What Is the Gig Economy?

The Gig Economy Explained

Delivery driver carrying package
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The gig economy can be characterized by temporary, flexible, and freelance jobs and allows businesses to hire freelancers and independent contractors for short-term “gig” work. For workers who desire flexible schedules, meanwhile, the gig economy provides them with the ability to earn extra income while prioritizing other responsibilities. 

To gain a better understanding of the gig economy, it’s important to learn what it is, how it works, and some of the main types of gig work involved.  

Definition and Examples of the Gig Economy 

The gig economy is characterized by short-term, flexible jobs that businesses offer to freelancers and independent contractors instead of traditional, full-time employees. In the gig economy, businesses can save money on recruiting, benefits, and payroll expenses, while gig workers benefit by being able to earn income from multiple sources and complete projects and tasks with a flexible work schedule. 

Typically in the gig economy, freelancers and independent contractors get individual gigs using an online platform or mobile app to connect with businesses and customers. Companies like Airbnb, TaskRabbit, Uber, Lyft, PostMates, DoorDash, and Instacart have relied and thrived on this process, giving significant rise to the gig economy over the past decade. In fact, a 2020 study from the ADP Research Institute found that gig work in the U.S. grew by 15% from 2010 to 2019. And by 2023, the gig economy is projected to grow to $455 billion in gross volume transactions according to a MasterCard and Kaiser Associates report.

How Does the Gig Economy Work?

While the gig economy covers many industries, the concept is essentially the same: gig workers will complete small, on-demand assignments for pay. These assignments could include developing a website, delivering food, walking a dog, or transporting a family from their home to the airport. Once the project is completed, the gig worker moves on to the next assignment. 

Although it is not uncommon for companies to continually work with the same gig worker, there is no long-term commitment needed from either the company or worker.  

Workers who are interested in participating in the gig economy typically need to sign up to their platform(s) of choice by completing an application. Once accepted, they can choose work shifts or projects to complete. For instance, a mother working with DoorDash might decide to work for two to three hours while her children are in school, which allows her to keep her nights and weekends free. In contrast, a virtual assistant may choose to perform a traditional 9-to-5 workday for a company to complete a specific project. When the project is completed, so is their eight-hour shift. 

Types of Gig Economy Jobs

There are many types of gig economy jobs offered by companies whose primary goal is to provide a convenient service to their customer base. Here are some examples of the different types of gig work and the companies involved: 

  • Virtual assistants: Administrative assistants, receptionists, project managers can find convenient, flexible employment through Belay Solutions, VirtualAssistants.com, and Upwork.
  • Ridesharing: Platforms such as Lyft and Uber allow travelers the convenience of using an app to schedule a ride. All it generally takes to drive for these companies is having a smartphone and car. 
  • Creative freelancers: If you have ever needed a graphic designer or content creator, online platforms such as Creative Market, Fiverr, Upwork, and Guru provide the opportunity for you to share your project and have freelancers send you pitches.  
  • Delivery services: Companies such as Uber, DoorDash, Grubhub, Amazon, and Instacart are ready to meet the needs of consumers who want the convenience of staying home and having groceries or hot food delivered to their door. 
  • Labor support: Platforms such as Task Rabbit and Handy provide clients with on-demand housekeepers, home improvement laborers, and errand runners.

When choosing a platform to work with, a freelancer should consider how it connects to their talents and passion along with the flexibility it provides. 

Pros and Cons of the Gig Economy

Pros
  • Flexibility

  • Independence

  • Variety of work

  • Inexpensive for businesses


Cons
  • Inconsistent income

  • Lack of benefits

  • Stress and burnout

  • Taxes and expenses


Pros of the Gig Economy Explained

Flexibility: With gig work, you essentially are your own boss, and can choose how you work, where you work, for how long, and sometimes even your client base and rates. 

Independence: Without direct supervision or the need to be in an office, gig workers have the ability to complete tasks on their own, the way they want to and on their own timetable. 

Variety of work: Instead of working in one 9-to-5 job for one boss, the gig economy provides an opportunity to take on a variety of tasks and projects that can keep you on your toes and flex your creativity and problem-solving skills in the process. 

Inexpensive for businesses: Freelancers can be an inexpensive alternative to hiring full-time employees, and gives business owners the opportunity to find fresh talent and offer varying rates depending on their skills. 

Cons of the Gig Economy Explained

Inconsistent income: A drawback of having a flexible work schedule is the inconsistent income that comes with it. Gig work income depends on the amount of work available and you only get paid when you’re doing gigs. 

Lack of benefits: In general, gig workers aren’t eligible for health insurance and retirement plans, and if you get hurt on the job, you typically won’t receive workers’ compensation or disability insurance.

Stress and burnout: Having a variety of work can be financially beneficial, but can also lead to stress and burnout. If you’re a delivery driver, for example, taking on multiple gigs can wear on your energy, lifestyle, and even your vehicle. 

Taxes and expenses: Gig workers are responsible for paying self-employment taxes and also if you earn money for gig work as an independent contractor, you may have to pay quarterly estimated taxes. You can avoid a penalty by paying enough tax on time. Gig workers are also responsible for purchasing and maintaining their tools and equipment for work, including a smartphone, phone plans, computers, and vehicles. 

Key Takeaways

  • The gig economy is characterized by short-term, flexible jobs that businesses offer to freelancers and independent contractors instead of traditional, full-time employees.
  • Freelancers and independent contractors typically get individual gigs using an online platform or mobile app to connect with businesses and customers.
  • Notable gig economy businesses include Uber, Lyft, Doordash, Upwork, and Fiverr.
  • The gig economy has benefits, including flexibility, independence, and a variety of work.
  • Cons of gig work include inconsistent income, lack of benefits, stress, and self-employment taxes.