Digital transformation has brought a lot of change to how industries conduct business and planning. This is no different for financial services, as digital banking expectations continue to develop and expand more quickly, especially through 2020 with COVID-19. Through fast-paced change, it can be easier to look to the unknown landscapes rather than those we are most familiar with, for example, the gig worker segment of small businesses.
Gig workers continue to be a growing and important element for financial institutions and credit unions – as more fintechs and providers appear to entice this segment, it’s now more important than ever to learn about this group, and who they are, in order to best serve their needs.
StatsCan reported that 1.7 million workers in 2016 were employed in the gig economy. At the time this represented 8.2% of the Canadian work force.
- A gig can be defined as any job, usually short-term or informal in nature. Ultimately, any side-hustle, digital or not is also part of the gig economy. Gig workers are not usually long-term contract workers and typically work for many firms conducting a specific task.
- In November 2019, the Angus Reid Institute reported that in the past five years, more than 40% of Canada’s millennials have participated in the gig economy.
The Bank of Canada recently released the report The Size and Characteristics of Informal (“Gig”) Work in Canada. The opening remarks noted – just under one-third of Canadians participate in this type of work, and this participation is often consistent with labour market slack and feelings of job insecurity. Just over one-third of respondents who take part in informal work do so as a result of weak economic conditions. Given this was pre-pandemic we can certainly expect that participation in informal work will grow in the coming months and years.
- The median net gig income in 2016 was $4,303. Roughly half of the people who entered gig work in a given year were not involved in this type of work the following year. However, about one-quarter remained gig workers for three or more years. (Stats Canada)
- According to the Bank of Canada the Gig economy represents approximately 700,000 full-time equivalent jobs or 3.5% of the labour force.
- Many gig workers are youth, 18-24 (58%) and seniors, 55+ (26%).
- Some 10.8% of male immigrant workers who had been in Canada for less than five years were gig workers in 2016, compared with 6.1% of male Canadian-born workers. ( Stats Canada)
- In 2016, according to Bank of Canada data, 9.1% of all female workers and 7.2% of all male workers were identified as gig workers. Workers in the bottom 40% of the annual income distribution were about twice as likely to be involved in gig work as other workers. Gig work was also more prevalent among immigrants than among Canadian-born workers.
The Sweet Spot for growing your business and attracting new prospects
It’s vital to know and understand the gig worker segment, as it’s a sweet spot for financial institutions across Canada, particularly as there’s increased uncertainty through COVID-19. Central 1’s Deputy Chief Economist Bryan Yu recently reflected on this with an analysis of the recent business outlook report by Bank of Canada (BOC), indicating that business sentiment is improving but still remains weak across the country, with slower momentum expected. The outlook remains hampered by weak demand and required health precautions (i.e. physical distancing, PPE), with about 33% of sectors operating at or above pre-COVID levels, 33% are expecting a return within 12 months, and 33% are expecting weakness to prevail (these are largely tourism/hospitality). With such a promising yet uneven recovery across the country, gig work is being increasingly considered as a quick way to remain stable through the instability of 2020.
Based on the information above, it’s clear that gig workers are most inclined to trust credit unions and people-focused financial institutions. With that being said, they are still less inclined to have a small business account compared to other types of small businesses, making them an often-overlooked segment in the Canadian small business landscape. Imagine how many new ideas and household names could take shape in years to come, should gig workers and other small businesses have the advantage of digital transformation through the support of their financial institution?
This was something Randy Johal and team considered and researched extensively while building Forge Small Business. While providing a scalable, ever-evolving product that serves the day-to-day needs of small businesses, there would also be key insights and governance to enable smaller businesses to focus further on their operations, empowering them to become the next generation of entrepreneurs and innovators.
We’ll continue to explore opportunities within small business territory – be sure to stay tuned, and to connect in with us should you have any questions.