- Smart Investing
The Gig Economy is Expanding in Canada.
By now you’ve either experienced or at least heard about Uber and its arch-enemy Lyft – the lower cost alternative to taxis. They are in many major cities and starting to expand to smaller Canadian cities, much as they have done in the United States and in the rest of the world.
Uber is also the best-publicized example of the “Gig Economy” – temporary work arrangements where independent contractors perform tasks for a company instead of being employees of the company. The tasks are typically paid on a piecework basis – by the task or by the mile.
Independent contracting is not new in Canada. In fact, because of Canada’s relatively high tax environment, many people work as independent contractors in Canada. The worker benefits as they can write off many work-related expenses that they otherwise would not be able to deduct. The company benefits by having more flexibility and by limiting benefits costs.
But these arrangements have normally been for full time or close to full time work. The Gig Economy puts this arrangement on a microscale and parses out work in jobs that can take only hours, or sometimes just minutes. In fact, there is a well known site www.fiverr.com, that was originally built to offer services for as little as $5. While the site has expanded into higher value services since, you can still buy services for $5, or less. A worker choses to work, or not, and can make as much, or as little as they want.
The Gig Economy is very active in the US and it is spreading into Canada. We all know we can use Airbnb to rent someone’s home or room instead of going to a hotel. Home delivery of takeout is already in Canada. Now with electric scooters coming to Canada, there will be another opportunity for people to earn a bit of money by charging the scooters overnight and returning them to the street (how did you think they were charged?).
So, how does it work? Let’s take the example of the latest entrants to Canada, the electric scooters operated by companies like Bird and Lime. Lime came to Canada last year, starting with a pilot in Waterloo. Customers pay per mile and per minute to ride the scooters. How do Gig workers get paid?
Bird and Lime operate a simple model – they have Chargers and Mechanics. If you sign up as a Charger and are accepted, the companies will provide training (videos), a software application (to find the depleted scooters) and the power adapters to recharge the scooters (a few to start and more if you prove yourself as a good Charger). You set up your account for direct deposit and you can then go hunt for scooters to recharge. It is like an Easter egg hunt as there are other Changers running around also looking for scooters but you soon learn to begin searching for the scooters when they “turn off’ for the night. At that time, every scooter becomes available for capture as their companies want them off the streets at night. You take the scooters home and charge them with the power at your house overnight. In the morning, you have to return the scooters to pre-determined sites, and “release team” (mark on the app that you have placed them at release points). Later that day, money will show up in your account by direct deposit.
So, how much can you make doing this? Fees that companies provide to chargers do change and, have declined over time as more people volunteer to work and more scooters are on the road (Uber and Lift drivers have also found their fees reduced over time). In major cities in the US, Chargers only earn $3-5 per scooter per night and the Charger must pay for the electricity that goes into the scooter (although that is less than $.50/scooter/night). So, the idea of someone collecting a couple of scooters per night just doesn’t make sense as they’d only make $6-10 dollars and spend a couple of dollars for the electricity. This means that in many of these cities, Chargers have become semi-professional, usually using pick-up trucks to pick up 30, 40 or more scooters per night. Companies are always searching to minimize their costs by paying as little as possible to have the service performed which is why the Gig Economy has emerged and why prices for tasks tend to drop with time.
You might look at these models and object to taking what could have been full time jobs and replacing them with these Gig Economy models that clearly pay less than what people working directly for these companies would have earned. But remember that these models only work using these Gig Economy models. Uber without the Gig Economy is a taxi company.
So, as companies have discovered that they can start new businesses or disrupt other businesses by introducing new businesses using the Gig Economy, look to more and more workers becoming independent contractors. A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors. Expect that trend in Canada too.