By Chelceé Brathwaite
The COVID-19 pandemic has ensured that it can’t be business as usual – more firms are leveraging digital solutions for business continuity, online labour markets are becoming more popular, and the suitability of the traditional 9-5 workweek is being questioned. However, even before the pandemic, technological advancements, changing cultures and emerging business trends were shaping new business models and economies. This SRC Trading Thoughts explores one such ‘future of work’ development – the “gig” economy – and how it can drive cross border trade in services.
What is the Gig Economy?
There is no internationally accepted definition for the gig economy, and as a result, the term’s scope differs across literature. For example, some individuals use the terms gig economy and sharing economy interchangeably, while others use varying parameters to differentiate between terminology. However, there appears to be a general understanding that the gig economy is a global online marketplace where businesses and independent workers establish short-term, flexible, on-demand professional relationships. Common characteristics of the gig economy include: the use of digital or online platforms which facilitate matching between providers and customers, short-term and on-demand tasks akin to individual gigs, and provision of skills-based labour to individuals or businesses.
For the purposes of this piece, I adopt the working definition compiled by the United Kingdom’s Government Department for Business, Energy, and Industrial Strategy (BEIS) which describes the gig economy as “involving exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment by task basis.” According to the BEIS, this definition excludes “people who find permanent or short-term employment via an agency, matching service or platform like LinkedIn; people who use digital platforms to provide goods (e.g. eBay), or types of services/utilise assets that are not directly labour-related (e.g. Airbnb); self-employed people who find tasks via advertising on classifieds websites; and employees who interact with their employer or customers via online platforms.”
In 2018, Mastercard and Kaiser Associates estimated the gross volume generated by the global gig economy to be around US$204 billion, and with a projected 17% compound annual growth rate, it is expected to reach US$455 billion by 2023. These projections could well increase as the gig economy becomes more popular. There are various factors contributing to the growth of the gig economy, especially since the onset of the COVID-19 pandemic. Some of these growth drivers include: increasing digitization rates, preferences for flexible working arrangements, and the need for additional or multiple income streams.
The Gig Economy and Cross Border Trade in Services?
Thanks to global online platforms like Fiverr, Upwork, Guru, and many others, individuals can sell their services to clients worldwide without having to travel abroad. The General Agreement on Trade in Services (GATS) – which is one of the agreements of the World Trade Organization (WTO) describes this type of trade in services as Mode 1 (Cross Border Trade), where “services are supplied from the territory of one Member into the territory of any other Member.” Gomez-Herrera, Martens and Mueller-Langer (2015) further note that online labour markets such as those embodied within the gig economy are redefining the popular “trade-in-task” concept with skills now being increasingly embodied in digital services rather than physical goods.
The gig economy can serve as a catalyst for driving cross border trade in services. For instance, software platforms in the gig economy provide easy access to flexible work opportunities while handling time-consuming and costly business support activities like marketing. Of course there are fees attached to using these platforms, but when considering the potential gains these fees are quite minimal. For example, gig workers in developing countries completing a series of gigs for companies or individuals in developed nations may benefit from the increased labour productivity and wages in those countries. At the same time, contracting businesses can now choose specialized staff from a global talent pool at more affordable rates. These dynamics portray the gig economy as “a conduit for online migration of workers” – where some of the economic benefits of migration can be obtained without incurring the physical costs of migrating.
The ease of access, flexibility and global reach afforded by gig economy platforms hold significant potential for increased participation in cross border trade in services. Traditional barriers to trade for developing countries like geographic distance, size constraints, huge investments in physical presence and others, become less obstructive thanks to these digital platforms which allow developing countries to be better integrated into the global trade landscape. For example, Mastercard and Kaiser Associates found that “while many of the consumers of services are individuals or businesses in developed markets, a significant portion of their contracted freelancers are based in developing nations.” For the Caribbean, a developing region comprised largely of services-based economies, the gig economy offers opportunities for services export diversification – which is even more important now amidst the region’s tourism sector fallout.
There is also potential for the flexibilities and cost-savings of the gig economy to encourage greater participation of traditionally “side-lined” actors like women and youth in trade. Millennials and ‘Gen Z-ers’ are opting for more flexible and self-employed working arrangements, making the gig economy naturally more attractive. Likewise, for women with limited networks who are restricted by time, mobility, and financial constraints, the gig economy may sometimes be the only available option for economic empowerment. This also highlights the role that the gig economy can play in job creation. Pre-COVID-19 the OECD in the Latin American Economic Outlook 2019: Special Feature on Caribbean Small States estimated youth unemployment in the Caribbean to be around 25% (with a 10% gender gap between young women and men experiencing unemployment), while adult unemployment was around 8%. Since the COVID-19 pandemic these numbers have increased due to widespread economic fallout. However, Pettinger (2018) noted that the gig economy has contributed to the rapid decline in unemployment across the United Kingdom since 2012, especially when compared to previous recessions, by allowing workers to find some kind of work much easier and quicker, even if lacking in permanence. There are therefore possibilities for leveraging the gig economy to provide supplemental or even primary sources of income for displaced workers across the Caribbean.
The Gig Economy in the Caribbean?
Although the gig economy boasts several benefits, there are still some aspects to consider. For example, the gig economy remains quite controversial especially from a human resources perspective with contentious issues like fair pay, social protection coverage, benefits, and others.
From a trade standpoint, while these platforms can provide Caribbean service providers with easier access to clients worldwide and a global reach, economic leakage can occur when utilizing foreign-owned platforms. The money collected from these platforms via subscriptions and membership fees represents money leaving the economy in cases where these platforms are not domestically owned. Although these foreign-owned large-scale platforms offer a global reach, there is potential for a regional CARICOM gig economy platform to spearhead the digital movement of skills and promote deeper regional integration. There are already local examples to draw from like the National Commercial Bank (NCB) in Jamaica, which launched the NCB Gig Network (freelance.jncb.com) amidst the COVID-19 pandemic in 2020. The NCB Gig Network mirrors popular global gig platforms like Fiverr and Upwork, allowing various service providers (copywriters, website and software developers, graphic designers, project managers, etc.) to bid on gigs posted by the NCB. Since its launch The Gleaner reported that over 3,000 freelancers from multiple countries have listed their services on the platform. This example not only demonstrates the utility of locally developed gig platforms but also demonstrates the region’s potential to position itself on the higher value-added spectrum of the global services value chain. Upskilling and educational reform will continue to be supporting factors in this regard.
Additionally, although online labour markets are lauded for overcoming traditional trade barriers (sometimes over-exaggerated since within digital spheres trade costs like language, cultural distance and time zones still persist), there are also new barriers to consider. For example, what is the level of digital literacy and digital skills among the population in order to navigate the gig economy? Does the population have reliable internet access and the appropriate digital technologies/devices to effectively participate in the gig economy? Are digital payment platforms widely accessible? These are some of the new dynamics to consider. Some of these issues are already being addressed across the Caribbean. For example, projects like the CARICOM Single ICT Space and the Caribbean Digital Transformation Project aim to address shortcomings in the region’s digital ecosystem. There are also programmes like Internet Income Jamaica which has been helping individuals capitalize on online income generating opportunities from as early as 2010. Recently, Dominica in partnership with IsraAID, DSC and the UNDP launched the Work Online Dominica training programme to help individuals find new sources of income online and increase their financial stability.
Evidently, the concept of the gig economy is becoming more popular in the Caribbean, especially following COVID-19’s devasting economic impact. While we may never return to normal, one thing is certain: we must adopt a forward-thinking, innovative, and adaptable approach, capitalizing on new opportunities in spaces like the gig economy and other innovative business models.
Chelcee Brathwaite is a trade researcher with the Shridath Ramphal Centre for International Trade Law, Policy & Services of The University of the West Indies, Cave Hill. Learn more about the SRC at www.shridathramphalcentre.com.