In recent months, a slew of studies has debunked predictions that we’re witnessing the dawn of a new “gig economy.” The U.S. Bureau of Labor Statistics (BLS) found that there was actually a decline in the categories of jobs associated with the gig economy between 2005 and 2017. Larry Katz and the late Alan Krueger then revised their influential study that had originally found gig work was exploding. Instead, they found it had only grown modestly. Other economists ended up finding the same — and now writers are declaring the gig economy is “a big nothingburger.”
The Gig Revolution’s True Believer
Arun Sundararajan, an economist at NYU and the author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism, remains a true believer in the gig revolution. Sundararajan has been pushing the idea that the gig economy — and specifically work done through digital platforms like Uber and Airbnb — will conquer traditional employment. Instead of an economy dominated by big corporations, he believes it will be dominated by “a crowd” of self-employed entrepreneurs and workers transacting with customers through digital platforms. “We are in the early days of a fundamental reorganization of the economy,” Sundararajan said while riding to the airport in, naturally, an Uber.
When asked about the onslaught of data contradicting his thesis, Sundararajan said the Bureau of Labor Statistics continues “to underestimate the size of the gig economy and in particular of the platform-based gig economy.” The best BLS estimate of the number of gig workers employed through digital platforms — whether full-time, part-time or occasionally — is one percent of the total U.S. workforce, or about 1.6 million workers, as of mid-2017. Sundararajan argues that the survey questions the BLS used to gather this data were clunky and don’t quite capture what’s going on.
While Sundararajan disagrees with estimates about the size of the gig economy, he agrees that most people doing new gig work are either Uber and Lyft drivers or Airbnb hosts. It’s no coincidence that housing and transportation have been the two main areas of growth. Homes and cars are the most valuable things many people possess, and the Internet and smartphones have made using them to make extra money much easier. Sundararajan makes a good case that there will be growth in areas like health care and accounting as well, but there is little evidence to suggest we’re witnessing “the end of employment.”
The Resilience Of Traditional Employment
Employment as a we know it is a relatively new development. At the turn of the 20th century, almost half of Americans were still self-employed as farmers and ranchers and artisans. But in the background, a mighty organization called the company was taking off. By 1960, around 85% of Americans were employees of companies.
While Sundararajan believes our economy will once again be dominated by the self-employed, he admits that full-time employment has “tons of advantages.” It offers stability, a steady paycheck, and benefits. We’ve collectively engineered much of our social safety net around participating in this system. All of this means, Sundararajan says, “we’re going to see full-time employment remain resilient, even though there are more efficient ways of organizing economic activity.” He believes work done through gig platforms can be more efficient than work done in a traditional company — and that will spell the company’s doom.
The Mysterious Benefits Of The Firm
Economists were long confused by the existence of companies. They celebrated prices and competition — and it seemed natural that the most efficient way to do business was as individuals transacting within the open market. Need an advertiser? Hire one for a few weeks. Want design work? Work for the highest bidder until the project is done.
From this traditional view, it seemed odd that we would organize ourselves as full-time employees in top-down, bureaucratic organizations insulated from the market. Then came Ronald Coase, who won a Nobel Prize in 1991 in large part because of his 1937 paper, “The Nature of The Firm.” Coase argued that the reason firms exist is that it’s costly for individuals to transact in the market. You have to search for trustworthy people with quality goods or services and then haggle with them, and doing this over and over is inefficient. Within a company, Coase argued, these “transaction costs” are minimized. You can quickly walk to your colleague’s desk and share ideas without having to figure out if they’re shady. You can share resources, tools, and machinery. You can work in a team and specialize in different tasks. And you can do this all without having to continually negotiate over the price of everything.
The dawn of a new gig economy has seemed plausible because the Internet has been dramatically reducing transaction costs. Search engines have made it incredibly cheap to find goods and services, compare prices, and get bargains. Social media and peer reviews have made it easier to determine if people are trustworthy. E-commerce has made it easier process payments. You can click a button on a mobile phone and instantaneously have GPS guide drivers right to you. But as big as these efficiency gains have been, a new economy based on crowds of people doing gigs through digital platforms—as exciting or scary as that might sound—still doesn’t compare to one based on the efficiencies and stability of the good old-fashioned company.
EU incoming economy chief calls for less restrictive budget policies
By Gavin Jones
ROME (Reuters) – The European Union needs looser budgetary policies and an overhaul of its fiscal rulebook, the bloc’s designated economics commissioner said in an article published on Sunday.
Writing in Italian financial daily Il Sole 24 Ore, Paolo Gentiloni said that while the EU’s deficit and debt rules must not be ignored, they needed to be “reviewed and updated”.
“It’s time for countries which have fiscal space to use it, in an overall context of less restrictive budgetary policies,” Gentiloni, due to replace Pierre Moscovici as economic and financial affairs commissioner on Nov. 1, said.
The former Italian prime minister warned that with the EU economy slowing, “the risks of a prolonged period of low growth must not be overlooked” and the task of stimulating the economy “cannot be left to monetary policy alone”.
Gentiloni will have an important role in scrutinizing Italy’s draft 2020 budget which was submitted to the Commission last week.
The budget plan raises next year’s structural deficit — which excludes the effect of GDP growth fluctuations — by 0.1% of gross domestic product, reversing a previous commitment by Rome to lower it by 0.6%.
EU Commission Vice President Valdis Dombrovskis told Reuters on Friday that Brussels would ask Italy for “clarifications” over its budget intentions.
However, even though the budget seems to flout EU rules, many analysts expect the Commission to take a lenient approach and avoid a prolonged dispute with Rome like the one that broke out last year when Italy had a less EU-friendly government.
Gentiloni, who comes from the pro-Europe Democratic Party which now governs with the anti-establishment 5-Star Movement, said it was crucial that the budget plan comes from a government that has a constructive approach toward the EU.
Among what he termed new instruments needed help growth and stability, Gentiloni cited an EU-wide unemployment insurance scheme, without going into details.
(Reporting by Gavin Jones; Editing by Canada News Media)
Lebanese continue protests, demand government to fix economy
Demonstrators, who have been on the streets since Thursday, have pledged to continue marching despite the resignations late on Saturday of four government members from the key political party, Lebanese Forces.
Labour Minister Camille Abousleiman, one of the four to quit the government, told Al Jazeera shortly after the decision that they had “lost faith in the government’s ability to effect change and address the problem”.
Lebanese citizens have been suffering from tax hikes and dire economic conditions in the heavily indebted country.
Lebanon’s public debt stands at around $86bn – more than 150 percent of gross domestic product, according to the finance ministry.
The grievances and anger at the government’s lack of solutions erupted into protests on Thursday, sparked by hikes in taxes including a proposed $0.2 tax on calls via messaging apps such as WhatsApp.
Such calls are the main method of communication for many Lebanese and, despite the government’s swift abandonment of the tax, the demonstrations quickly swelled into the largest in years.
“It is day four and protesters are back on the street. It’s not just in the capital Beirut, but across the country. The message they [protesters] are giving is of defiance and that they will continue to demand the resignation of the government,” said Al Jazeera’s Zeina Khodr, reporting from Beirut.
“While there are tens of thousands on the street protesting, there are still people who are backing the political parties, so it is not going to be easy to bring a change. These people out there want a nationalist leader whose loyalty is to Lebanon and not a political party.”
In an attempt to appease demonstrators, Lebanon’s finance minister, following a meeting with Prime Minister Saad Hariri, announced that they had agreed on a final budget that did not include any additional taxes or fees.
“We want everybody to join us on Sunday and also Monday to topple the government,” one protester said.
On Friday, Hariri gave a 72-hour deadline to his partners in government to agree on a solution to the country’s economic woes without imposing new taxes.
Hezbollah chief Hassan Nasrallah, whose movement is part of the government, warned on Saturday that a change in government would only worsen the situation.
The army on Saturday called on protesters to “express themselves peacefully without harming public and private property”.
|What is the solution to Lebanon’s economic and political crisis?|
On Saturday evening, thousands were packed for a third straight night into the Riyadh al-Solh square in central Beirut, despite security forces having used tear gas and water cannon to disperse similar crowds a day before.
Amnesty International said the security forces’ reaction was excessive, pointing out that the vast majority of protesters were peaceful.
“The intention was clearly to prevent protesters gathering – in a clear violation of the right to peaceful assembly,” it said.
Small groups of protesters have also damaged shop fronts and blocked roads by burning tyres and other obstacles.
The Internal Security Forces said 70 arrests were made on Friday on accusations of theft and arson.
But all of those held at the main police barracks were released on Saturday, the National News Agency (NNA) said.
Al Jazeera and news agencies
Finance Officials Focus on Economy
The IMF managing director, Kristalina Georgieva, said the threat from trade wars was a chief point of discussion for finance officials.
She said the IMF has estimated that the tariffs already imposed or threatened could shave 0.8% off global growth by the end of next year. Much of that stems from the fallout on business confidence.
In trade wars, “everybody loses,” she said. “Policymakers ought to take very seriously their obligations to international cooperation in trade.”
The World Bank’s president, David Malpass, said this week’s finance discussions had focused on how to address multiple challenges.
“Growth is slowing, investment is sluggish, manufacturing activity is soft and trade is weakening,” he said. “Climate change and fragility are making poor countries more vulnerable.”
He said the World Bank was committed to helping to address these challenges to provide a better life for the 700 million people in the world living in extreme poverty.
The IMF, in an updated economic outlook, projected the global economy would expand by 3% this year, the weakest in a decade, and said 90 percent of the world was experiencing a downshift in growth. But the IMF forecast growth will accelerate slightly to 3.4% in 2020, still below the 3.6% rate in 2018.
Jubilee USA, a religious organization fighting global poverty, said in a statement that while the IMF outlined a number of serious threats, the recommendations for dealing with them fell short.
“Risky investing, trade tensions and developing countries borrowing too much are serious concerns for financial stability,” said Eric LeCompte, the group’s executive director.
While Trump’s trade policies were a prime topic of discussion at the meetings, finance officials for the most part avoided direct criticism of the American president.
Christine Lagarde, who dealt with the Trump administration during her last three years as head of the IMF, was a bit more direct in an interview to be broadcast Sunday on CBS’s “60 Minutes.”
Asked about Trump’s trade war with China, she said it would give the world’s economy “a big haircut” and should be resolved by having all parties “sit down like big men, many men in those rooms and put everything on the table, and try to deal bit by bit, piece by piece, so that we have certainty.”
On Trump’s frequent Twitter attacks on Federal Reserve Chairman Jerome Powell, Lagarde said central bankers need to be independent to do their jobs well.
“Market stability should not be the subject of a tweet here or a tweet there. It requires consideration, thinking, quiet and measured and rational decisions,” she said.
Lagarde is scheduled to take over on Nov. 1 as the head of the European Central Bank, which manages monetary policy for the 19 countries who use the euro currency.
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