  We introduce a dynamic principal-agent model to understand the nature of
contracts between an employer and an independent gig worker. We model the
worker's self-respect with an endogenous backward-looking participation
constraint; he accepts a job offer if and only if its utility is at least as
large as his reference value, which is based on the average of previously
realized wages. If the dynamically changing reference value capturing the
worker's demand is too high, then no contract is struck until the reference
value hits a threshold. Below the threshold, contracts are offered and
accepted, and the worker's wage demand follows a stochastic process. We apply
our model to perfectly competitive and monopsonistic labor market structures
and investigate first-best and second-best solutions. We show that a
far-sighted employer with market power may sacrifice instantaneous profit to
regulate the agent's demand. Moreover, the far-sighted employer implements
increasing and path-dependent effort levels. Our model captures the worker's
bargaining power by a vulnerability parameter that measures the rate at which
his wage demand decreases when unemployed. With a low vulnerability parameter,
the worker can afford to go unemployed and need not take a job at all costs.
Conversely, a worker with high vulnerability can be exploited by the employer,
and in this case our model also exhibits self-exploitation.
