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How Digital Communication Technology Shapes Markets pp 57–69Cite as

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The Independent Contractor and Entrepreneurship in Labor Markets

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Abstract

Empowerment of workers and degree of control are central themes in the workplace. The shift of workers from employee status to independent contractors is accompanied by more control. Employees typically have job security and multiple benefits, but limited freedom over terms of the work. Contractors are at the other end of the spectrum of control, with the ability to tailor their work environment but face the risk of disruptive forces. Jobs are parceled out in discrete packets to workers around the globe, requiring only an Internet connection and execution, while at a distance, is on-demand. As independent contractors, workers own their skill set and, therefore, have incentives, and opportunity, to reconfigure skills using the Internet in online education.

Jobs are granulized and parceled out in discrete packets to workers across the globe – the common factors are an Internet connection, execution at a distance and output provided on-demand by people who are not employees but independent workers. The online platform for trading goods and services is the on-demand economy, while only services are traded on the online gig economy.

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Notes

  1. 1.

    Note that while young firms (one to five years in existence) are generally small (less than 250 employees), not all small firms are young.

  2. 2.

    Marginally attached workers are those who are no longer looking for work, for whatever reason.

  3. 3.

    Author calculation based on data from the Federal Bank of St. Louis (FRED) database. By contrast, in October 2001 when the iPod was released (actual date was October 23, 2001), the ratio was 0.018 and was 0.024 six months later.

  4. 4.

    In addition, the trend toward granularity is not reflected in the papers cited above since their data series ends in 2011.

  5. 5.

    Dinlersoz et al. [37] segment the labor market into the entrepreneurial and corporate sector, which are associated with young and mature firms, respectively.

  6. 6.

    I will call all labor by the generic name, workers, which could be office workers, manufacturing workers, agricultural workers, etc. The Internal Revenue Service treats employees differently from contract workers since the former file W-2 forms versus the latter fill out 1099 forms.

  7. 7.

    These terms gained global publicity after Democratic Presidential candidate, Hillary Clinton’s address at The New School in New York, in July 2015. She said, “This on-demand or so called ‘gig’ economy is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future” [46].

  8. 8.

    Additional examples from the transportation industry are UberChopper (for helicopters) and Sailo (Uber for boats). Many thanks to Pia Sur for suggesting these examples.

  9. 9.

    Jeffrey Young writes, “But there’s a growing sense that monologues by professors are of limited effectiveness for many of today’s students. The teaching style is a tradition passed down through generations of academics, and despite the addition of computers, projectors, and PowerPoint, little has changed in the basic model: A professor talks, large numbers of students listen, and one or two brave souls ask questions in the final moments. Class dismissed” [55].

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Authors and Affiliations

  1. Department of Economics, Princeton University, Princeton, New Jersey, USA

    Swati Bhatt

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  1. Swati Bhatt
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Bhatt, S. (2017). The Independent Contractor and Entrepreneurship in Labor Markets. In: How Digital Communication Technology Shapes Markets. Palgrave Advances in the Economics of Innovation and Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-47250-8_4

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  • DOI: https://doi.org/10.1007/978-3-319-47250-8_4

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