The gig economy has undeniably elevated the customer experience by offering the 21st century’s ultimate value-add: convenience. Here’s the catch: it comes at a price.
In the wake of the COVID-19 pandemic, the world became increasingly dependent on the gig economy. The majority of us found ourselves subject to public health orders that restricted our movement and altered our daily routines, and as we attempted to adjust, we looked towards the gig workforce to ease the transition.
Gig workers rose to assume the roles of essential workers, sustaining the restaurant industry, delivering our groceries, and catering to the whims of our fingertips on a screen.
This may all appear to be an ideal testament of the potential of technological applications to simplify day-to-day processes, but there’s a problem that it fails to address, one that can’t be overlooked: payments in the gig economy. To address this problem, we must first understand the complexities that underpin the contemporary state of the gig economy.
The Freelance Workforce is Growing
In the past year alone, 59 million Americans freelanced, according to Upwork’s Freelance Forward 2020 report. This figure represents 36% of the entire U.S. workforce, a segment that generates over $1.2 trillion in annual earnings through gig work.
Now, the emerging demographic of Gen Z is being added to the mix, with half of the Gen Z workforce freelancing in the past year. This doesn’t seem to be a momentary trend, with 9 out of 10 Gen Z freelancers stating they plan to continue to pursue gig work in the future.
But despite its rising popularity, gig work is by no measure a new phenomenon.
The Gig Economy Is Yesterday’s News
Once upon a time, not too long ago, gig workers were called temps, and they had to register at staffing agencies to make their services available to prospective businesses. They typically made much less than their full-time counterparts, with agencies charging upwards of 15% of a candidate’s remuneration package.
But, we must have evolved, right? Well, yes and no.
In the modern era, gig-seekers do not have to turn to staffing agencies, but they do have to register with a platform. Companies like Upwork and Fiverr have capitalized on the rise of the gig economy by hosting digital platforms that operate like marketplaces, connecting clients with freelancers in a multitude of industries. Alas, these platforms charge a commission rate of 20% on each transaction and impose various barriers to entry due to geographical restrictions.
It’s more of the same, just packaged differently and disguised under the allure of technological innovation. With a rise in full-time gig workers comes a greater dependency on these platforms to obtain work and facilitate the new norms of business, but there’s a better way.
Cue, Blockchain Technology
The birth of blockchain technology was exciting for a plethora of reasons, but there’s one that’s most relevant here: it set the perfect stage for smart contracts to thrive.
Simply put, smart contracts are blockchain-based lines of code that store criteria that must be met in order for the code to be executed. When applied to the gig economy, the combination of distributed ledger technology and smart contracts has the potential to empower gig workers by formalizing and solidifying payment systems, so that they have full confidence that they will be fairly compensated for their labor.
Gig workers aren’t the only ones who would benefit from the use of smart contracts. Businesses can also reap the rewards of a blockchain-based system to optimize operations, according to a recent article from Cutter’s Business Technology Journal titled Fueling Post-COVID-19 Growth with Blockchain & Gig Economy Strategies.
“[Smart] contracts can remove unnecessary costs associated with delivering value to customers by cutting humans out of the equation while also shortening times to get things done, making operations significantly more efficient,” the article stated.
Getting Paid with Crypto?
The article also suggested that businesses can increase revenues through the development of dApps (decentralized applications) and accompanying them with their own cryptocurrency. In taking this approach, “businesses can incentivize employees with a portion of the cryptocurrency that they can work toward increasing the value of over time.”
With cryptocurrencies being catapulted into the mainstream, the article’s recommendations come as no surprise. Fintechs have formed to utilize blockchain technology for the gig economy, making it possible for gig workers to get paid with cryptocurrencies, and a rising number of businesses around the world are now accepting crypto payments.
We know by now that cryptocurrencies and blockchain will play a major role in the future of finance, but it’s also becoming clear that the gig economy will shape the future workforce. The integration of distributed ledger technology onto gig payment systems is symbolic of the blockchain’s potential to foster a more inclusive and transparent world, as well as its ability to permeate all sectors and industries, and we’re excited to see where it goes next.