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How Will Business Automation Impact Workers in the Gig Economy?

How Will Business Automation Impact Workers in the Gig Economy?
Credit: Mopic/Shutterstock

Two trends remaking the American economy are the growth of freelancers and independent contractors – the so-called gig economy – and an expansion of automated processes. But how do the two intersect? What impact will the breakneck pace of automation have on temporary workers in the gig economy?

Morag Brand, a freelancer and certified automation expert, said automation and short-term contract work are a natural pair, and that the gig economy can expect a boost in activity as a result of more businesses employing automation-focused technologies.

"Automation has to start somewhere, and that's right at the initial concept stage … but it has to be set up by someone, and this is where freelancers enter the scene," Brand told Business News Daily. "So, yes, freelancers and contract workers should expect more work as automation expands, but it will be short bursts of 'set up and move on,' rather than the traditional retainer model of old. This is also cost-effective for the business owner too."

Moving from more permanent working arrangements to short, individual assignments is a hallmark of the gig economy. Whether it's a single car ride, like Uber, or one assignment like the automation setup Brand envisions, this sector of the economy is all about selling one-time services and building up extensive networks. [How is the gig economy changing the American workforce?]

Cristina Escalante, COO of the web and app development company The SilverLogic, said the gig economy has grown exponentially with automation technology, which paved the way for the Ubers and Airbnbs of the world.

"The gig economy was created by the combination of automation and the birth of Web 2.0," Escalante said. "[Many of these jobs] would have been completely unimaginable without both automation and web-based platforms."

But the intersection of the gig economy and automation goes well beyond the common references. Freelancers are taking to platforms like Fiverr and Upwork to get their services out to the public at affordable rates. Writers and data analysts share these platforms to connect with potential clients all over the world, enabling them to spread their services to a wider audience. [Looking for freelance work? Try one of these platforms.]

"An Upwork data researcher or proofreader can build a reputation, maintain connections with clients, and use a gig platform as a launch pad for his or her own business," Escalante said. "Although it's conceivable that humanity will automate itself into unemployment, for the near future at least, gig workers capable of retooling and pivoting can expect more work."

However, there remains a great deal of progress to be made when it comes to connecting freelancers and clients. Kristen McAlister, president and co-owner of Cerius Executives, which provides companies with temporary executives, said locating temporary workers is still a heavy lifting process for the would-be client. She anticipates further automation of this space in the future, which she predicts would lead to much quicker mass adoption.

"The overwhelming trend to finding contract workers on platforms is a 'post' rather than a 'search' process," McAlister said. "This makes the connection process far more manual and flawed than most realize."

A major complaint of clients searching for freelancers is that oftentimes the posts advertising their services are vague and ambiguous, McAlister added. She sees further automation as an obvious solution to this problem.

"Increased automation and AI to help improve the need identification and matching process will provide significant advances in this space," she said. "It needs to get to the point of an Uber or Amazon AI model to remove much of the current friction and increasing mainstream adoption for businesses."

There are a few legal issues any company interested in hiring gig workers needs to be aware of. Jon Yarbrough, a labor and employment attorney for Constangy, Brooks, Smith & Prophete, said businesses commonly misclassify their employees, which can lead to severe penalties from government regulators.

"I see a lot of … government agencies looking at gig workers and telling employers you've misclassified these individuals, and that employer is faced with serious penalties," he said. "My advice has always been to look very closely at gig workers and [determine] whether or not they're actually employees."

According to Yarbrough, you can make that determination with a series of tests, particularly one known as the Economic Realities Test. The test asks these questions:

  • Are you the worker's only client and sole source of income?
  • Are they performing a short-term project or completing long-standing work?
  • Do you retain day-to-day direction and control over the worker?

A truly independent gig worker has the latitude to turn down projects and determine the direction of their work. Moreover, a genuine gig worker likely has multiple sources of income from several clients, rather than relying on a single source of revenue for their livelihood.

There remains much ambiguity surrounding the gig economy, mainly because its tech-fueled growth has been so rapid that the regulatory landscape has not caught up to it, Yarbrough said. Changes to the law are likely inevitable, he added, perhaps even leading to a new classification of worker altogether.

"The law … is way behind the changed economy and the workforce," Yarbrough said. "We have our 1099 contractors and our regular employees, but it seems to me that the discussion is being had, at least preliminarily, that maybe there is a group in between where these gig workers fit.

"The law is going to have to figure that out," he added, "and, frankly, I think it will be a matter for state and federal legislators to define some third category of worker that's more of a hybrid and isn't necessarily subject to the constraints of being an employee."

Adam C. Uzialko

Adam C. Uzialko, a New Jersey native, graduated from Rutgers University in 2014 with a degree in Political Science and Journalism & Media Studies. In addition to his full-time position at Business News Daily and Business.com, Adam freelances for a variety of outlets. An indispensable ally of the feline race, Adam is owned by four lovely cats.