As gig economy restrictions have been reintroduced at the federal level, a new analysis has found such platforms crucial to helping businesses and workers recover from the COVID-19 economic downturn.
“The gig economy is a central part of the 21st century economy, and we felt an understanding of entrepreneurship is incomplete without an understanding of what the gig economy is, and how it impacts entrepreneurship,” Wayne Winegarden, Ph.D., senior fellow in business and economics at the Pacific Research Institute (PRI), told the Northern California Record by email.
“The gig economy firms’ role is to create a platform that enables these transactions to occur,” Winegarden said. “Gig economy firms are not in the business of providing these services – Uber is not a taxi-company, it's a company that designs technology platforms that allows providers of these services to connect with consumers of these services.”
Winegarden, who authored “The Small Business Gig” as part of the PRI entrepreneurship research program, noted the proposed federal restrictions would create unnecessary barriers that diminish entrepreneurship, innovation, and incomes.
“The gig economy benefits people as consumers of goods and services and by the income-earning opportunities created,” Winegarden said. “If adopted widely, AB 5-style regulations will reduce economic growth potential, lead to worse products and services for consumers, and will eliminate valued opportunities for many gig economy workers.”
The Covid recession has increased the momentum of the gig economy.
Surveys from ADP and other organizations indicate more than one-third of all workers have engaged in gig opportunities, and more than two-thirds of them are doing so by choice and are happy with their current arrangements, the PRI study found.
“This demonstrates the gig economy fulfills an important need, particularly as it relates to empowering workers to manage their own schedule. When the consumer benefits are taken into account – through transportation or handyman apps for instance – the use and acceptance of the gig economy is growing substantially,” Winegarden said.
The value created by the gig economy directly helps some of the most pressing problems facing small businesses. The study notes small businesses often cite taxes, regulations, or finding the right talent as the most pressing problem facing their business, according to the National Federation of Independent Business.
“The gig economy expands the ability for small businesses to flexibly engage with professionals with the skill sets it needs, expanding the talent pool available to the businesses, and empowering the business to more efficiently manage their tax and regulatory burdens,” Winegarden said.
The federal push to enact policies like AB 5 is meeting opposition.
“These regulations are restricting options for workers and making them worse off,” Winegarden said. “Since the vast majority of gig workers are both working in the gig economy by choice and are satisfied with the arrangement, it is difficult to argue that there is a role for the government to protect them.”