To properly forecast the gig economy, we need to first look at the current state of the U.S. economy. In a word, it’s volatile.
Inflation levels are at some of the highest rates we’ve seen in four decades. After raising interest rates by three-quarters of a point for the third time this year in September, the Federal Reserve boosted the overall borrowing target range to its highest level since 2008. Some experts predict at least one more rate hike before year’s end, and others warn that the economy will “crumble” if the Fed doesn’t stop raising rates. One analysis forecasts that the cost of certain goods and services won’t drop even under rising rates.
For all the market’s volatility, we know this: Business borrowing costs are tied to the Fed rate, which means companies should be expected to remain cautious about overextending themselves and likely will target cutting costs over growth in the near future. Rounds of layoffs have come on the heels of the post-pandemic hiring spree, and more are likely to be on the way.
It’s impossible to know how any given business will react to these developments, but given what we know about how companies have handled lean or unpredictable economic times in the recent past, we can reasonably forecast the gig economy ahead of the coming year.
Why Contract Labor Now?
The pace of hiring is slowing. Rising inflation and borrowing costs have squeezed many organizations in the short term – but business doesn’t simply stop when the economy turns crummy. Companies with sufficient runway understand that this moment may be an opportunity to pull ahead of struggling competitors. Others just hoping to hang on may find that they cut payroll too deeply. But taking on new staff would be a costly, and potentially risky, commitment.
Instead, expect many of them to turn to contract workers. With contingent labor already making up 30 percent of large organizations’ workforce, it’s likely that we’ll see that figure continue to grow as businesses seek more of the flexibility independent contractors offer.
Strength in Contract Workers
Not only are more workers than ever recognizing the benefits of contract work, but recent layoffs are also prompting many more to consider it for the first time. During a period when organizations are seeking ways to carry out business as usual without being forced to commit to W-2 employees, the contingent labor talent pool may be rising to an all-time high. That should make every company – even those attempting to streamline – stand up and take notice.
At Google, for instance, CEO Sundar Pichai has said he wants to make the company 20 percent more efficient – including potentially shedding labor after the tech giant overexpanded its headcount and became “slower.” Although Pichai spoke of downsizing labor, companies like Google still need to balance agility with sheer power – a workforce capable of handling big initiatives.
As SAP notes, “Organizations that face a shortage of local talent may end up outsourcing jobs internationally or contracting parts of their processes to a third party. If they lack in-house skills, they might also hire contract workers or turn to managed services to supplement their workforce. Organizations are also turning to contingent labor to right-size the number of employees on the payroll and give them the ability to flex. Using contingent workers or SOW-based contracts offers businesses the flexibility to act nimbly when business requirements change.”
And those requirements will change. Inflation is up and the economy is down, but they won’t remain that way indefinitely. Organizations that have properly prepared a strategic workforce plan – one that includes a significant helping of contingent labor – will be best positioned to take advantage when business opportunities eventually (and inevitably) arise.
For more insight into the evolving gig economy, check out PeopleCaddie’s blog.