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Is the “Gig Economy” Here to Stay?

The “gig economy” is one of the many trendy revolutions capturing the news media’s attention. But some simple realities apply to the gig economy, buried in a great deal of hype.

“Gig economy” work is the same sort of casual labor that has always existed. It’s a variation on the day-labor centers where workers go in the morning in the hope of finding work for all or part of a day. The only difference is that the gig economy operates over the Internet and involves workers in a wider range of occupations, some relatively skilled. However, just as some day-labor companies hope to profit by evading regulations and cheating workers, many gig economy companies hope to legally skirt labor laws that apply to other employers.

The survival of gig economy companies depends on the overall state of the economy. It is no accident that the gig economy exploded following the recent steep recession. More than eight years after the onset of the recession, the economy is still down more than 3 million jobs from trend levels.

If we pursue policies designed to weaken the labor market, such as higher interest rates from the Federal Reserve Board, we likely will continue to see large numbers of workers desperate for employment from Uber, TaskRabbit and other gig economy companies. In a bad economy, irregular work is better than no work.

The survival of the gig economy also depends on whether governments will apply labor laws to gig economy companies. There is no reason Uber should be exempt from minimum wage laws, overtime regulations and workers’ compensation coverage. If the company’s claim is true — that compliance is too difficult to figure out — then companies that are more adept with technology will outcompete Uber. But if gig economy companies are exempt from rules that apply to their competitors, gig companies will be allowed to thrive in a very weak labor market.

Of course, there is a place for the type of casual labor that fills gig economy advocates’ stories. There are people who would like to earn some extra money in their spare time. If gig economy companies can provide more opportunities for such work, that would be great. But there is no reason this cannot be done in a way that complies with existing labor laws.

This column originally appeared in CQ Researcher.

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Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

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