The Pandemic’s Impact on the Gig Economy

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Apr 17, 2020
This article is part of a series called COVID-19 Coverage.

Organizations historically plan for occurrences like natural disasters, energy shortages, and digital outages (remember Y2K?). They invest billions in disaster-recovery plans, data availability, and backup sites. But let’s admit it — unlike a few Hollywood movies, not many companies give real thought to preparing for a health pandemic. 

Within a short period of time, the coronavirus outbreak has affected human life more than we could’ve imagined. COVID-19 is disrupting the global economy and forcing billions across the world to stay at home to contain the spread. Consequently, enterprises of all sizes need to adapt quickly to a new reality in which the only thing certain is uncertainty. Finding themselves without a blueprint, they are scrambling to transform overnight from physical to virtual workplaces, recalculate their go-to-market strategies, and redefine their product offering. 

While industry after industry and market after market across the globe are struggling to survive the pandemic, one sector in particular is benefiting from the chaos — the gig economy.

The millions of sudden layoffs, combined with quarantine guidelines and shelter-in-place orders, have created an impactful combination of supply and demand that has boosted demand for gig workers and services. However, the gig economy itself can be divided into many subcategories, and some are doing better than others. 

One of the primary distinctions between gig services is physical versus digital. While both sides are seeing varying levels of demand, the characteristics of digital services in the midst of this pandemic should propel this area for more sustainable, long-term growth than physical services. 

Physical Gig Services

While relatively new, nebulous, and rapidly evolving, the physical gig economy has been a darling of media and venture capitalists. And whereas during the 2008 Great Recession, gig economy juggernauts like Uber and Airbnb found their footing, right now, COVID-19 is striking at the heart of their business models.

While likely to survive in the long-run, the current lack of demand for certain physical services is contingent upon the quarantine order. Yes, physical gig economy powerhouses like Instacart and Amazon are reporting a 10.4% increase in income during the last two weeks of March. But this crisis has exposed a major vulnerability for other physical gig platforms based on tangible supply (physical assets or services). 

Uber and Airbnb are running human-driven businesses that are affected in the same way as local taxis services or family-run bed-and-breakfasts. So far, these companies are reporting 60% to 70% sales decline in areas hit hardest by COVID-19. Other services, such as Uber Pool, have been suspended entirely due to health concerns. Similarly, Airbnb was pressured to change its cancellation policy and is now considering delaying its IPO as a result of the devastating impact of the pandemic on its global business.

Despite the advanced digital envelope they are wrapped in, all of these physical gig economy marketplaces are vulnerable to the swings of their local economies, workers rights and labor laws, and current health concerns. 

Digital Gig Services

Now to the digital side of the gig economy. The pandemic is shining a light on gig services such as digital staffing and networking platforms. These platforms are designed and built to thrive in the COVID-19 reality and should experience a long-term and sustainable boost from a sharp increase in supply and demand. They enable you to browse and filter through their selection of freelancers and place orders in just one click. Most offer a global labor pool, which spreads geo-political risk from work disruption. Workers providing digital services also have more control over their workflow, hours, and opportunities by serving a global customer base from the safety and comfort of their homes. 

Meanwhile, from a demand standpoint, uncertainty will drive companies to hire freelancers for short-term projects or specific tasks, especially when the availability of experienced, talented individuals is skyrocketing due to the COVID-19 lockdown. The opportunity in this crisis lies in companies adapting their workforce models to be more flexible.

Erratic, abnormal business needs will also lead companies to urgently seek experts with skills they never expected and who are available on digital platforms. But to be long-lasting, they’ll need to pay freelancers fair market wages, offer flexible work-life balance, and embrace wage transparency.

Ultimately, despite the havoc it has unleashed, the crisis has given digital platforms a major opportunity to demonstrate the long-term necessity and effectiveness of agile workforces. Multiple gig economy platforms create wage competition for workers and allow the recently unemployed to quickly find work. And hopefully, as we move beyond our current state, workers and businesses alike will evaluate today’s necessary changes to create a more sustainable tomorrow. 

This article is part of a series called COVID-19 Coverage.
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