Technology, skills, and the gig economy – American Enterprise Institute

The National Academies of Sciences, Engineering, and Medicine recently released a giant report on how information technology is influencing the US workforce. I recommend it to anyone interested in job creation, labor-force participation, economic growth, and/or technology. It’s chock-full of interesting findings and ideas for future research. Though it offers a number of reasons to worry (there’s lots of disruption underway and even more on the horizon), it does highlight one important opportunity: the “gig economy.”

A cyclist rides a bicycle as he delivers food for Deliveroo, an example of the emergence of what is known as the ‘gig economy’, April 7, 2017. REUTERS/Charles Platiau.

The report catalogs all of the ways information technology is influencing work (personal devices, network speed, videoconferencing, speech recognition, peer-to-peer networks, artificial intelligence, massive online open courses, and on and on) and argues that this will only grow. In the long term, we should expect to benefit greatly, like we did with the advent of steam engines, electricity, and computers. But we also need to be aware of the major short-term downsides, namely thousands of jobs disappearing, people losing work and struggling to find new ones, and entire industries and towns collapsing.

But it also raises a different short-term issue. Despite all of these recent technological improvements, we’re currently not reaping a number of the benefits we might’ve expected. For instance, there are fewer new firms today than in the past, and productivity gains have slowed considerably. So there’s less dynamism and less economic growth than many would’ve assumed. And this is without widespread Luddite-esque thinking or policymaking (i.e. efforts to stand in the way of technological progress) that could torpedo economic gains. The legacy of the Great Recession seems to explain some of the barriers to economic dynamism, but not all.

So how do we realize more of the benefits of the current tech revolution?

A lesson from history is to see the jobs-dislocation glass as half-full. Yes, some jobs are disappearing, but that makes room for new jobs and entirely new industries. Weavers, blacksmiths, and stagecoach drivers were replaced by engineers, machinists, conductors, and so on. Indeed, one of the report’s conclusions (that’s increasingly common in the field, for instance see the TED Radio Hour podcast on the “Digital Industrial Revolution”) is that the combination of humans and technology offers major opportunities.

And this opportunity could be exploited though the “gig economy,” professionals moving from discrete work engagement to discrete work engagement without a single employer. Workers can use technology to develop specific, high-need skills; to find and access an expansive customer base; to execute their work; and more. Although such on-demand work represents only about one percent of the current US workforce, there appears to be significant growth potential.

A good short report from last year, “Beyond the Gig Economy,” explains the possibilities but also helpfully differentiates between promising and unpromising paths. Low-skilled gigs (e.g. on-demand car service) generally won’t support a middle-income lifestyle, and they run the risk of being automated. But gigs based on specific skills and that can’t be off-shored or accomplished by computers or robots have enormous upside potential. The key is finding work in a marketplace that values the worker’s particular abilities and that enables the worker to differentiate his or her services, prices, and brand from others’. Standing in line for someone would be an example of the former; photographers, trainers, therapists, and caterers would be examples of the latter. Importantly, the report finds that a remarkably high percentage of high-skill gig economy employees are very satisfied with their work.

One of the most interesting aspects of the tech-fueled growth in high-skilled gig economy work is that it puts a premium on education. Workers are incentivized to acquire skills demanded by the marketplace. This could be accomplished through a variety of means (high school, four-year or technical colleges, apprenticeships, certificate programs, etc.). And once in possession of these in-demand skills, workers—able to market themselves and reach broad client bases thanks to technology—are less reliant on employers. This approach turns a job at a firm into the expendable middleman between the service provider and the customer.

Obviously, gig-style work has downsides: It can lack consistency, it often requires ongoing business-development, and it doesn’t come with benefits. I also worry that it will serve to further atomize society; employers can serve as mediating institutions that foster social capital. And expanding gig-style work will probably depend on a number of policy changes, such as fewer occupational licenses, different approaches to post-secondary education, and different safety-net programs.

But we should also appreciate that today’s technological revolution may be empowering skilled labor in unprecedented ways. And that could generate huge benefits for workers, consumers, educators, and the economy.


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