The New “Disruption Economy” and Its Impact on the Workplace

The advent of peer-to-peer technology has led to the recent labor boom of the “gig economy.” Companies like Airbnb and Uber have altered the labor force by changing the work distribution from corporate-to-consumer to individual-to-consumer.

Not only is this change in the labor market shifting the traditional employment model, it also has other economic impacts due to its inclusion of new technology. This has led to what is now called the “disruption economy,” affecting labor for companies, individuals and now, governments.

What does this mean for the future?

Some governments realize this rise in automation, innovation and change in the labor market that defines the disruption economy’ will require a paradigm shift in government policy. They believe the disruption economy increases economic inequality by displacing a significant amount of jobs.

The thought is that companies – let’s take Airbnb and its technology, for example – shift the economy from one of several workers (e.g., janitors, housekeeping, front desk employees, management, food service, etc.) to one with very few or no workers. 

Technological advances will also bring driverless cars, which are believed to be much safer than current human-driven cars. This is anticipated to drop the cost of insurance and reduce the overall need for the auto insurance industry.

In addition, these advances could impact other industries, such as retail, with the rise in self-checkouts; medical with the advancements of software in self-diagnosis; and legal, with software replacing work once performed by attorneys.

In the future, the disruption economy is expected to impact the overall number of required – or available – jobs, as well as on the rules of employment. Employees may have reduced access to pensions, healthcare, benefits, sick leave, disability and retirement savings.

How does this affect employers right now?

In the meantime, employers will have to review their employment relationships with current employees. The success of the gig economy is increasing the number of workers taking on gig work, where employees leave the formal employment workplace for a spot in this new full-time workforce.

This will require employers to determine new ways to retain their current workforce, especially at a time when unemployment is low to be able to replace any employees who do leave.

An increasing number of governments are starting to take notice. It is argued that governments need to find ways to deal with and absorb this new reality.

For example, Hawaii, which relies heavily on service-based jobs, recently passed House Concurrent Resolution 89. This resolution acknowledged this new disruption economy and its potential impact to the employees of the state. The state agreed to create a working group to address these concerns to increase wages, benefits and working conditions in the future. One of the solutions this working group is set to review is a Universal Basic Income (UBI).

UBI gives everyone in a country, state, county or city gets an annual or monthly check to prevent them from falling below the federal poverty level.

Hawaii isn’t alone. Finland, Ontario and San Francisco are also researching and experimenting with UBI. Hawaii believes that UBI would allow for retraining a workforce impacted by the disruption economy, part-time work and job-sharing in the fewer jobs that are available.

While the full impacts of this new reality remain unknown, it is certain that there will be labor impacts that affect employers and employees. The natural consequences to the labor force are already occurring.

The rise in governmental awareness to this issue will most likely result in new labor laws and regulations of which employers will need to know and comply. In the meantime, we will continue to see employment relationships defined in the workplace, the agency regulatory level and in the court system.