Unemployment & the Gig Economy

Author Mike Marschke Date Apr 23 2019

With the US official unemployment rate around 4%, this means that there are now more jobs than people. The unemployment rate includes different types of workers who are considered to be unemployed. This classification of workers includes those who are part of the gig economy, part-time workers and freelancers. In other words, those who are part of the contingent workforce.

What percentage of workers in gig economy?

The most recent reports from the BLS found that 5.9 million people or 3.8% of all workers are contingent workers in the gig economy. It is predicted that the number of on-demand workers will reach about 9.2 million by the year 2021. Other reports, such as Freelancing in America, a 2017 survey estimated that 57.3 million Americans are freelancing, or 36% of the workforce.

Unemployment and the Gig Economy


The low unemployment rate, with the type of available employment, is having an impact on businesses that hire hourly workers. As well as opportunities, these conditions also pose challenges in terms of sourcing and recruiting the best candidates in a competitive job market.

Due to the low unemployment rate, businesses that hire hourly workers are finding it increasingly difficult to source the right number of candidates. In fact, research has shown that the more hourly workers a company needs to operate, the more difficult and the longer the cost and time to hire is.

For example, 8% of companies with hourly workers that make up around 26% to 50% of the workforce take three weeks to fill an opening. Additionally, 13% percent of businesses that use hourly workers that make up 51% to 75% of their staff take more than three weeks to fill an opening. Finally, 21% of companies with hourly workers that make up 76% to 100% of their staff take more than three weeks to fill an opening. This shows that, the higher the percentage of hourly workers, the longer the time to hire process.

In order to source the best candidates, businesses need to make smart hiring decisions in order to meet the candidates where they are at. This low unemployment rate means that businesses need to review their hiring processes to ensure that they are up-to-date. This will enable businesses to compete with other companies and businesses in the industry.

The positive news is that, according to research, 74% of survey respondents said that they would not mind working more than one job with different companies to get enough hours. This is also coupled with having enough flexibility to have a good work-life balance. As a result, an emerging trend is that many workers who already have a full-time or part-time job are taking part in the gig economy so that they can make extra income on the side.

Low unemployment rates plus the shifting needs of workers means that businesses that hire hourly workers need to take a new and fresh approach to finding the right candidates, as well as retaining those candidates when they have made a successful hire.

Businesses that hire hourly workers now need to improve their hiring and recruitment processes to ensure that they continue to reduce time to hire rates and employ the best recruitment strategies to entice the best hourly workers. This means that failure to innovate hiring and retention practices could have disastrous effects for businesses.

Here are some ways that businesses can cope and also rise above their competitors with the low employment rates when it comes to hiring hourly workers.

  1. Invest in the best modern hiring technology

Businesses that hire hourly workers, especially those in the gig economy, need to be able to hire at scale. They need to be able to entice the best workers with the smartest hiring practices and also a strong brand. Recruitment strategies need to include the budget to utilize the most modern hiring software. This ensures that businesses provide what the workers expect including ease, convenience and short application forms.

Want to know how to make your applications irresistible to candidates? Download our 5 Ways to Improve Your Application Performance e-Book.

Fountain is modern hiring software that is designed with the developing gig economy in mind. Our aim is to help you to reduce your time and your costs to hire, even in a hyper-competitive market. We utilize functionalities, like artificial intelligence AI), to automate communication so that you can hire at scale.

Looking for more information about how the on-demand economy is growing at a rapid pace and what it means for your business?  Get a free copy of our Ultimate Hiring Benchmark Report.

2. Provide more pay

In 2018, Amazon made a pledge to pay all its US workers, both part time and seasonal, $15 an hour as a minimum wage. This has put pressure on other businesses that hire hourly workers (especially in retail) to do the same. Due to the fact that there could be a labor shortage because of the low unemployment rates, businesses need to consider increasing the minimum wage to attract the right candidates.

Given that applicants are looking for jobs that pay more and offer more flexibility, it stands to reason that they will choose jobs where they can earn more and work less. So this means that businesses need to think about their budgets to work out how they can compete with mega retailers, like Amazon, in terms of offering higher pay to their candidates.

3. Provide work flexibility

For gig workers, flexibility is the name of the game. Whether you hire full-time or hourly workers, they need to know which shifts they will be working in advance, so they can plan their private lives. Giving workers a predictive schedule is an important aspect of retaining your hourly workers. Ideally, your workers should know how many hours they will be working each month and when they will be scheduled to work, so that they can enjoy the flexibility of gig work.

Some states have introduced predictive scheduling laws to ensure that businesses in the retail, hospitality and restaurant industries give their staff the required notice before they start their shifts. If an employer does not give their staff enough notice of a shift, they could be liable to pay fines and be subject to legal action.

4. Utilize AI

When used correctly, AI and automation can reinvent the hiring and the HR process. There was a fear that automation technology would reduce jobs, but this has not been the case. In fact, automation can make your recruitment better and provide your recruiters with more time to spend on non-menial and repetitive tasks.

For example, Fountain uses AI to send communications to applicants informing them of where they are in the hiring process. Our AI also provides data and analytics so businesses can make informed decisions in terms of budgeting and other financial planning. This enables businesses to get the best out of the hourly workers in an environment with a low unemployment rate.

When utilizing AI for your business, you need to ensure that you do thorough research to make sure that the solution you choose will be a benefit and not a detriment to your business. With Fountain, we provide a personalized demo to walk you through our solution to find out how it will benefit your specific business in terms of reducing the cost and the time to hire hourly workers.

Click on the button below to book your demo today.

5. Be proactive with no-shows

In an economy with low unemployment rates, your hourly workers will have options about the jobs they choose. This will increase the amount of no-shows for job interviews. In order to reduce the number of no-shows, you should do all you can to pre-screen applicants to get the most assurance that they are committed to working with your company.

A practical way of doing this, which does not involve any extra effort for your recruitment team, is to add another pre-screening process when recruiting. For example, with Fountain, you can ask your candidates to take part in a video interview to find out how they communicate. Asking your candidates to participate in a pre-recorded video interview will help you to determine whether they are dedicated to taking the job.

This is because a candidate who is willing to go through this extra stage shows that they are committed to working with your business. This also helps you to reduce the amount of candidates you bring in for face-to-face interviews. Therefore, this will minimize the risk of no-shows because you have done as much as you can to ensure that the candidate is the right fit and they are willing to commit to your company.

As well as no-shows, another trend in an economy with low unemployment rates is those people who just walk away from jobs. It is not uncommon now to find people who just walk away from a role if they are unhappy or do not understand their job. This is because they have options to get another job very quickly.

The gig economy is known for a high turnover rate. Therefore, businesses that employ hourly workers in an environment of low unemployment need to have a continuous pipeline of candidates that they can call on when the gig workers leave.

Fountain has been developed with gig workers and the on-demand economy in mind. This means that replacing workers who have left the job for whatever reason is simple and easy, especially since your talent pipeline is already full of candidates. Or if you do choose to start the hiring process again, you can use Fountain’s Boost, which enables you to post open vacancies on free and paid job boards at the click of a button.

6. Consider employee engagement

Even though gig economy workers may be a transient workforce, you should create policies to try to retain the best hourly workers. Your workplace culture should be geared towards keeping workers happy and treating them fairly, to increase the chances of them remaining with your business. Issues like employee mistreatment, a lack of diversity and unfair pay will increase your turnover rate which, in turn, could hurt your business.

Retaining the right workers, including hiring gig economy workers, is a very important success indicator for your business. Therefore, you should do all you can after you have hired the best employees to try to retain them.

7. Adopt a flexibility mindset

With flexibility being a top priority for most workers today, they will not hesitate to leave your company if they feel like they can get a better work-life balance with a competitor. This means that paying a higher wage alone will not be good enough. This has to be coupled with flexible schedules and allowing your workers to be able to enjoy a work-life balance.

Your business must offer different shifts to workers. Businesses must now consider offering their hourly workers paid leave and other perks that are normally reserved for full-time workers.

A low unemployment rate means that businesses that hire hourly workers need to update and review their hiring strategies. Responding to this low unemployment rate, along with the new type of worker, demands that employers move away from how they used to recruit candidates in the past.

This does not mean that your businesses have to give up on important metrics like time to hire and sourcing the best candidates. In fact, with Fountain software, you can have the best of both worlds. You can source the best candidates and remain competitive without compromising on how the candidate experiences your business.


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About the Author

Director, Strategic Programs

Mike Marschke

Mike Marschke is Fountain's Director of Product who has a passion for innovation and optimizing talent acquisition strategies, enhancing candidate experiences, and driving organizational growth.