A long-anticipated ruling came from the California courts last week about the “gig economy.” A California court of appeals ruled that Proposition 22, a 2020 ballot measure that allows companies like Lyft and Uber to classify their workers as independent contractors instead of employees, is constitutional—a clear sign that the gig economy is here to stay.
And the use of contract workers may prove useful amid ongoing labor shortages and difficulties in hiring and retaining full-time employees, according to 177 CEOs polled March 7 thru 9 in Chief Executive’s Confidence Index reading. Twenty-seven percent believe the gig economy is a viable solution for organizations even beyond the current economic environment.
“The gig economy has been around forever—way before it was known as the gig economy. It just makes sense,” says Christine Nichols, CEO at People Science, a talent acquisition firm. Despite her belief that contract workers are a viable solution for businesses, she cautions, “It can be overused and should be monitored for effectiveness regularly.”
Other CEOs who agree with Nichols say that it is easier to find good people who are willing to work on a contract basis now compared to before the pandemic and expect the trend to stick around for a while. They say that many people want flexibility, and now that there are other options for healthcare, it has been easier to find quality contractors which can cost less than full-time employees.
Twenty-six percent of CEOs are still undecided and don’t know whether the gig economy is a viable solution or not. They shared that for some businesses it can work wonders but for many functions, high-skilled employees are in short supply and the gig economy doesn’t seem to bring a solution.
Forty-seven percent of CEOs say that the gig economy doesn’t offer a solution, listing reasons from loyalty to training to regulation. They share concerns about culture-related issues and struggles to find quality short-term workers. Or the talent solution simply doesn’t work for their industry.
“Gig workers do not provide significant value for professional services. For technical functions, technology and automation are preferred,” says Steve Schiller, S.E., president at John A Martin & Associates of Nevada.
“The costs are not sustainable and the ability to build an effective corporate culture is compromised,” says Donald H Lloyd II, president and CEO at St. Claire Healthcare.
“Gig workers are not feasible in the manufacturing sector due to the skill sets necessary for the job,” says Patrick Collings, president at Lane Enterprises Holdings.
And most CEOs, 64 percent, say that their company has not turned to contract/gig workers to specifically help curb this talent shortage. However, 36 percent of companies have turned to gig workers, pointing to an overall increase in the proportion of contract/gig workers now compared to pre-pandemic levels.
Data shows that on January 1, 2020, 67 percent of companies had a workforce comprised of less than 2 percent of gig workers. Now, that proportion has fallen 13 percent to 58 percent of companies that have less than 2 percent gig workers.
The proportion of companies whose workforce is made up of 10 percent or more contract/gig workers shot up over 50 percent from only 9 percent on January 1, 2020, to 14 percent now.
A similar poll of 108 CHROs fielded from January 31 thru February 6 reveals related trends around the gig economy. When CHROs were asked whether the proportion of contract/gig workers at their company has increased over the past three years, 23 percent said yes—while only 8 percent said that the proportion has decreased.
It’s clear that although contract/gig workers may not be a viable solution for all organizations, this trend is on the rise, and likely to be a part of our economy for years to come.