What Is the Gig Economy? A Quick Primer

We’re not going to lie.  There might have been a time in our lives when we thought that the gig economy had something to do with gigabits and gigabytes.  Thankfully, it’s a lot easier to understand than all that computing stuff.  We’re essentially talking about a gig, as in what a musician does.  Just applied to a lot of other types of work.  So what exactly is the gig economy? Here is a simple primer.

 

The Concept

The traditional concept of employment entails getting a job with a company and working that job for a long time.  Payment is typically determined by an hourly wage or a predetermined salary.  In return for loyalty and hard work, companies often offer employees generous benefits such as discounted health insurance, disability insurance, paid vacation, retirement plans, tuition assistance, and free gym memberships.

In recent years, much has been said about the move towards a gig economy, which in many respects is quite the opposite of the traditional employment model.  This type of labor market is characterized by a large number of independent contractors performing short-term work on a contract basis, often for a variety of different companies at the same time.  In other words, we’re referring to independent contractors piecing together a living by landing a sufficient number of gigs.  This type of model encompasses some associated terminology such as freelance work, project-based work, and temporary work.

While technology has been a key factor in connecting workers to work opportunities, this paradigm predates the widespread proliferation of household technology.  And while ride-sharing platforms such as Uber seem to have brought the gig economy into the mainstream conversation, a wide variety of work can be applied to this framework.  A small list of examples would include information technology, writing, graphic design, project management, and education.  Some estimates indicate that 36% of American workers (57 million) are involved in the gig economy.

 

Pros

As with most things in life, pros and cons exist.  Gig workers can enjoy a sense of empowerment, sometimes being able to determine if, when, and for whom they will provide a certain type of service.  Intertwined in this concept are the ideas of flexibility and work variety.  Thanks to technology, geography has become much less of a factor for certain kinds of assignments.  In today’s world, a North American can rather easily perform freelance writing for an Asian company.

Businesses can also benefit from the lack of geographic constraints in identifying appropriate workers.  Furthermore, the gig economy obviates the need for things like employee training.  As much of the work is done remotely, the necessity of maintaining large and expensive physical operations decreases.  Finally, not having to provide employee benefits can result in convincing savings.

 

Cons

Unfortunately, not all is sunshine and rainbows in regards to the gig economy.  Competition for gigs can be stiff, resulting in ongoing financial insecurity.  Critics have also argued that the independent contractor model has eroded years of hard work in acquiring worker protections.  As an example, gig workers are not protected by minimum wage laws.  Standard benefits such as health insurance, paid vacation, and overtime pay are off the table.  And for certain types of work, the absence of workers’ compensation can be of concern.  Of course, higher-skilled work that demands higher pay is less susceptible to some of these concerns.

Given the business benefits of using independent contractors, some argue that the line between employee and independent contractor has been blurred, often intentionally.  A consequence is that those preferring traditional employment are at risk of being overrun by their cheaper independent contractor counterparts.

Since the need for large physical operations could decline as above, governmental bodies could see a drop in the tax revenue that comes from actual physical entities.  Compounding the matter in the U.S. is the fact that confusion has existed among gig workers regarding the payment of self-employment and estimated quarterly taxes.

As a last point, the traditional relationships between employees, employers, and clients have been altered, creating a sense that the loyalty and trust that can be critical in the business world are now being jeopardized.

 

Obviously, this oversimplified outline captures only the basics.  But rather than continue writing, ending the summary here seems reasonable.  That strategy will keep the word count at a tolerable level.  And it’s time to move on to the next gig.