating officer. James has also served as chairman of Costco since August 2017.

      I'm no investment genius by any means. The reason I like this program so much is that I always learn something about finances I didn't previously know. I admit that as a novice I don't always understand it all.

      However, what caught my eye about this particular program is something we should all be aware of. Mr. James stated that because of the Trump trade policies, if they are not changed, he has predicted a Wall Street "catastrophy."

      He isn't the only top Wall Streeter who has stated this since summer 2018.

      I have never been a quitter or subject to defeat. Thus, I don't buy into the gloom and doom manic depressiveness Trump manages to spread like a contagious disease.

      Tyrants want no arguments or dissent. When an entire nation subjects themselves to the belief that they are defeated and their hands are tied, only those voices like mine will not be silenced.

      World history of various major civilizations show that their extinction was a result of decadence, greed and poor leadership.

      We can do little about decadence and greed. We can work miracles by replacing poor leadership with our finest minds.

      In the end, excellent leadership offers the promise of reduction in decadence and greed through assessed and well evaluated regulation.

      If there is one thing the most decadent and greediest hate most, it is "regulations."

      However, they are not entitled to be above the laws of society that keep order and civility.

    • lovemychris profile image

      Leslie McCowen 

      3 weeks ago from Cape Cod, USA

      Perhaps when the inevitable crash comes in 2019, they will admit the policy of greed is detrimental to a country.

      Not likely, tho.

      They have flipped the script. Somehow, they have allowed everything to cater to the idea that greed is good.....think only of yourself, allow business to think only of profit, and u may get that French chateau.....drive that Benz, own that goldmine.

      Not likely. Takes money to make money....economics, 101.

      And the fact they use religion to do it is the biggest sin.

      How many warnings are in all religious books rebuking greed?

      And this is an abomination, not something to be proud of:

      “Richest 1 percent bagged 82 percent of wealth created last year - poorest half of humanity got nothing”

      https://www.oxfam.org/en/pressroom/pressreleases/2...

      There is only one outcome to all this, and it’s the same outcome we see over and over again, Crash and Burn.

      I guess they are hoping that eventually we can never recover.

      Grind us down to dust.

    • Ewent profile imageAUTHOR

      Eleanore Ferranti Whitaker 

      3 weeks ago from Old Bridge, New Jersey

      My way to see things most clearly is to see the pieces that are visible as jig saw puzzle pieces.

      From the minute the downsizing began, offshoring US jobs was inevitable. No worker was fooled that offshoring was because of employer taxes being too high.

      The fact is that when US jobs go offshore, the cheap labor contracts they sign for workers earning $11/month allows these employers to pay ZERO business taxes and employee benefits.

      That's the first puzzle piece in the puzzle picture. Then, you add in government deregulation of the Too Big to Fail, Too Profitable to Care corporations.

      The next puzzle piece is the fallout from allowing businesses located in the US to offshore jobs while they pay NO US corporate taxes because they claim they are not operating in the US. Pure profit puzzle piece No. 2.

      The final piece to the puzzle is the remnants of a labor market that no longer is sufficient for individuals to pay the taxes that continue to increase as a result of corporate tax decreases.

      The picture is a country with stagnant labor opportunities beaten back further by corporations who are so deeply embedded in college educations that the average American high school senior and their parents cannot afford college.

      When did a US education become a luxury affordable only by those who are responsible for demolishing what should be a vibrant labor market full of highly educated individuals who can produce state of the art innovations and advance the country they live in?

      Gig economics is not an answer for the US labor market because it can't be. It inflicts more austerity on Americans who need jobs to pay the ever increasing taxes dumped on them by the loss of tax revenues from the top 1%.

      If you see the puzzle picture, you see a tiny enclave lavishing themselves with all manner of luxury provided by a huge populus bearing most of the responsibilities.

      Keyword here is Accountability When we do not demand accountability from those we elect, we allow them to luxuriate in that tiny enclave.

      Perhaps, when Nathaniel Hawthorne wrote the "Scarlet Letter" and Hester Prine was forced to wear the letter "A" for all to see, we should do the same. Only this time, the letter "A" would identify with the word "Accountability."

      Those who refuse to be accountable for their misguided decisions, political actions and irreparable harm to our quality of life, should be forced to wear an "A" for their lack of accountability.

    • lovemychris profile image

      Leslie McCowen 

      3 weeks ago from Cape Cod, USA

      Biz is so shady. I once was manager at a chain store, and when winter came around, we just cut everyones hours. They couldn't live on what we offered them, so they would quit. And, since they quit, they were not entitled to unemployment. What a shabby way to treat people.

      No, the gig economy is a hard way to go, especially if you have kids.

      Biz gets away with murder, families suffer.

      But i did hear some good news today....housekeepers union in Boston went on strike and got their demands met from a certain hotel.

      $26-27 per hour, and guarenteed 40 hrs.

      Now they can live on one job, not 2 or 3.

      As James Baldwin said, "Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor."

    • Wesman Todd Shaw profile image

      Wesman Todd Shaw 

      3 weeks ago from Kaufman, Texas

      If you don't mind my bit of a rant, here goes: In the hvac industry, anyone with any degree of skill and qualifications can get a job when the heat kicks in around May. Companies will work the hired service or installation tech 90 hours a week, for exactly 90 days. Then, it's thanks for knowing you. Buh bye. Check with us next year.'

      I've been treated exactly that way several different times. It's entirely for the purpose, of course, of getting around having to offer a full time job with benefits. You can typically get another job for a month or two while the weather is still hot. Not a nice way to try to live.

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