The Shift to a Gig Economy?
We’re in the midst of a massive economic change. The coronavirus pandemic has changed how the world works, educates, connects and plays. Many are now wondering if this is the “new normal,” and if the world is shifting to a gig economy.
If you never studied economics, gig economy may be a foreign concept to you. So, let’s first consider what a gig economy is and how it works.
Gig economy is actually a relatively new term that was coined back in 2009 by a former editor of the New Yorker. Essentially, a gig economy is dominated by part-time, temporary workers, or freelancers and independent contractors, who primarily connect and work with clients online, rather than the traditional full-time, in-office employees.[1]
Back in 2017, the U.S. Bureau of Labor Statistics estimated that there were about 21 million gig workers in the U.S.[2] This figure has rapidly expanded over the past three years, but there is not an accurate way to count these workers. A Freelancing in America Survey revealed that approximately 35% of the U.S. workforce in 2019 was freelancers, or about 57 million Americans.[3]
Nailing down an accurate count of gig workers is made difficult because we still don’t have a firm definition of who qualifies as a gig worker. The reality is that gig workers can range from adjunct professors to Uber drivers, from computer programmers to DoorDash deliverers, from architects to Airbnb hosts. Some gig workers could be full-time, 9-to-5 workers in the day who also perform freelance work in their free time.
Now, there are several benefits to a gig economy—for gig workers and employers.
Gig workers have more flexibility in their schedules and workloads, and often, in turn, are less stressed. Gig workers have the ability to pick and choose what jobs they want to tackle, whether it’s working for a set number of hours for an employer or on a project-by-project basis.[4] They also can work with multiple businesses or clients. Oftentimes, they aren’t tied to the traditional 9-to-5 workday.
For employers, the main advantage to hiring gig workers is the amount of money it saves the business. A company is not required to provide benefits, including paid vacation, health insurance or retirement plans, to part-time and contract workers.[5] According to the Bureau of Labor Statistics, employee benefits account for approximately 32% of employers’ costs of compensation.[6] The other 68% is salary.
So, it’s not too surprising that many companies are turning to gig workers to fulfill their needs.
In fact, big-name companies, like Google, are hiring more and more freelance and contract workers. Google actually had more part-time workers than full-time workers in 2018.[7] Other well-known companies, like Airbnb, Amazon Flex, Care.com, Etsy, TaskRabbit, and Uber, are comprised 100% of gig workers.[8]
Clearly, there are a variety of industries that hire gig workers: accounting and finance (tax preparers), administrative (executive assistants), education (tutors), information technology (network analysts), project management (project managers), software development (designers and programmers), and writers (copywriters and bloggers).[9]
While there are certainly benefits to a gig economy, it’s not without its pitfalls.
The benefits that a business experiences from hiring gig workers can be negatives for gig workers themselves. Freelancers and contract workers have to set up their own health insurance and retirement plans, as well as consider the tax ramifications. Job security also doesn’t exist for most gig workers.
Overall, there are pros and cons to consider in a gig economy. With many individuals working remotely throughout the coronavirus pandemic, businesses and individuals alike are now seriously considering the positives and negatives of a gig economy. It will be interesting to see if this ignites a massive shift in the global economy.
Please click here for important disclosures.
[1] https://www.investopedia.com/terms/g/gig-economy.asp
[4] https://www.flexjobs.com/blog/post/what-is-the-gig-economy-v2/
[5] https://www.cnbc.com/2020/02/04/gig-economy-grows-15percent-over-past-decade-adp-report.html
[8] https://www.hrtechnologist.com/articles/mobile-workforce/top-gig-economy-companies/
[9] https://www.flexjobs.com/blog/post/what-is-the-gig-economy-v2/