What Is the Gig Economy?

20 min read

March 21, 2024

What Is the Gig Economy

The gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. The term "gig" refers to a single project or task for which a worker is hired, often through a digital marketplace, to work on demand. 

The gig economy has been around for over a century, with jazz musicians in the early 1900s being some of the first gig workers. However, the rise of technology and the internet has made it easier for people to find gig work and for companies to hire gig workers. 

Although the gig economy has some downsides due to the erosion of traditional economic relationships between workers, businesses, and clients, it can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles. 

Factors Behind the Gig Economy

op reasons why people are going into the gig economy
Factors behind the continuous popularity of the gig economy. Source: Mbaindating.com

The gig economy is becoming a big thing around the globe. Inthe USA, for example, as of 2021, about a third of workers were already in this gig world, and the number is rising. But why is this happening? Let's break it down:

1. Independent Work and Remote Opportunities

Technology has transformed the way people work. Computers and the Internet have become powerful tools that allow workers to do tasks from virtually anywhere. This shift has paved the way for remote work and the gig economy. 

Employers now have the flexibility to hire people based on their skills and qualifications rather than their physical location. This global talent pool means that employers can access a diverse range of talent, and workers can access job opportunities that may not have been available in their local area. This opens up new possibilities for businesses and workers alike.

2. Economic Factors

Businesses often face fluctuations in demand. During busy times or for specific projects, they may require additional help but may not be able to commit to hiring full-time employees. In such cases, they turn to gig workers who can provide their expertise on a temporary or part-time basis. This cost-effective approach allows businesses to adapt to changing workloads without the long-term financial commitment of traditional employment.

For instance, a restaurant during the holiday season knows they'll be busier than usual. So, they hire extra waitstaff and chefs on a temporary basis to handle the increased demand. Once the holiday season is over, they don't need as many employees, so they let go of the temporary staff. It's a win-win – the business gets the help it needs when it needs it, and workers can take on additional gigs during busy periods.

3. Changing Lifestyles

Top reasons why Americans would leave their job to work in the gig economy
Flexibility is the number one reason why Americans will leave their jobs for the gig economy. Source: FATbit

People's lifestyles are evolving. Some people prefer flexibility in their careers. According to a study by FATbit, about 33% of Americans choose the gig economy because of the flexibility it offers. This means that the gig economy aligns with this desire. It allows people to take on multiple positions, explore various industries, or even switch careers more frequently. This adaptability appeals to those who value diversity in their work experiences.

4. Impact of the 2020 Pandemic

The year 2020 brought unforeseen challenges with the COVID-19 pandemic. Many traditional jobs were impacted, and people turned to gig work out of necessity. Gig workers became essential in delivering basics to home-bound consumers, and people who lost their jobs sought part-time and contract work for income. This surge in gig activity highlighted the resilience of the gig economy during crises.

Benefits and Downsides of the Gig Economy

Pros and cons of the gig economy
Pros and cons of the gig economy. Source: Oberlo

The gig economy has a lot of benefits, and that is why it is gaining momentum lately. It also has many downsides that are hardly talked about most times. Below are some of them.

Benefits of the Gig Economy

  • Flexibility. Gig work offers flexibility in scheduling. A worker has the freedom to choose when and where they work. This flexibility suits people with diverse lifestyles and commitments, allowing them to adapt work to their needs.
  • Variety. In the gig economy, one can engage in different types of work. It's not limited to a single job or industry. Workers can explore various gigs, from writing to driving, which can add excitement and diversity to their career.
  • Independence. Gig workers have a sense of independence. They can choose clients and projects that align with their preferences and values, having a greater sense of autonomy.
  • Opportunity to try new jobs. The gig economy enables people to experiment with various roles. One can test different jobs without long-term commitments, allowing them to discover their interests and strengths. 
  • Work-life balance. Gig work promotes a better work-life balance. One can arrange their work hours to fit around personal life, whether it's family time, hobbies, or other commitments. This balance contributes to a healthier and more fulfilling lifestyle.

Downsides of the Gig Economy

  • Inconsistent payment. Income in the gig economy can be irregular. Gig workers may experience fluctuations in earnings due to varying demand for their services. This inconsistency can create financial uncertainty and difficulty in budgeting.
  • No benefits. Unlike traditional employment, gig workers typically do not receive benefits such as health insurance, retirement contributions, or paid time off. This lack of benefits can leave workers vulnerable in times of illness or emergencies.
  • Taxes and expenses. Gig workers are considered self-employed, which means they are responsible for their own taxes. They must set aside a portion of their income for tax payments and manage their own tax filings. Also, gig workers often incur expenses related to their work, such as transportation or equipment costs, which can impact their overall earnings.

The Impact of the Gig Economy on Traditional Employment

How the gig economy is shaping the modern workforce
How the gig economy is changing the modern workforce. Source: CVVIZ

The gig economy has significantly impacted traditional employment in several ways. First and foremost, it has introduced a new dynamic into the job market. Traditional full-time employment with long-term job security is no longer the sole option. Many workers now consider gig work as a viable alternative or complement to traditional jobs. In fact, according to MyCreditSummit, more than half of freelancers in America claimed that no amount of money could persuade them to return to their traditional employment. This shows that more employees prefer to be in the gig economy.

This shift has also influenced the relationship between employers and employees. Traditional employment often entails a long-term commitment between both parties, with benefits and job stability. In contrast, the gig economy fosters a more transactional relationship. Employers hire gig workers for specific tasks without the long-term obligations associated with traditional employees.

Furthermore, the gig economy has forced traditional employers to adapt. To compete for talent, some companies have started offering more flexible work arrangements and benefits, as per ResearchGate. This is to attract and retain employees. It reflects the changing expectations of workers who may seek a balance between traditional employment and gig work.

However, not all traditional jobs are disappearing. Certain industries and roles, like healthcare professionals, teachers, police officers, factory workers, etc., continue to rely on traditional employment structures. Nevertheless, the gig economy has reshaped the job market's landscape, offering both opportunities and challenges for workers and employers alike. This evolution underscores the importance of adaptability and continuous learning in today's dynamic employment environment.

Future of the Gig Economy

Global gig economy market size in 2028
Potential gig economy market size by 2028. Source: Business Research Insights

The future for gig workers appears promising based on recent studies and trends. In the United States alone, the number of freelancers is projected to reach a substantial 86.5 million by 2027, according to a study by StartUpsAnonymous. The COVID-19 pandemic has accelerated this growth as 32% of freelancers report increased demand for their services since the pandemic's onset. Even more encouraging, over 66% of freelancers believe this upward trend in demand will persist in the coming years.

Global perspectives align with this optimism. A 2023 report from Business Research Insights predicts that the global gig economy market will surpass a staggering $873 billion by 2028. This projection signifies a robust compound annual growth rate (CAGR) of 16.18% from the $355 billion recorded in 2021.

These statistics indicate that, despite concerns about economic fluctuations, the gig economy is set to continue its expansion. Gig workers can anticipate a future with increasing opportunities and demand for their services, making the gig economy a thriving and viable option for years to come.

In Conclusion

Based on recent data, the gig economy appears to be a worthwhile endeavor. A Brodmin study reveals that 79% of gig economy workers report higher job satisfaction compared to their experiences in traditional jobs. This indicates that many people find fulfillment and contentment in the flexibility and independence that gig work offers.

Additionally, generational trends demonstrate a growing inclination towards freelancing. WebsitePlanet highlights that 53% of Gen Z individuals and 40% of millennials are actively choosing freelance work. This suggests that younger generations are recognizing the benefits of gig work, including the opportunity for skill diversification and shaping their own career paths.

The impact of the gig economy on traditional employment reflects a shifting landscape, with some industries still relying on traditional structures while others embrace gig work. While the gig economy presents opportunities, it's essential to acknowledge its challenges, such as modest pay and lack of benefits. 

Ultimately, people venture into the gig economy depending on individual preferences and goals. Those seeking flexibility, skill diversification, and higher job satisfaction mostly explore gig work. This is because it can be a worthwhile endeavor for them. However, individuals should carefully consider their needs and circumstances to make an informed choice about whether the gig economy aligns with their career aspirations and lifestyle.

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