How the ‘Entrepreneurialism Ideology’ and Worker Rights are Shaping the Future of the Gig Economy

The latest Creative Distillation research podcast delivers a spirited discussion on the positive and negative impact entrepreneurialism can have on businesses and communities through employer relations.

Freelancing, subcontracting and tapping into the gig economy is common practice in Silicon Valley. And why not? Organizations reduce overhead and offset risk while quickly scaling up and seizing opportunities for growth. Alternatively gig workers are finding plenty of work, greater mobility and operate as “entrepreneurs” instead of employees.

While this might seem like a good idea, new research demonstrates that in the long run it might not be great for the gig worker or the organization. 

In Episode 19 of the Creative Distillation research podcast hosts Brad Werner and Jeff York discuss the future impacts of contingent employment with Dr. Robert Eberhart, co-author of the study titled "Freedom is Just Another Word for Nothing Left to Lose: Entrepreneurialism and the Changing Nature of Employment Relations" and Associate Director of Research on Entrepreneurship and Society from Stanford University’s Graduate School of Business. 

How Entrepreneurship Can Lead to Workplace Inequality

Hosts York and Werner begin the research discussion by keeping with Creative Distillation tradition and sharing their colorful thoughts on the paper’s title.

Where some researchers might stumble on Werner’s comments, Dr. Eberhart was able to deftly segue to the roots of the study.

Looking at the inspiration for the research, Eberhart offers that he and his collaborators were attempting to answer, “Why do people support new emerging ways of doing things that really aren't in their benefit for the sake of being considered entrepreneurs?” 

Finding examples wasn’t difficult according to Eberhart who offered that contingent employment comprises nearly 40% of the positions in Silicon Valley. And the growing number of gig positions is creating a disturbing trend.

As Eberhart points out, the social obligation an organization carries diminishes as they offset talent costs with gig labor and contingent employees.

Businesses are no longer required to pay for benefits or professional development and can easily tap into an endless pool of talent and resources - a relationship that all agree is considerably skewed towards the benefit of the organization. 

Resistance From Gig Workers

Not everyone views these changes in the workplace the same. And organizations fighting against expanding workers’ rights are finding strange bedfellows through the support of the gig workers. 

According to Eberhart, gig workers see themselves more as entrepreneurs and not as employees. In this way, the positive frame of “entrepreneurial risk taking” is used to justify an erosion of workers’ rights. This lack of support for worker protections has the potential to create an even greater imbalance in the workplace.

There is some good news. When asked about the future Eberhart sheds light on where over-commitment to the gig economy can negatively impact organizations over time.

Diminishing Organizational Expertise Through Knowledge Loss

During the discussion Eberhart points out that as organizations continue to find ways to reduce costs through gig labor and contingent employment, they are also decreasing the amount of organizational knowledge. 

Knowledge loss or what some consider “de-talenting” at a company happens as insights and experience leaves the organizational ecosystem. 

Through this process there are several negative effects to the organization including increasing the potential of new competitors that have an intimate knowledge of a company’s core business functions. 

This loss of knowledge over time and potential increase in competitors are important drivers that organizations are navigating is they further plug in to the gig economy.

Takeaways for Entrepreneurs and Organizations

Episode 19 of the Creative Distillation Podcast delivers several important insights applicable to current and future entrepreneurs as well as organizations navigating the gig economy.

According to Werner entrepreneurs need to focus on their stakeholders.

“This is no joke. This is not something to take lightly. You really need to understand that pretty much as well as your customers.”

For York the realities of being an entrepreneur are important and understanding concepts such as affordable loss can help guide decision making and avoid the pitfalls associated with entrepreneurial mythologies.

As the hosts and guest finish their lasts tastes of Japanese Whiskey and collect their final thoughts, they agree that being an entrepreneur must mean more than just the freedom to come and go; they must consider the long-term implications of what they are giving up (benefits, development support, etc). For organizations, the balance between the bottom line and growing institutional knowledge is going to create friction. It is also going to create opportunities for entrepreneurial approaches in solving these problems for the future.

Creative Distillation Background

Creative Distillation is a research podcast co-hosted by Associate Professor Jeff York, Research Director, and Instructor Brad Werner, Teaching Director for the Deming Center for Entrepreneurship. Each episode distills academic research on entrepreneurship into actionable insights. This season, Jeff and Brad connect with researchers from around the globe to discuss sustainability, yoga, cannabis, Food Trucks, university entrepreneurship programs and accelerators.

Our thanks to Dr. Robert Eberhart, Associate Director of Research on Entrepreneurship and Society Stanford University Graduate School of Business. You can read his forthcoming research on the changing nature of employment relations here.