Informalization and the Gig Economy

Informalization is an important topic in recent years as the global economy and marketplace changes. Whitson (2010) and Pearson (2007) are among the researchers considering the gendered impacts of informalization. In the news, informalization (which comes in several forms) may be discussed in different terms, such as the growing “gig economy”, “contract work”, or even “freelancing”. Although, these terms seem to be used exclusively for traditionally developed countries such as the United States. There is the expectation that this type of work arrangement allows flexibility. Workers can pursue any opportunity that comes along to make a larger income. They aren’t tied down to a formal job in a particular location. This sector of the job market is growing. There is a large debate on the benefits and dangers of our changing market, as discussed by NPR’s special series, “The Rise of the Contract Workers.” Many questions arise, such as; is this really a voluntary arrangement for workers, is this the inevitable trajectory of business policies, and what does this mean for less developed countries that haven’t reached the level of formality in work that countries like the US have achieved (though we may be in the process of losing it)? These questions cannot be answered in this blog post, but they are worth considering.

According to NPR correspondent Noguchi (2018), under the current unemployment law of the US, contract and freelance workers are ineligible for most “rights and benefits of traditional employees”. In addition, most US workers will fit that category within a decade. Contract workers have recently sued for employee rights, as they may work similarly to employees in schedule and expectations. David Weil, a former Labor Department administrator explained that businesses can avoid obligations by misclassifying employees as independent contractors. So, what rights do contract workers have? Not many, it appears. They are not protected by many federal labor laws, such as minimum wage, unemployment insurance, workers compensation, and most anti-discrimination laws. The lack of rights is sometimes quite apparent. Noguchi interviewed Mr. Dudzinski, a contractor for pharmaceutical companies that worked in his position for the past five years. He explained that he does the same work as employees, and only wears a different colored badge. As a contract worker, he has no room for negotiation to become “employed” and receive benefits such as employer retirement contributions.

As another example, BBC Newsnight posted a video this past week on the gig economy in the UK. Despite the attractive narrative of freedom in work, major issues continue to develop.

It’s worth noting that unlike in the US, UK citizens have access to universal healthcare not connected with work, perhaps making the arrangement a bit more reasonable. As the video explains, however, businesses oriented around profit will gravitate towards the cheapest hiring option. Today, that tends to be contract workers or the “self-employed”. It’s evident that if informal workers are not protected by law, they will not have access to an array of rights and benefits. A further consideration is how countries will address (likely) loss in taxes.