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Here’s a sobering statistic. According to research carried out on behalf of the U.K. Department for Business, Energy and Industrial Strategy (BEIS), just under 90 percent of Britain’s gig economy workers earn less than £10,000 per year.
Now that’s not a large amount – at least not by the standards of industrialized countries – and yet, despite the low levels of reward, an increasing number of Britons are working in the gig economy. And they are all around us in the shape of couriers, taxi drivers, freelance service providers, and small business owners. Some – the lucky ones – earn good money doing premium work, but many are struggling to push their earnings above the hourly living wage. And as freelancers, their working lives are, almost by definition, insecure. Incomes can fluctuate widely, depending on demand, and holding down two or three jobs to make ends meet is not unusual. In societal terms, this is not a good thing.
It would be wrong to paint too bleak a picture. A corner of the gig economy is still populated by highly skilled and well-paid professionals. These were the original gig economy workers, hopping from one well-paid project to another. Equally, there are plenty of freelancers who enjoy the freedom of non-regular working hours and many others who welcome the opportunity to pay their way through university or fill in gaps between regular jobs with a bit of gigging. But on the other side of the coin, an increasing number of people find that the gig economy is the only game in town when it comes to finding employment. They don’t like it, but they have to do it.
A Mixed Bag
“It’s a mixed bag,” says Sho Sugihara, co-founder and CEO of London financial technology (fintech) startup, Portify. “Some delight in the flexibility. Others are struggling to make ends meet.”
But regardless of whether a gig economy worker is a reluctant conscript or an enthusiastic volunteer, Sugihara says that financial exclusion is a common problem. It’s an issue that his company has set out to address.
Born in Japan but with joint nationality and now living in London, Sugihara witnessed the problems facing freelancers relatively recently when he, along with his sister and mother, attempted to buy a house in the U.K. I was CEO of a company that wasn’t making revenues, my sister was a freelancer and my mother wasn’t working,” he says. “It was very hard to get a mortgage.”
And as he sees it, freelancers in the gig economy – even the well-paid ones – often find it difficult or impossible to obtain credit. Meanwhile, others may be struggling to pay the rent or put food on the table, due to fluctuating income.
Portify was set up to make life easier. The company – which last November raised £1.3 million in seed funding – was created by Sugihara and co-founder, Chris Butcher when they were taking part in a business creation program run by Entrepreneur First. Sugihara had worked in Brazil and Japan on financial and social exclusion alleviation initiatives before going to University and then on to consultancy, McKinsey. CTO, Butcher had a track record working for technology startups. The idea behind Portify was to provide a cash flow management tool – based around Open Banking APIs – coupled with finance offers that would allow irregular workers to build credit scores.
At this point, the cash management tool is fully operational and is provided to gig economy workers through employers, such as Deliveroo, Stuart and Swift “We are not a typical fintech, selling services directly to the consumer,” he says. “We have a BtoBtoC model.” Or to put it another way, wage providers license the solution from Portify and offer the app-based service to their freelance workforce.
Put simply, Open Banking technology allows the Portify solution to analyze the user’s bank data – for instance, income, outgoings – and provide advice on managing their finances month-by-month. For instance, the app might tell you that unless you work more hours, you’re heading for a financial shortfall.
In addition – although it’s still in Beta – Portify is developing a range of financial services, that will help freelancers build their credit scores.
To date, the company has acquired “tens of thousands of users.” Perhaps more importantly, it has signed up around 50% of the freelancers who work for Deliveroo, Stuart and Swift and about half of them use the app regularly.
A Bigger Market
But there is a bigger market to play for, given the trends in the employment market. “In the US about 90 percent of the jobs that are being created are in the contingent economy,” says Sugihara.
This, of course, raises a question about the direction society as a whole is taking. Individually, many employers have adopted the contingent workforce model because, among other reasons, it keeps their costs down. But on a macro level, workforce insecurity arguably weighs on the economy. For instance, gig workers are less likely to buy houses, if they feel insecure. Arguably they are also likely to consume less.
But for the time being at least, the gig (or contingent worker) economy is not going to go away – indeed, it is set to expand rather than contract – and that in turn risks a situation where the workforce as a whole is divided into those with rights, benefits, and steady incomes and those who simply “get by” on a day to day basis.
This is an issue for Governments – not least because contingent workers pay less in taxes and tend not to have pension schemes.
But Sugihara believes the private sector can play a role in ensuring those in the gig economy get a fair deal.
April 25, 2019 at 12:39PM
Forbes – Entrepreneurs