What Is a Gig Economy?
A gig economy, also known as the sharing economy or access economy, relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees.
Gig workers have flexibility and independence but little or no job security. In a gig economy, employers save money when they do not have to provide benefits such as health coverage and paid vacation time.
Key Takeaways
- A gig economy is based on flexible, temporary, or freelance jobs.
- The gig economy can benefit workers, businesses, and consumers through a flexible model.
- Gig workers do not earn paid holiday or sick leave, and experience fluctuating wages.
Job Types
The gig economy is a labor market characterized by temporary, contract, and freelance jobs rather than permanent positions. People earn money from providingon-demand work, services, or goods.
A wide variety of positions fall into the category of a gig. The work can range from managing short-term rentals, tutoring, writing code, driving for ride-share services, delivering food, or authoring freelance articles. Colleges and universities cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.
The gig economy experienced significant increases in 2020. COVID-19 lockdowns forced people to work from home and rely more on purchasing goods and services online, and these trends continued when restrictions were lifted. In 2023, nearly 64 million Americans, 38% of the U.S. workforce, were freelancers or gig workers, according to an Upwork report. Independent contract workers contributed $1.27 trillion to the U.S. economy.
The term “gig economy” is borrowed from the music world, where performers book gigs, or single or short-term engagements at various venues.
Benefits for Employers and Employees
For Employers
Wider range of applicants due to remote work options
Can hire and fire more easily based on seasonal work
Do not need to provide costly benefits like health insurance or paid vacation time
For Employees
Greater flexibility for individuals to set their own schedule
Offers various side-hustle opportunities to those who work regular full-time jobs
Remote positions allow gig workers to live anywhere that has an internet connection
Hiring a full-time employee costs companies nearly 1.25 to 1.4 times the salary. If an individual's salary is $35,000, the actual costs likely range from $43,750 to $49,000.
Downside of a Gig Economy
The gig economy trend can make it harder for full-time employees todevelop careers and establish a long-term reputation. The gig economy is often associated with eroding worker rights, loss of health insurance, and sick and vacation pay.
Employers are under little pressure to pay higher wages. Opening up positions to people living anywhere in the world, including places where the cost of living is much cheaper, allows employers to seek places with lower wages.
The flexibility of working gigs can disrupt the work-life balance, sleep patterns, and daily life. Long-term relationships between workers, employers, clients, and vendors can erode. This can eliminate the benefits of building long-term trust, customary practice, and familiarity with clients and employers.
Do Gig Workers Experience Higher Job Satisfaction Than Regular Employees?
According to the National Institute of Health, gig workers reported lower mental health and life satisfaction than those employed full-time and part-time in 2022. Gig workers also experienced higher levels of loneliness and financial insecurity.
How Do Gig Workers Get Health Benefits?
As independent contractors, gig workers must pay for health insurance benefits and expenses. They are also responsible for self-employment taxes and business expenses.
How Do Gig Workers Pay Taxes?
Individuals must report any income made in cash, property, goods, or virtual currency, earned from the gig economy on a tax return. This includes part-time, temporary, or income not reported on another form like Form 1099-K, 1099-MISC, 1099-NEC, or W-2.
The Bottom Line
Temporary, freelance, and part-time work, collectively known informally as the gig economy provides workers with more flexibility and allows companies to cut down on certain costs. While employers save money on health benefits or paid vacation time, gig workers must cover all business and personal expenses and report all earnings on their tax returns.
FAQs
A gig economy, also known as the sharing economy or access economy, relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. 1. Gig workers have flexibility and independence but little or no job security.
What is an example of a gig economy job? ›
Providing transportation or delivery services represents a common option within the gig economy. Individuals can often find these opportunities by signing up through service providers' apps. With these apps, customers can order takeout from restaurants or groceries and have someone else pick up and deliver them.
Is the gig economy good or bad? ›
More often than not, gig work lacks benefits and means lower wages, which can be a turn-off. There are pros and cons to hiring gig workers. Companies that hire freelance workers hire a more diverse workforce as freelance workers from international job markets are more likely to be available to work remotely.
What is gig short for? ›
G.I.G is also a fairly commonly used abbreviation. Gig abbreviation could mean, God is Good, Get in Gear, Growing in Grace, or any number of other things depending on the situation. With so many gig definitions it is vital to be aware of the context when choosing the appropriate definition of “gig”.
Do gig workers pay taxes? ›
You must pay tax on income you earn from gig work. If you do gig work as an employee, your employer should withhold tax from your paycheck. If you do gig work as an independent contractor, you may have to pay estimated taxes.
Who benefits from a gig economy? ›
That's because gig work is generally paid at a higher rate than a salaried employee performing the same task. There is a payoff to the risk involved with freelancing. Both a business and an individual worker can greatly benefit from this type of economy, which continues to grow exponentially, every year.
Why are companies hiring gig workers? ›
For businesses, hiring gig workers can reduce overhead costs associated with full-time employees, such as benefits and office space. The gig economy also fosters innovation and entrepreneurship by lowering entry barriers and enabling individuals to monetize their skills and assets.
What is considered a gig job? ›
A gig worker is someone who takes on short-term or project-based jobs, often for multiple clients at once, rather than being employed by a single company. Many freelancers find gigs through online platforms.
What are the problems with gig economy? ›
Therefore, this leads to problems like salary shortfalls, lack of insurance coverage, income fluctuations, and a lack of job security. There are certain benefits and drawbacks to the gig economy for workers.
Is gig economy ethical or not? ›
On the other hand, there are ethical problems relating to the unfair and unequal treatment of gig workers due to a lack of labour law protection. These problems are often worsened by the fact that gig work is often outsourced to, or 'dumped' in, low-rights jurisdictions.
It's possible to make money, plus have a free place to stay, if you're willing to live in the home for weeks or months. Freelancing. Various freelance careers include web design, writing, software development, coding, graphic design, and social media management.
What is gig slang for? ›
The word comes from early 20th century jazz slang. Definitions of gig. noun. a job, especially a temporary job.
Why is a job called a gig? ›
The term "gig" is a slang word for a job that lasts a specified period of time. Traditionally, the term was used by musicians to define a performance engagement. Examples of gig workers include freelancers, independent contractors, project-based workers and temporary or part-time hires.
How many gig economy workers are there? ›
There are between 154 million and 435 million online gig economy workers across the globe - representing 4.4% to 12.5% of the global workforce, according to a report by the World Bank titled Without Borders: The Promise and Peril of Online Gig Work.
What is the gig economy short-term? ›
In the gig economy, workers earn income by completing short-term jobs as independent contractors or freelancers. For example, many gig workers in Malaysia perform food drop-off, online delivery, and ride-hailing services.
Which of the following is an example of gig economy? ›
Final answer: The gig economy refers to freelance or short-term contract work, with examples including ride-hailing and delivery drivers, freelancers, and virtual assistants.
What are the two main types of the gig economy? ›
3 Types of Gig Economy Workers
- Full-time Independent. ...
- Part-time Independent. ...
- Occasional Independent. ...
- Examples of Gig Economy Jobs and Industries. ...
- #1 – Flexible Environment. ...
- #2 – Important Legalities. ...
- #3- Driven Telecommuting. ...
- #4 – Batch Work.
A gig is a live performance by someone such as a musician or a comedian. [informal] The two bands join forces for a gig at the Sheffield Arena on November 28. He supplemented his income with occasional comedy gigs. Synonyms: show, production, appearance, presentation More Synonyms of gig.
