The gig economy has become a management strategy

Gig-ing along.
Gig-ing along.
Image: Collage by Quartz. Images courtesy DoorDash, Handy, TaskRabbit, Lyft, Uber, Washio.
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When it rains in drought-ridden San Francisco, more people than usual order a pizza for dinner. And to keep up with the demand, Papa Johns “orders” extra workers to deliver them.

The restaurant is one of about 600 businesses—ranging from startup e-commerce companies to behemoths like Johnson & Johnson and Target—that hire on-demand, mostly low-skilled labor through an app called Wonolo.

While traditional temp agencies can take days or weeks to fill positions, Wonolo works like Uber. Businesses post “gigs” via the Wonolo app, and the startup’s algorithms push them to its pool of about 30,000 workers in eight cities, much like Uber pushes ride requests to its drivers. Wonolo pegs its average time to fill an open shift at a snappy four minutes.

Wonolo workers, who are mostly independent contractors, staff warehouses when a larger-than-normal delivery comes in, help run one-off events, fill the gaps between when employees quit and when new employees are hired, and bring Odwalla juices to stores that unexpectedly run out of the product (Coca Cola, Odwalla’s owner, funded Wonolo). Workers can be called on for a few hours or a week (gigs run 6.5 hours on average), come without commitment, and are available almost instantly. At the end of the day, management simply rates workers, and sends them on their way. Workers likewise rate managers.

About a third of the workers who have signed up for the app have actually signed up to work a gig. Some take gigs around another part-time job. Some work every day. Others are stay at home parents or students who work infrequently. Nobody is guaranteed work or required to work. Average pay is around $14 per hour, according to the company.

“It’s Uber, but for the staffing problem,” explains AJ Brustein, Wonolo’s co-founder and COO.

For years, pundits have discussed the impact of Uber and the “gig economy” on the labor force. But the small batch of tech startups that ensure San Francisco’s elite never need to take the bus, or travel for a breakfast burrito, involve, by most estimates, less than 1% of the US workforce. The real impact of the gig economy looks much more like Wonolo and similar on-demand labor startups who provide workers not for individual neighbors, but for companies. It is not a category of businesses, but a management strategy for an increasingly contingent workforce.

Businesses in the US have spent years becoming lean and mean, desperately trying to avoid adding full-time workers in order to keep costs low during an economic recovery that has never really taken off. Between 2005 and 2015, all US job growth was in temporary, part-time, freelance, and other “contingent” work. Temp agencies now employ a record share of the US workforce, and according to a report by McKinsey, 20% to 30% of the working-age population in the US and EU-15 engage in freelance work. There are many perks to this non-full-time employee arrangement: Workers get flexible work arrangements (though whether they want them or not remains debatable); employers avoid obligations like health insurance benefits and payroll taxes (independent contractors aren’t entitled to employer contributions toward safety-net programs like social security); and employers can perfectly match the supply of workers with the amount of work to do—ensuring they never pay employees to wait for a busier time.

With Uber’s management strategy, contingent workers can be hired for ever smaller and more unpredictable tasks.

While it may have always been logical to hire a highly skilled worker on a project basis—say, a freelance advertising creative to create a brand—only with the gig economy’s ability to automate job recruitment and task assignment has it become feasible to hire short-term workers to fill in at a warehouse for a three-hour shift. A traditional temp agency has physical storefronts and staff, and it requires human work to get the job done. But with Wonolo, says Brustein, “It doesn’t cost us anything; it’s just the technology.”

Wonolo, which launched in early 2014, raised $5.7 million last year, bringing its total funding to $7.9 million.

“[Gig-to-gig] models used to be the highly skilled, and I think we’ll see that pushing it into lower skilled labor,” says Lisa Disselkamp, a managing director in the HR Transformation practice at Deloitte Consulting. “Technology has made this immediate connection between an available worker and an opportunity to work.”

Skilled work, meanwhile, has also gotten an on-demand makeover. Tilr, an on-demand labor startup that launched in September, fills temporary jobs for things like graphic design and engineering. The company created an algorithm that automatically matches companies’ open shifts with workers it considers qualified. “We removed the onus of the sourcing, screening, interview, selection, and on-boarding 100% from the employer,” CEO Carisa Miklusak told me.

Other on-demand labor companies focus on providing workers to fill industry-specific shifts and jobs. Zeel, a company that initially offered “on-demand massage,” now has a product that helps spas find masseuses to staff open jobs. Looking for a programmer? You no longer need to sift through endless resumes on Upwork and negotiate a price. Cable companies use an app to dole out one installation gig at a time to their armies of independent workers. Companies like Gigster coordinate a freelance workforce to get your project done. (“The Fastest Path from Idea To App,” it advertises.) Apps like Talkspace match independent therapists with clients for messaging sessions. Others provide lawyers or interior designers by the hour.

Versions of flexible scheduling have long existed via “just in time” scheduling, where retailers attempt to match staff schedules to predicted demand, holiday temp work, and freelance. But it has never been so easy to recruit and install an on-demand workforce.

Some jobs require consistency and employee know-how, and temp staffing can be expensive (Wonolo charges a 35% fee on top of its workers’ wages). But more companies now have the capability to hire contingent workers for more tasks because of the development of the gig economy. Already, Brustein says a Wonolo customer is using the technology to not recruit new workers, but manage its own internal employees’ shifts.

Apps like Uber have raised questions about their workforces: What should a safety net should look likeHow can these workers organize? How will they learn new skills if every job is a task? What does it mean for career paths if work comes through bite-sized projects rather than long-term relationships with employers?

As the gig economy spreads beyond Silicon Valley, their answers will potentially impact not just the handful of drivers who find work on Uber, but the massive workforces across retail, warehouse, fast food, and other industries.

“The importance of [on demand platforms],” says Michelle Miller, the cofounder of an online worker organization site called Coworker, “has always been that they’re a new model for managing a service workforce, and that model is easily transferrable.”