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Temporary Work/The GIG Economy

Sigma Investment Counselors

November 16, 2016

Over the last several years, increasing attention has been directed toward the relative merit of temporary work, often referred to as the gig economy.  Wikipedia describes temporary employment as an employment situation where the working arrangement is limited to a certain time period based on the needs of the employing organization.  Temporary employees are sometimes called contractual, seasonal, interim, casual or freelance.

This kind of employer/employee relationship has existed for hundreds of years, think harvesting, but has more recently gained heightened visibility, largely due to the rapid growth of Uber, Airbnb and other similar enterprises.

There are advantages and disadvantages of temporary versus permanent employment status.  Most of the employer related issues revolve around costs, such as vacation pay, minimum wage laws, health insurance, retirement benefits and the demands of inherently seasonal activities.  On the employee side of the equation there are issues such as the need or desire for supplemental income and an interest in limited and/or flexible hours, think students and parents.

Looking just at Uber and the ride sharing industry, any substantial movement towards requiring that industry to provide the work place environment generally attributed to full-time permanent employment, would negate most of the cost savings and flexibility associated with the Uber business model in comparison to the taxi industry.

The gig economy is likely to be quite disruptive and investors should understand the potential impact on established business models.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

 

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