“The Gig Economy has a corrosive impact in Higher Education, undermining Academic Stability”

In recent years, the gig economy has reshaped the labour market, promising flexibility and autonomy to a wider and more diverse workforce. Yet beneath its glossy interior lies a more troubling reality, particularly within higher education. The rise of freelance, contract-based work has begun to erode the foundational structures of academia, compromising the stability of academic institutions and ultimately impacting students for the worse.

The gig economy – the exchange of labour for money between individuals or companies on a short term and payment by task basis”– indicates a decisive change in the structure of the labour market globally. This has had and continues to have unignorable, far-reaching effects on a variety of microeconomic and macroeconomic variables for the global economy, in both a positive and negative way. The explosion of the gig economy has been largely facilitated by the increased growth of the internet, particularly post the dot-come bubble in 1990. This had three main effects on the global labour market. Firstly, and most evidently, it connected producers to consumers, making it easier for individuals to find one off work, for example through the rise of platforms such as Fiverr, Upwork and PeoplePerHour. Secondly, it allowed businesses to connect with other businesses, which enhanced the role of globalisation and global production chains in the provision of good and services. Naturally, this meant that it would be easier to find one off business-to-business work for freelancers. Thirdly, the internet provided an avenue for international flows of money, through the rise of platform merchant systems such as PayPal and Revolut, making it easier for freelancers to receive income from one-off jobs. Also, freelancers receive the equipment they require to complete such jobs more easily, through online delivery services like Amazon and eBay. As a result, there has been increased prospects of income and more flexibility in the gig economy, leading to disincentives to remain in conventional employment, hence causing the exponential growth in this sector in recent times. As such, the gig economy has become of more and more interest to economists, who seek to examine its effect on economic agents in a critical manner.

The growth of the gig-economy has led to an increase in the trend of “platformerization”, meaning that freelance work is provided predominantly by large software platforms. Good examples include firms like Uber, which has over 7 million drivers who work through their system. 2Heek’s research suggests 70 million people in 2015 found work through a platform, 3 and in the long run, McKinsey’s estimates suggest that up to 540 million people could find work through these “online talent platforms” by 2025. 4 This has largely led to a monopolistic supply of work to those operating in the gig-economy, inciting a need for regulation of these platform companies. In March 2024, employment and social affairs ministers in the EU-27 states confirmed a directive cracking down on platform firms, whereby workers are required to be informed about algorithms used for automated monitoring and decision-making systems, as well as clarifying existing obligation for platforms to declare work to national authorities. 5 However, because of the unfamiliarity of this type of work to governments, the gig economy has effectively become a regulatory playground, with authorities desperately scrambling to enforce legislation with little knowledge of its effects. Because of this, platform companies have been able to effortlessly skirt around regulation and laws, which has had adverse effects on those in the gig-economy.

One key issue with the gig economy is that as per the technical definition, these individuals are self-employed, despite working for a firm. As a result, they do not receive access to a workplace pension, meaning millions are reliant on ungenerous state pensions and consequently are not saving enough for retirement. These individuals also do not receive other employee benefits, such as paid maternity or paternity leave, and private healthcare provision. Once again looking at Uber, despite having over 7 million drivers, it only technically has 30,400 employees, making up less than 1% of its total workforce. 2 Despite regulation by the EU to combat this misclassification of workers, 5 the rest of the world still lags behind, leaving individuals in the gig economy progressively worse off whilst employer profits soar.

The growth of the gig economy has typically seen consumers benefit. As there are more firms and individuals in the market, the pool of labour that consumers choose from has increased. This leads to what the literature calls “allocative efficiency” – the skills of the workforce are matched with the consumers’ needs better, therefore increasing the quality of the service relative to the consumer, increasing utility on a micro level. Furthermore, as the supply of firms and individuals in the market increases, there would be a downward pressure on prices. As a result, more consumers have been able to afford these good and services, particularly those on low incomes, further increasing utility and satisfaction within the demand-side of the global economy. To add to this, by employing individuals in the gig economy, firms can avoid costs associated with contract-based employment, such as national insurance contributions, retirement plans and paid sick leave, whilst receiving the same quality and quantity of work as they would do otherwise. Findings from consultancy firm KellyOCG show that 57% of firms use “gig labour” to realise costs saving, and 43% of the firms engaging “gig workers” experience at least a 20% labour cost saving.6

The Gig Economy’s Toll on Teaching Staff

Teaching is not the first thing that comes to mind when discussing the gig economy. And to an extent, the conventional gig economy – the use of online platforms to find work on a short-term basis – does not have much to do with teaching or research at higher education institutions. However, gig employment practices are slowly seeping their way into modern academia, adversely affecting staff at even the most wealthy and prestigious universities. Like individuals in the gig economy, a large proportion of university staff are employed on fixed-term contracts. This means they are employed for a specific time period or until a particular project is completed, with a clear start and end date. The Higher Education Statistics Agency estimates that half of all academics in UK universities are on a fixed-term contract. Because these contracts are short-term, staff are often the first to be laid off when university budget cuts occur, leaving them vulnerable when their contract expires.

Naturally, this job insecurity takes a toll on staff health. A survey by the University and College Union (UCU), the main trade union for higher education employees, found that 70% of its members reported their mental health had been negatively impacted by working under insecure contracts, and 43% reported negative impacts on their physical health.

In addition to job security, some of these individuals are not legally classified as employees and are thus denied employee rights such as paid sick or maternity leave. This situation has led to individuals prosecuting universities for denying workplace rights. One notable case involved Rebecca Abrams and Alice Jolly, both respected authors who teach on Oxford’s creative writing course. They successfully sued the university and secured employee status following a judgment in their favor.

What makes this issue worse is that the culprits are some of the biggest names in British education. The problem is especially prevalent in top Russell Group universities. At the University of Oxford, 88% of research-only staff were employed on fixed-term contracts. This figure is even higher at Kings College London and the London School of Economics, where a staggering 96% of research-only staff are on these short-term contracts.

The British higher education sector is often celebrated as world-leading, with high-quality research and teaching. However, this glowing reputation is built on the use of insecure contracts and poor working conditions for academic staff, mirroring the gig economy. This disparity raises questions about how the UK can claim to have the world’s best education system while relying on such precarious and unfair labor practices.

Addressing the Gig Economy through Strategic Reforms

The gig economy has the potential to re-mould the labour market, with its wide impact on an array of variables and economic agents. With this newborn style of working that seems to be the future of employment, authorities have been thrown into the deep end, as they desperately attempt to establish a grip on this modern job market. The actions these authorities take will be pivotal, ensuring long-run stability and welfare in the global economy, making it critical to understand the trends in the gig economy now, to pave a better way for employment into the future.

It is evident that the gig economy and gig employment practices have adverse impacts on universities in the long run. On one hand, the eroding relationship between degrees and income negatively impacts the demand for tertiary studies. On the other hand, gig employment practices undermine the supply side of higher education through unfair labor practices that compromise the quality and stability of the allegedly world-renowned sector.

These consequences call for urgent reforms in academia. Universities must move away from short-term, insecure “sham contracts” to secure the sector and ensure its sustained high standards and competitiveness in an increasingly crowded globalised world. Degrees also need a significant shake-up – universities must place more emphasis on transferable skills in their programs, rather than hard theory, in the hope of future-proofing their qualifications and ensuring they retain value in the evolving labor market. By implementing these changes, institutions can better equip students with the practical skills and stable career prospects necessary for their success in a dynamic and competitive professional landscape.