Thinking of going freelance? You’re not alone. Actually, that’s an understatement. The so-called “gig economy” is among the fastest growing sectors of the American labor market. In fact, according to Statista, freelancers will likely make up more than half the U.S. labor economy before the end of the decade. By 2027, the online data repository reports, more than 86.5 million Americans will be working freelance in some capacity. These Americans will make up what is now commonly referred to as the gig economy.
This rapidly expanding slice of the U.S. labor market represents several different overlapping phenomena. From the proliferation of web and mobile technology, which enables so many of us to work when and where we wish, to shifting cultural values and greater generational interest in a meaningful work-life balance, the growth of the gig economy represents a confluence of factors.
But what is the gig economy, what are the benefits of participation in this labor market, and is it the right move for you?
If you are interested in being a part of the gig economy but you have mixed feelings about telecommuting, check out our look at the 10 Ways Telecommuting Can Save You Money.
Otherwise, read on to learn more about the gig economy…
What is the gig economy?
Today, it’s common to associate the term gig economy with the rapidly rising On-Demand market. Indeed, the last decade has seen enormous growth around on-demand mobile apps like Uber and Lyft; DoorDash and Grubhub; Etsy and Upwork. These platforms create a direct connection between consumers and a free market of freelance workers, business owners, and creatives. This connection allows consumers to receive fast, convenient, and flexible on-demand service while providing workers and vendors with direct control over the amount of time committed to work.
But there is far more to the gig economy than this emergent e-commerce sector. In fact, the gig economy is a complex cross section of independent contractors, consultants, sole-proprietors, and those with full-time work who earn a side-income through something other than a wage-paying job.
Embroker explains that “The gig economy is a free market system in which temporary, flexible jobs are commonplace and companies bring on independent contractors and freelancers instead of full-time employees, and in many cases, for short-term engagements.”
In this regard, the gig economy also offers benefits to employers who may have more options when it comes to short-term, project-based hires. The growing availability of independent contractors means that employers have access to consultants, creatives, and wage-level workers as needed. This can translate into significant savings relative to the cost of bringing in additional full-time employees and providing them with the general benefits that accompany full-time employment.
In this regard, the gig economy has evolved as something of a mutually beneficial arrangement for workers, employers, and consumers alike. This is not to idealize the gig economy without consideration of its drawbacks. Well-publicized labor disputes between independent contractors and services like Uber demonstrate that this growing section of the labor economy is still in a state of evolution. Fair labor practices are not universal, and many gig economy workers do struggle to make ends meet. Below, we will explore some of the disadvantages of living on an income fueled entirely by gig work. But first, we recognize that this segment of the economy is growing out of demand, necessity and convenience. In many ways, the gig economy has evolved organically as workers have sought new and more personally accommodating ways of participating in the labor market.
Why is it called the gig economy?
The word “gig” used to conjure a sort of cultural coolness, implying, as it did, that you were in a band that had just been booked for a performance. But that term has been co-opted by the mainstream to describe pretty much any short-term work assignment. According to Nerdwallet, “A ‘gig’ (sometimes called a ‘side hustle’) is generally a short-term task, project or job that a person takes up to make extra cash. But many do gig work long term or as a main source of income. Some gig workers get paid per task or assignment. Others earn an hourly rate.”
This makes the phrase “gig economy” a fairly effective catch-all for this growing segment of per-assignment workers. While struggling rock bands still play “gigs” at smoky dive bars, people who work for driving services, do food delivery, provide freelance web development, offer independent editing services, or provide third-party safety compliance reviews for industrial sites may also have the right to refer to their assignments as gigs.
What kinds of jobs make up the gig economy?
Again, the reason “gig economy” has become a preferred terminology is because the labor economy really is made up of an increasingly complex array of working arrangements. In essence, the gig economy is composed of those who work to earn some form of non-wage income, whether full-time or as part of a side income. That said, there are a few broad categories of gig workers.
Embroker differentiates between independent and contingent workers. While both make up important segments of the gig economy, they do so through two distinct channels. According to Embroker, independent workers “are truly their own boss” whereas a contingent worker “works for another company just like a regular employee might, sans job security and other traditional benefits and protections that come with being a full-fledged employee.”
This distinction is important to note, especially as we address some of the potential drawbacks of the gig economy.
What is an example of the gig economy?
Within these two broad categories, the gig economy is an extremely diverse landscape of unskilled laborers, skilled laborers, consultants, creatives, entrepreneurs, and more. Moreover, as new service ideas are introduced through web and mobile applications, the array of possibilities for gig-level income have grown to include independent sales, vacation rentals, educational support, ticket brokering, and so much more.
According to Nerdwallet, “Common examples include renting out a room on a short-term rental site, selling clothes online, driving for a rideshare company and making deliveries for Amazon Flex or another service. It also includes jobs like freelance writing, tutoring, design, caregiving and many more.”
Not only that, but for many, the gig economy represents an opportunity to turn a passion or talent into a steady stream of revenue. Outlets like Etsy make it increasingly possible for artists, artisans, antique restorers, hobbyists and collectors to turn their interests into income. Nerdwallet notes that “if you are looking to work from home, gig work may be just the ticket, particularly if you already have hobbies that make money.”
What are the benefits of the Gig Economy?
On the surface, the benefits of the gig economy are pretty clear. American workers are coming to increasingly prioritize personal agency, freedom, and autonomy in employment. Moreover, many are trading in the traditional aspiration for long-term security with a single employer over the course of a lifetime in favor of career paths that are varied and even a bit adventurous.
This is perhaps why so many workers are turning toward the gig economy for opportunities. According to the U.S. News & World Report, “Reuters reports that 34% of the workforce in the United States were gig workers in 2017, and that number is expected to rise. A Mastercard study from 2019 predicts the gig economy will have a gross volume of $455 billion in 2023. If you are one of the almost 60 million people who make money in the U.S. gig marketplace, sometimes referred to as having a side hustle or being a freelancer, you are a gig worker.”
This suggests that the opportunity is certainly there to make a living. But the real draw of the gig economy is that you can make this living on your own terms. In many ways, the transforming labor economy is a response to discontent over the conventions of the American employment outlook, particularly our national culture’s persistently dismissive attitude toward work-life balance. While the competitive nature of a capitalist economy may dissuade traditional employers from prioritizing this balance, the gig economy gives workers the power to seize it for themselves.
This is the notion at the heart of Diane Mulcahy’s text, The Gig Economy: The Complete Guide Getting Better Work, Taking More Time Off, and Financing the Life You Want. Here, the author points out that one of the primary benefits of the gig economy is the control it gives you over your own life. This is especially true in an era where mobile technology gives us the power to work from anywhere. Mulcahy refers to those who take full advantage of this power as “digital nomads,” those who “use technology to work, live, play, and travel when they want, from where they want. Freed from commenting, cubicles, the suburbs and the status quo, they build geographically flexible lives around the places they want to be.”
While we may not all be cut out for the life of a digital nomad—I know I prefer the comfort of my own bed to the flatbed of a van—Mulcahy’s point is well-taken. Wireless technology gives us the freedom to work untethered from traditional expectations, and consequently, gives us the power to establish our own work-life balance. It also creates opportunities for participation where none previously existed—such as the opportunity for a single mother to drive an Uber around her child’s school schedule or for a craftsman to sell furniture directly to consumers without a physical store.
What are the drawbacks of the gig economy?
Anybody who has ever worked primarily on a freelance basis understands full well how much work can go into actually acquiring work! As an independent contractor in particular, it’s important to keep a full calendar up ahead, and to always be in a state of seeking out or taking on new work. The availability of this work can depend a great deal on your experience and connections, the nature of your work, and the state of the economy at any given time. In other words, there are a lot of factors that can impact the stability and consistency of your income. This is something that every gig worker must learn to navigate.
According to the U.S. News & World Report, “For some, getting work is easy as indicating availability. But many others have to be proactive about offering services – for example: getting testimonials or reviews, taking great pictures of your Etsy offerings, learning about and using SEO keywords and executing selling or incentive campaigns to increase sales.”
Whatever your service, product, or labor arrangement, it will be entirely incumbent upon you to keep your work schedule full. Moreover, the price of freedom from traditional employment is a certain loss of job security in the event of an unforeseen calamity. As U.S. News & World Report points out, gig workers lack the safety net that comes with traditional employment. The global pandemic demonstrated this risk all too clearly. As lockdowns temporarily shuttered many of the businesses and local markets that rely on gig workers, many independent workers struggled to make ends meet.
Where some traditional employees benefited from beefed up unemployment benefits or company-wide government rescue packages, many gig economy workers were left to their own resources. The pandemic in particular demonstrated that even those with a long history of participation in the gig economy and well-established client and partner relations are not immune to the impact of major economic events.
And even in the best of economic times, gig workers don’t always have access to the same resources as their traditionally employed counterparts. As U.S. News & World Report notes, “the gig economy has a lack of predictability and a lack of comprehensive benefits such as health insurance. Workers may not have a clear professional career path and the support of mentors within a company.”
This is not just an incidental distinction. As noted earlier, many employers like the idea of hiring gig workers because they aren’t required to provide the same security and benefits to these workers. In many ways, the emergence of the gig economy suggests that some simply can’t access the parts of the economy that offer security, health insurance, and other benefits. For some, the gig economy is the only option, and it does leave workers wanting for certain protections.
Again, this is evidenced in ongoing disputes between Uber and its drivers, who argue that the company’s practices make it difficult for these on-demand workers to earn a fair income for their work. Drivers have rallied to be recognized as permanent employees of Uber, as opposed to gig workers, so that they can’t be denied certain securities and benefits. A recent decision in the Netherlands granted this status to Uber’s drivers, and may suggest that inequities in the gig economy are now being effectively challenged.
In spite of the drawbacks to participation in the gig economy, at its core is the promise of freedom and independence for workers of all kinds. Even those who work in unskilled gig markets enjoy a level of personal freedom and autonomy not afforded to full-time unskilled laborers. For those with certain marketable skill sets, however, the gig economy may actually offer unlimited potential.
If you’d like to dip a toe into the gig economy but you’re not quite ready to say goodbye to your 9 to 5, there is another option. Take a look at these 10 Reasons to Get Yourself a Side Hustle.