An Empirical Investigation of Labor Economics in the Gig Economy and its Long-term Economic Implications

Abstract

The rapid expansion of the gig economy has completely changed the conventional arrangement between employers and employees, allowing for more flexibility yet greater economic instability. The change is happening against a backdrop characterized by global economic uncertainty, which raises questions about the applicability of current standards in the labor market. Digitalization, while increasing efficiency in trade, has made wage negotiations and job security more complicated. This dissertation adopts an empirical study based on a mixed methods approach focusing on OECD countries. The study is based on a stratified random sampling technique involving 5,000 participants from the online platforms. The fixed-Effect Regression Model was applied in order to analyze the impact of the gig employment period on wages using high-frequency data collected by the ILO and the World Bank. Findings from empirical studies show a high degree of income instability for gig earners, who face three times more income instability than salaried workers. Statistical analyses suggest that despite providing immediate liquidity, the gig economy comes with an earning disadvantage ranging between 12% to 15% after factoring in the cost of fees charged by the platforms and taxes. In addition, prolonged use of gig employment has been found to contribute to the wage ceiling effect, leading to savings for retirement that are 22% less than what would be saved in traditional employment scenarios. From the research findings, the conclusion can be drawn that the gig economy serves as a buffer for economic contraction but poses potential problems of economic fragility in the future.