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Definition

gig economy

A gig economy is a free market system in which temporary positions are common and organizations hire independent workers for short-term commitments. The term "gig" is a slang word for a job that lasts a specified period of time; it is typically used by musicians. Examples of gig employees in the workforce could include work arrangements such as freelancers, independent contractors, project-based workers and temporary or part-time hires.

There has been a trend toward a gig economy in recent years. There are a number of forces behind the rise in short-term jobs. For one, the workforce is becoming more mobile and work can increasingly be done remotely via digital platforms. As a result, job and location are being decoupled. That means that freelancers can select among temporary jobs and projects around the world, while employers can select the best individuals for specific projects from a larger pool than what's available in any given area.

Digitization has also contributed directly to a decrease in jobs as software replaces some types of work to maximize time efficiency. Other influences include financial pressures on businesses leading to a flexible workforce and the entrance of the millennial generation into the labor market. People tend to change jobs several times throughout their working lives, especially millennials, and the gig economy can be seen as an evolution of that trend.

The gig economy is part of a shifting cultural and business environment that also includes the sharing economy, the gift economy and the barter economy. The cultural impact of the gig economy continues to change, for example, with the advent of COVID-19 in 2020 -- where the pandemic has had a large influence.

Who is part of the gig economy?                             

Companies, gig workers and consumers all make up the gig economy. The types of organizations that the gig economy can apply to range from technical positions to transportation positions.

For example, some industries that include gig economy jobs are:

  • IT
  • Software development
  • Project management
  • Accounting and finance
  • Education
  • Construction
  • Media and communications
  • Freelance writing
  • Arts and design
  • Transportation
  • Material moving

There isn't a single profile for who gig economy workers tend to be. However, these workers can include freelancers, independent contractors, project-based workers and temporary or part-time hires. In 2017, 6.9% of all US workers were independent contractors. Gig workers are generally not easy to identify in surveys about employment and earnings, but reportedly, less than half of these workers rely on gigs as their primary source of income. Some studies have shown that men tend to take more labor-based gigs and try to rely on this for income, while women will be more likely to take sales or marketing gigs for supplemental income. 

Consumers may participate in the gig economy as a matter of convenience, as with ride-sharing or food delivery apps. Others may participate in it in terms of entertainment, as with concert-goers. Others still, may participate in the gig economy as a potential alternative to non-gig products or industries. For example, a person may choose to stay at an Airbnb instead of a hotel. There have been many popular gig-based services, including ridesharing apps like Uber or food delivery services like Grubhub. However, in 2020, the gig economy began changing how customers use these services due to COVID-19.

A survey was conducted by the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research in 2020 about how consumer attitudes changed regarding ride-hailing and delivery services. The survey found a divide in user base. Americans with higher incomes were more likely to use these delivery services to help reduce their risk of infection. Regarding customers who previously used ride-hailing services, 63% said they had not used the service since March of 2020, and 54% said they feel uncomfortable using a ride-hailing service during the COVID-19 outbreak. With the presumable loss of customers, however, the percentage of individuals using delivery services remained approximately the same. This could've been caused because those who cut back on these services because of comfort and cost was balanced by some users, increasing their reliance on these services. Additionally, people with higher household incomes had more groceries delivered to their homes at this time. Households with incomes of about $100,000 a year were about twice as likely to have increased their use of grocery delivery services, AP reported.

However, even though delivery services remained about the same, some services still lost money. For example, even though GrubHub's daily average orders rose 32% in the second fiscal quarter, it still lost money in efforts to protect drivers and prop up struggling restaurants.

Common gig economy jobs and industries

Gig economy jobs may include multiple positions found in common industries that hire gig workers. For example:

  • IT gigs may include freelance work for information security engineer and network Analyst jobs.
  • Software development gigs can include DevOps engineers and UX
  • Freelance writer gigs may include gigs for content writer and copywriter jobs.
  • Accounting and finance freelance gigs can include independent consultants and mortgage representatives.
  • Transportation jobs can include ride-share drivers.
  • Construction gigs can include carpenters and other construction workers.
  • Art and design gigs can include musicians or graphic design
  • Administrative gigs can include pharmacy technician and design administrative assistant jobs.
  • Media and communications gigs can include technical writers and photographers.
  • Education gigs can include substitute instructors and tutors.
  • Project management gigs can include project or office manager jobs.

Perks of the gig economy

In a gig economy, businesses save resources in terms of benefits, office space and training. They also have the ability to contract with experts for specific projects who might be too high-priced to maintain on staff. From the perspective of the freelancer, a gig economy can improve work-life balance over what is possible in most jobs. Ideally, the model is powered by independent workers selecting jobs that they're interested in, rather than one in which people are forced into a position where, unable to attain employment, they pick up whatever temporary gigs they can land.

Issues with the gig economy

However, the gig economy isn't for everyone. Some downsides include:

  • Lack of benefits may be the biggest downside. A gig worker won't have health insurance or other benefits they would get from working as full-time employee
  • By labeling workers as independent contractors, a hiring organization will not need to pay those workers minimum wage, deliver benefits or pay for overtime.
  • Work-life balance can be disrupted if the worker isn't used to making their own schedules.
  • Because temporary employees are cheaper to hire, the gig economy may make it harder for full-time employees to develop their careers.
  • Inconsistent income can also be an issue. Having enough work to maintain a stable income from gigs can be a continuous worry in terms of job security.
  • Taking on too many gigs may also add to difficulties in scheduling and may lead to burnout.
  • It will be more difficult to maintain relationships between workers, employers and clients long term.
This was last updated in October 2020

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