What is a Gig Economy?
A gig economy is an economy that operates flexibly, involving the exchange of labor and resources through digital platforms that actively facilitate buyer and seller matching.
In the gig economy, organizations hire independent contractors and freelancers instead of full-time employees. It is because work is allocated on a temporary basis, not requiring a systematic schedule. A similar arrangement can be seen in companies such as Uber, DoorDash, and Airbnb.
The result of a gig economy produces cheaper, more efficient, and flexible services that can offer consumers a unique and fast alternative to regular, standardized business. In addition, it is solely operated through the internet, making it an extremely popular choice for the younger demographic.
In the United States, it is estimated that about one-third of the population is operating in some form of gig capacity. The number is expected to rise as more organizations adopt independent contractor work in order to save time and money.
The gig economy has risen drastically in popularity over the last half-decade and is now a very common way for individuals to earn a second stream of income.
More precisely, it is estimated that 1.6 million workers worldwide get their income from the gig economy.
Advantages of Working in a Gig Economy
Operating in the gig economy produces a wide array of advantages realized by both the business and the workers.
Shown below are some of the advantages realized by businesses:
Minimizing costs and expenses are widely considered one of the major benefits of operating in the gig economy. This is because businesses are able to hire off-site workers which significantly reduces the need to maintain expensive workspaces and large offices.
In addition, hiring independent contractors completely eliminates large expenses such as employee benefit packages, retirement plans, and paid sick leaves.
2. Labor Force
The gig economy provides a labor force that is able to directly match the company to the freelancer. This removes the hassle of dealing with a middleman throughout the hiring process, thus, making it easier to find people to complete the job.
3. Output Production
Modern workers in today’s society are beginning to value flexibility much more than compared to in the past. This is why the gig economy prospers.
Individuals who are interested in accumulating extra income are attracted to applying for a position that offers a unique work schedule. Such flexibility directly impacts employee motivation, which in turn, creates a positive correlation to output production.
Shown below are some of these advantages realized by the workers:
Independent contractors in the gig economy are not required to work in offices, rather, they work in their own spaces. It varies from someone working in a home office writing articles to someone working from their car driving for Uber.
Workers operating in the gig economy are allowed to work any of the hours they desire. In most cases, a task will be given to a worker with an end date, but when they work on it is completely up to their discourse.
As mentioned above, the gig economy is an increasingly attractive market due to the sheer flexibility that allows individuals to earn extra income.
Disadvantages of Working in a Gig Economy
While there is a wide variety of advantages that the gig economy produces, there are also some downsides that tend to make the process difficult.
Shown below are the disadvantages realized by businesses:
1. Worker Commitment
Individuals who work as freelancers may not be as invested in their organization as if they were hired full-time. In addition, gig economy companies are generally not known to incentivize their employees.
Such an arrangement can create loyalty issues, reduce the likelihood of further work, and decrease motivation to work overall.
2. Ethical Issues
In some cases, organizations that operate in a gig economy are criticized for the ethical practices they perform. Their employment is casual, does not offer benefits, and generally does not offer competitive wages.
Shown below are the disadvantages realized by workers in the gig economy:
1. Lack of Benefits
Organizations operating in a gig economy do not provide benefits to their workers. Independent contractors are not completely considered “employees” of the business.
2. Personal Expenses
In some cases, organizations within the gig economy are not required to cover personal expenses such as gas used while driving for DoorDash.
Being an independent contractor is an extremely independent job. For some people, the arrangement is a major motivation tool, but for others, it can create a feeling of isolation, which can negatively affect production and mental health.
Prominent Gig Economy Companies
The gig economy is consistently growing each day, becoming one of the largest segments of businesses we interact with daily.
Shown below are some of the most renowned gig economy companies and their revenue earned in 2020:
Thank you for reading CFI’s guide to Gigi Economy. To keep advancing your career, the additional CFI resources below will be useful: