The way people work has changed drastically over the past few years, especially since the pandemic. No longer is full-time employment the default. Instead, many businesses have moved to a more flexible, hybrid/remote work model and are less apprehensive about hiring freelancers and contractors.
This has all led to the popularization of the gig economy, which has changed the face of modern work. But what exactly is the gig economy? And why is it growing so much?
What is a gig economy?
The gig economy is a job market made up of temporary, flexible jobs where people are hired on the basis of being independent contractors and freelancers.
Rather than being paid a regular paycheck, gig economy workers get money in exchange for “gigs.” These can be either ongoing or one-off jobs.
Gig economy work can look very different depending on the industry. You could drive for Uber, write articles for an online publication, deliver packages for Amazon, or even work as a part-time teacher. Other popular industries include consulting, marketing, customer service, driving, and even retail.
Why the gig economy has become so popular
According to research from TeamStage, the gig economy is expanding three times faster than the total U.S. workforce. An estimated 36% of the workforce, or 57.3 million people, now work in the gig economy, and it appears to be growing.
The gig economy has become commonplace for a few reasons.
One is that technology has made it easier than ever to hire gig economy workers. Consumers are increasingly comfortable with apps that make shopping, banking, traveling, and networking easier.
For example, Uber’s business model makes it easy for all of its drivers to act as independent contractors and take the jobs they want. Consumers can get matched with a driver and arrange a ride all within the app.
Another reason is that companies want to protect their bottom line. One of the challenges of scaling a company is having to hire expensive full-time workers to grow along with it.
Gig economy workers are typically cheaper because employers don't usually have to pay for employee benefits such as health insurance, nor do they have to employ them full-time. As gig economy workers are often more flexible, employers can hire them in-line with demand, making them a popular choice for scaling businesses and smaller companies who aren't ready to hire full-time workers.
Why do companies hire gig economy workers?
The main reasons why companies are hiring gig economy workers is because it’s flexible employment, and it can also be more cost-effective. Companies can increase their capacity during busy periods by just hiring temporary gig economy workers.
They could also cut the cost of hiring full-time employees who require employee benefits, space to work, and a salary. Gig economy workers usually don’t require companies to pay additional benefits, possibly making it less expensive for them overall.
By hiring gig economy workers, you can potentially scale faster and utilize a diverse pool of flexible workers to help you do so.
Gig economy workers don’t necessarily need to be local workers. In industries such as marketing, remote work has become the norm. This means that companies can hire remotely from any place in the world and also have a much wider pool of talent to choose from.
The pros and cons of working in the gig economy
The benefits for businesses are clear. But is the gig economy good for workers? There are some clear pros and cons to being a gig economy worker.
Benefits of the gig economy for workers
Flexibility — You have the potential to pick your own hours and arrange your work around other commitments, such as school or childcare. This kind of flexibility is much harder to find in permanent work.
Independence — Gig economy work can be done on your terms, whether it’s on the road or in your home office. You won’t be stuck in the same office all day with a boss breathing down your neck. Depending on your type of work, you might be able to avoid the commute altogether.
Varied work — Gig economy work by nature is always changing. You could be working for entirely different people each week on different projects or tasks, which keep it fresh.
Set your own rates — While it depends on the industry and market rates, you can set your own rates and potentially earn more than a salaried worker.
Disadvantages of the gig economy for workers
No employee benefits — As gig economy workers are not permanent employees, they are not typically entitled to any workplace benefits such as health insurance or retirement contributions. This is dependent on their individual contract, however. According to TeamStage, only 40% of gig economy workers receive medical insurance.
You have to manage taxes — Gig economy workers are technically self-employed, which means they are responsible for filing business taxes. You should aim to save 25-30% of your pay for taxes. Some gig economy workers opt to hire an accountant to manage their taxes, which can be costly.
No guaranteed income — The nature of self-employment means that you can’t rely on a consistent paycheck coming through each month. Your income could fluctuate greatly, which makes it harder to budget and manage money. Some people may find this too stressful, especially if they have a lot of ongoing expenses.
Is the gig economy worth it?
The gig economy has come under fire for popularizing unstable working arrangements, which can make it tough for people to afford a living. This, plus the lack of a guaranteed paycheck and benefits, could be enough to turn people off.
If gig economy work is your main form of income, this could also make it more difficult to get approved for credit, such as a car loan or mortgage. Lenders will want to see stable income to determine affordability, and gig economy work can sometimes make this difficult.
However, there are some upsides to it, including flexibility, independence, and variety, which are reasons why a lot of freelancers are attracted to this type of work.
Many gig economy workers are not full-time and only use it to supplement their income alongside a job. Others use it to fit alongside their studies or to gain experience in the job market.
Is the gig economy right for you?
Weigh the pros and cons to help you decide if the gig economy is right for you. If you do decide to take on freelance work, make sure you have a budgeting method in place to help you manage your expenses and to set aside enough earnings for taxes and more.
