The Gig Economy

The costs and benefits of the gig economy, and how it impacts innovation

The gig economy employs taxi drivers and food delivery drivers to meet consumer demands. While it excels at moving goods or people around, its business involves selling the labour of insecure workers at rock-bottom rates. The gig economy can be considered an example of innovation, which is vital as it lowers prices and improves the quality of goods and services. However, it may lower wages and lead to bad habits.

Movement of Goods and Services

The gig economy excels at moving goods or people around. A taxi will soon appear outside your location at the tap of a button, or a meal will soon be delivered to your doorstep. The operations offer flexibility and dynamism to meet consumer demands. However, it is tough to regulate and monitor due to the pace and volume of transactions. This can threaten the welfare of workers in the gig economy whose incomes are vulnerable. During the pandemic, gig economy workers suffered dearly at the height of lockdowns, while the government offered weak support. Hence, while goods and services can be moved rapidly, the pace of these movements puts the workers in a vulnerable position.

Labour Exploitation

Similarly, critics argue that the gig economy sells the labour of insecure workers at rock bottom rates. While this is hard to justify currently due to the short labour supply, riders can reportedly earn as little as £2 an hour. This infringement of the minimum wage law results from a failure to monitor this section of the economy. However, the wages do not take into account the benefits of the flexibility of the working hours. Delivery drivers can choose when to log in and deliver orders. Moreover, the gig economy can act as a supplementary income to full or part-time jobs, meaning that although the wage may be low, workers do not rely on these paychecks. Despite this, more effort must be made to ensure average wages in the gig economy satisfy the minimum wage.

Lower Prices

Innovation is essential in the economy as it lowers prices. For example, the gig economy has reduced taxi fares in London as Uber can undercut the traditional black cab. This could help abate the cost-of-living crisis in today’s economy through lower commute prices, which has progressive effects on poor households who see their disposable incomes rise. Another effect of the gig economy would be increased social mobility, though taxi journeys make up only a tiny part. The lower prices would improve living standards, as the poor have access to goods and services that they previously did not. However, innovation can come at the expense of low wages. The gig economy benefits from workers with low bargaining power, which drives the wages down. If wages fall further than prices, the cost-of-living crisis may deteriorate. Hence, innovation is vital as it lowers prices, but governments must be on standby to ensure wages do not fall or stagnate in real terms.

Quality of Goods and Services

From a more qualitative point of view, innovation creates better quality goods and services for all. While this is hard to quantify, no doubt booking an Uber 5 minutes before a journey is less stressful and more spontaneous than booking a taxi days in advance. On a broader scale, innovation improves our ability to tackle global issues such as climate change through carbon capture and storage technology. Both of these examples allow us to live better quality lives. Or do they?
In some cases, such as cheaper fast-food delivery, innovation has exacerbated bad habits. Furthermore, it has fuelled our reliance on technology to solve our problems, giving us perhaps a false sense of hope that we can continue to pollute the atmosphere as innovation will soon take care of her. The laziness and complacency that we develop may be detrimental to our health, planet, or quality of life. Nevertheless, innovation is essential in improving our quality of life.

To conclude, the gig economy has positive external effects on consumers who can order services with great speed. It also allows workers to supplement their income due to its flexibility. However, those who rely on the wage from the gig economy need more protection and oversight from regulators and the government to drive out illegal practices. Innovation, such as that of the gig economy, helps lower prices, improving access to luxuries for lower-income households. It also produces better quality goods and services for all to enjoy. However, if wages stagnate and our reliance on innovation to solve our problems inflates, it becomes detrimental. We must stay alert.

If you enjoyed this article please👏, or if you have any feedback feel free to comment below!

Ted Jeffery

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A student passionate about economics and how the world works. New blog post every Monday.

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Ted Jeffery

Ted Jeffery

A student passionate about economics and how the world works. New blog post every Monday.

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