In recent years, there's been an increasing trend toward the gig economy. This trend is driven by advancements in technology and a more tech-savvy and mobile workforce that favors remote work via digital platforms.

The effect is an increasing decoupling between locations and jobs in the sense that freelancers or platform workers can bid for a temporary job or projects worldwide through popular platforms. On the other hand, employers or business owners can choose the most qualified candidate from a large pool of skilled freelancers available to undertake such a project.

This arrangement is convenient for both the employer and the gig worker. For instance, it saves employers money since they spend more on permanent employees (especially when you factor in employee benefits, which they're mandated by law to provide). To the gig worker, it gives them an avenue to earn passive or primary income without hassles.

According to projections by Statista, 50.9% of the U.S. workforce in 2027 will be freelancers. For context, that's roughly 86.5 million American workers. This upward trend is bound to persist because the gig economy is a vital aspect of a broader shift in the cultural and business environment encompassing the barter economy, the gift economy, and the sharing economy. Influenced by the coronavirus pandemic, the cultural impact of the gig economy is poised to grow continuously.

Fuelled by globalization and technological advancement, the gig economy has become not just an avenue for passive income but the primary source of income for many people. This article will enlighten you about the gig economy and its pros and cons.

What Is a Gig Worker?

Gig work refers to specific jobs (via ongoing contract or a temporary position) undertaken by a gig worker within a short period of time. Such short-term assignments are either project-based, part-time, hourly, or daily.

A gig worker is an independent contractor that engages in short-term jobs and gets paid after completing a specific task. Freelancers, 1099 contractors, contingent workers, independent workers, and platform-workers are sometimes used interchangeably as gig workers. Often, gig workers rely on apps or online platforms to find jobs.

What Is a Gig Economy?

For most people, Uber and Airbnb quickly come to mind once the gig economy is mentioned in a discussion. However, the gig economy goes deeper than that and encompasses multiple industries. The gig economy is a free market system where gig workers are hired for short-term assignments, jobs, services, or tasks. It is made up of either companies and freelancers or contractors and consumers.

Big cooperation and small business owners, in a bid to save on costs, engage the services of these freelancers as it's less costly compared to full-time employees. In most cases, the tasks are offered remotely, eliminating the need to meet up with the client. With the aid of technology, it has become easier for gig economy workers to perform their tasks without hassle. Equipped with a smartphone, a steady Internet connection, and marketable skills, you can work from anywhere at any time and earn a reasonable income. This makes for flexibility and comfort.

A Brief History of Gig Work

Gig work as a concept has been around for a while. The word "gig" was used by jazz musicians around the 1920s to describe their type of performance. Back then, musical concerts were often referred to as gig works.

Around 1940, during WWII, big companies were offering part-time laborers to clients that needed them to fill their workforce. The 1995 emergence of Craigslist, an internet-based marketplace that incorporated gig works, paved the way for platform-based outsourcing that gave rise to Elance (now Upwork) in 1998. Since then, so many other platforms have been developed to connect freelancers with clients who want specific tasks done.

In 2008, the popular house-renting platform Airbnb emerged, allowing homeowners to earn passive income by renting out their properties to clients for a specific period of time. A year later, in 2009, Uber was launched to allow people with vehicles to carry clients from their houses to their destinations in a comfortable manner. Lyft emerged in 2012 as a ride-hailing competitor to Uber. Post pandemic, the gig economy is poised to witness a boom as people discover that most work can be done remotely.

Full-Time Employees vs. Gig Workers

Gig workers can perform multiple tasks for various clients. On the other hand, full-time workers have specific job descriptions that they carry out until termination, resignation, or retirement. Their salary is well-structured and they enjoy employee rights like minimum wage protection, health care or health insurance, and other perks (unlike temporary workers).

Unlike full-time employees, however, gig workers enjoy flexibility concerning whom to work for and when to work. In essence, they're their own bosses and make their own hours. The flexibility offered by this work arrangement makes for an outstanding work-life balance.

Types of Gig Work (Definition of Terms)

Different terms exist for describing gig workers. All of the following terms lay credence to self-employment:

Freelancers

A freelancer offers services to clients usually on a short-term basis and gets paid immediately when the specific task is done. Freelancers often provide services in a specialized area, such as article writing, graphics designing, web development, SEO, etc.

Independent Contractors

An independent contractor or contract worker describes a worker hired for a specific project that needs to be completed within a particular period of time. The job contract of an independent contractor also ends once the project is completed and they are paid for their services.

Platform Workers

A platform worker looks for gig work on freelance platforms such as Uber, Upwork, Amazon Flex, Fiverr, etc. Platform workers possess specialized skill sets and connect to clients in need of such skills for a short time and get paid via the platform once the task is successfully done.

Temporary Workers

A temporary worker refers to someone who is employed for a limited time. Unlike full-time employees, they usually have a defined end date. A temporary worker is also referred to as a seasonal worker or a casual worker and can be employed for just a day's labor.

Side Gig

Also referred to as a side hustle, a side gig is an additional job a person engages in aside from his main job to earn extra income. Both full-time and temporary workers can have side gigs. Side gigs can either be done remotely or during your spare time, so it doesn't affect your primary job.

1099 Contractors

This is a person who works independently instead of working for an employer. A 1099 contractor is still different from an employee even though their work can be similar. There's no clear-cut difference between an independent contractor or a 1099 contractor; both are self-employed. 1099 MISC is the tax form for independent contractors.

Seasonal Workers

Seasonal workers are mostly part-time workers who are hired for a short and limited period. They are usually employed to increase the workforce at a particular time or during a specific period. A seasonal worker may work during the holiday season and stop once the holiday is over.

Pros and Cons of Gig Work

If you're hoping to be a part of the gig economy, it'd be good if you weigh in the following pros and cons.

Pros of Gig Work

  • Flexibility - Gig work offers a unique kind of flexibility and freedom. You work at your convenience and as your own boss; you live by the rules only you set for yourself. You only accept jobs that appeal to you and terminate them once your tasks are done and you don't want to continue with the client. You often have a lot of time for other things, such as family, vacations, or even other side gigs.
  • Great pay rate - Depending on the particular expertise, most gig workers tend to get paid higher compared to full-time employees. In freelance work, you have complete discretion in setting your rate based on the type and quality of service you offer.
  • Alternative career opportunities - It provides an opportunity for full-time employees in other fields to pursue alternative career paths while still at their jobs. Additionally, getting a higher education while working is possible with gig work. You can work when you are off school and then resume once the holiday is over. By offering flexibility, you have both the funds and time to pursue your dream career.
  • Variety of jobs available - There is no limit to the number of gigs you can accept in the gig economy as long as you have the necessary skills sufficient to execute a task when given. With multiple gigs, you also get to build your portfolio, making you more marketable than when working with a single company for a long time.

Cons of Gig Work

  • No extra benefits - Most full-time workers enjoy extra benefits, such as health care, retirement plans, life insurance, etc. Gig workers will need to sort all of this out themselves.
  • Job insecurity - There is no job guarantee with gig work, especially for new freelancers. Reviews are critical in the gig economy. Any negative review on your profile can affect whether you can get jobs on any of the gig platforms. Once a specific task is achieved, the employer can decide to terminate the contract.
  • Inconsistent income - Income can also be inconsistent since you will only get paid when you perform specific tasks. Depending on the industry, there will also be fluctuations in how you get your income, so there is no guarantee on the amount you can make monthly.

Popular Industries That Recruit Gig Workers

The gig economy encompasses a wide range of industries, including:

  • Information Technology (IT): Web developers, database administrators, software developers, and business analysts are all key parts of the gig economy. If you have any of the above skills, you can sign up with Toptal to get you started. Jobs here are done remotely.
  • Writing: People passionate about writing, either niche-based or general, can leverage platforms like Upwork, Fiverr, or Freelancer to earn income. Popular writing gigs include a blog, landing pages, copywriting, content writing, and technical writing.
  • Finance and accounting industry: Prominent accounting gigs include bookkeeping, accounting consultants, tax returns preparation, and mortgage reps.
  • Transportation: You can leverage ride-hailing apps like Uber and Lyftto earn passive income in transportation.
  • Media and communications: Technical writers, photographers, video editors, graphic designers, reporters, and translators can offer their services on freelance platforms to earn extra income.
  • Education: Online tutors, instructors, teachers, and trainers are a vital part of the gig community.
  • Digital marketing: Digital marketers with skills in Facebook ads, copywriting, SEO, PPC, and email marketing can also offer services to clients to earn a reasonable income.
  • Delivery: Delivery services like DoorDash, Grubhub, and Postmates are all aspects of the gig economy.
  • Project management: Gigs like office managers, portfolio managers, and program managers are aspects of the gig economy.

Stay on Top of Your Business Finances With Skynova

Due to the high cost of employee retention and recruitment, most businesses source talents online to maximize their profits — which is good for the gig economy. However, to know whether they're making a profit or a loss, businesses need effective financial management.

With Skynova's accounting software, you do not need to worry about managing your business finances, as our accounting software has you covered. Our software helps you ensure that your business finances are in check and all of your transactions are fully recorded.

Notice to the Reader

This content aims to give you insight into the gig economy. Although most people find gig jobs to be convenient, your perception might differ. You can seek an expert opinion to know more about the gig economy.