Article by: Lillian Kazmierczak - Finance Writer for Toarc United
As of August, more than 57.3 million Americans are working in the gig economy. In addition, it's been projected that by 2023, 52% of the US workforce will have worked as independent contractors or as gig economy workers. The gig economy is flexible, temporary, or short jobs where an individual or a company hires giggers, freelancers, and independent contractors to complete the job for an agreed-upon sum of money—opposed to a traditional 9 - 5 job or shift work that most of us are doing.
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When talking about a gig economy, we talk about many people doing temporary, part-time jobs or independent contracting. Many of these jobs rely on an internet connection-Uber, Doordash, freelance writers. The better the internet connection, the larger the city, the larger the gig community.
Many businesses and colleges use the gig economy to fill in their rosters because it is less expensive and eases staffing burdens. Many gig workers work from home, and most work part-time. Right now, 2/3 of the US workforce is gigging.
A Brief History of Gigs
While modern gigging started in 2009, Jazz musicians used the word gig in 1915 to describe their one-night jobs in clubs. By 1995, 10% of Americans worked "alternative" jobs such as independent contracting, temp work, and on-call.
Amazon jumped on the gig wagon in 2005 when they created AMK, Amazon Mechanical Turk. AMK offered jobs that artificial intelligence couldn't do. This continues at Amazon, but some jobs pay as little as $0.80/hr and are done mainly by workers in foreign countries who are glad to have the opportunity for these jobs.
In 2005, two roommates conceived Airbnb from this economy, trying to make rents cheap. By 2010, Airbnb was worth $38 billion. Uber appeared five years later and has given over one billion rides. While not all gigs turn into multi-billion dollar ventures, boo-yah to those who do!
Earlier this year, as things started to get back to normal and people could go back to work, people started leaving their jobs. Hence the name, the " Big Resignation."
These gigs are becoming a source of flexibility and independence. There is a satisfying work balance and the bonus of increasing your income.
Who Is Using Gigs and Why
Gig workers give businesses big and small a larger employee pool. In addition, it eliminates the commuter time, so there is no worry of living too far from the job. Finally, computer technology creates office jobs that can be done from home (goodbye latch-key kids, Mama has a gig now!).
Employees can take advantage of better educated and more talented workers because location no longer matters. In addition, economically, smaller businesses can outsource a job they don't do onsite, saving them time and money and still getting the job done.
The pandemic gave gig work a huge push. Most people worked from home, thus creating home-based delivery gigs that included food and necessities; you name it, it's delivered to your door.
Many gig workers are entrepreneurs who don't have a regular sleep pattern or a routine daily schedule. There are no pensions, PTO, health, or dental insurance. You don't work; you can't pay your bills.
Many people are using gigs as a second job in our current economy. So the more skills you have, the more gigs you can do! It's terrific for parents who can work their schedules around sports and school activities, be home on weekends, and still earn a living.
The Pros and Cons of a Gig Economy
The biggest pro is the ability to increase your income. This comes with flexibility; you choose what you want to do, when, and how. Most jobs are done remotely, usually on a smartphone or computer.
You don't have to relocate; you can live in any neighborhood, anywhere in the world, and have an income. Most computer service-related gigs have courses; youtube how-tos, and blogs on how to hone a skill. This allows everyone accesses to the education needed to do a gig.
Gig work creates inclusivity; disabled and workers on the spectrum who don't have access to transportation or have social issues can still make a living and be independent. It allows you to create a work-life balance around your life.
Where there are pros…there are cons, and the gig economy has some big ones. First, there are no traditional benefits. No medical, dental, vision, or pension options. Some US senators are trying to pass the Pension Portability Act to fix the pension options issue (see my Pension Portability article for an in-depth look).
There is no social aspect to gig work; there is no water cooler talks, no one to have lunch or take a break with. You no longer have co-workers.
If you are not motivated or disciplined, this is not your gig (pun intended). You have to get up and do the job; There is no boss to push you and no co-workers to show you what needs to be done…it is all you!
You are running a mini business, where you are the marketer, employee, and secretary. You wear all the hats, every day and when you don't get gigs and bring in income, you can't pay rent or eat.
How You Gig
I will use writing as the gig; I know that one best. Using a freelance platform, you create a profile that you can bid on jobs through the platform. You submit a bid, and the employer offers you a project based on your bid and experience. There is an agreed-upon payment, and when the work is completed to the employer's satisfaction, you are paid. Of course, this is a simplified version of the process.
If a writer takes a project worth $50 on a platform, they must pay a fee of 8-10% of the project. You are now getting $45 for the project. Once taxes are taken at approx. 30% in the US, you are now earning $28 for the original $50 project (most of which you are claiming on taxes and getting a percentage back).
Everyone has to decide what works for them. For example, long-term giggers work hard to have long-term clients to create financial stability.
But… isn't this how all small businesses start out. No one goes from $28 to $28 million in 3-8 months. If it's a second job and lucrative, you can earn good money. When it's your livelihood, you learn quickly to put yourself out there, with plenty of dusting yourself off. The satisfaction of a successful gig career is something you can't beat!
Most gig workers use a platform or digital job board and go through the process I just talked about. Employees pay a fee to hire through a platform; repeat employers will buy a subscription (subscriptions come with money-saving perks) to save money. The cost is usually between 2.5% and 4% of the project fee; companies outside the US pay a larger fee. It is not unusual for employers and freelancers to build a relationship and leave the platform, giving both a financial perk.
Currently, gigs are not regulated; no government agency is monitoring platforms or the rights of the gig worker.
Recently in New York City, the NYC Transport and Limousine Commission requested data from transportation platforms such as Uber and Lyft. After analyzing all the data, the commission set a minimum wage for all contract workers, allowing them to earn a livable wage. This will be a big win for the future of gig workers.
The Global Gig Economy
The US and UK are the top two nations in the top ten nations with the most gig workers. Brazil, Pakistan, and Ukraine are the third, fourth and fifth. The Philippines, India, and Bangladesh are the sixth through eighth nations.
Unfortunately, some gig workers in foreign countries do the same work as giggers in the US and UK. Still, they do it for less money and frequently in more dangerous conditions (food delivery giggers in Asian countries ride bicycles or scooters on busy streets to deliver hot food to businesses). Unfortunately, there is no regulation in these countries for these workers at this time.
Workers in India and Bangladesh tend to be the lowest-paid workers, frequently seeking gigs on the US and UK markets to earn a living. This led Spain and the Netherlands to create "budgets," an agreement with the trade unions, and created representation for the gig workers to ensure they receive the best salaries in their fields. As a result, they have created a gig economy that keeps their workers in their economy.
Spain currently has the best self-employment protection, creating a fixed monthly minimum contribution to its social security. However, countries are just starting to focus on workers and their wages and the lack of benefits. It will be interesting to see the solutions and who will benefit the most from them.
China has one of the largest gig economies; one-quarter of its workers are gig-based. But, they have gone a step further and created a few gigs you won't find anywhere else. They have designated drivers in response to years of alcohol-related issues involving Chinese businessmen. This service has reduced DUIs in China by 11% since it started.
They also have a Boyfriend rental gig due to the stress created by the pressure for Chinese women to be married by the age of thirty. The best gig is the Personal line-stander gig; people in China don't want to stand in line; the gigger does it for them.
I have to admit, this is entrepreneurism at a new level, the perfect case of finding a need, filling a need. Finally, someone was listening to the market!
After much protesting and pressure from the unions and labor movements, China decided this week to amend its trade-union laws to expand the inclusion of specific gigs. While these laws don't include all gig workers, it is a big step for the lesser-paying gigs in China. As the gig economy progresses, regulations and possible unionization will be needed globally for gig workers.
The Generations of Gig Workers
As of September, people ages 25 – 40 (millennials) make up 53% of all gig workers. Not surprisingly, many of them had difficulty finding work after college. They are the largest group surveyed who are unhappy in their current jobs.
The Gen Z's, ages 20 – 24, show the most significant increase in the last two years of new gig workers. It is up from 14% - 22%. They have the skills and tech know-how to do gigs well enough to make a future in them; they are the hungriest for new opportunities.
When you look at who makes the most monthly income on gig platforms, the workers are older. Gen Xers (41 – 56 years old) brings home an average of $352 a month, follow
ed closely by the Baby Boomers (57 – 75 years old), earning $331 monthly. That is a lot of people forty-one and older who are re-evaluating what they want from their current job.
The Future of the Gig Economy
So, what will the Gig economy look like in the future?
You are always going to have traditional employment. However, the need for steady, predictable income is too great a draw for employees, especially older employees who have worked this way their whole life.
Companies love the money they save hiring a gig worker to do a specific project. If you only need an employee to check e-mails for two hours five days a week, it makes sense to outsource this task to a gig worker instead of hiring an employee with full benefits to do the same job. So, you can see where the future of gig work is going.
The best solution for companies is to use both to create a blended workforce to their full advantage. A collaboration of full-time employees with gig workers to fill in on the projects that full-time employees can't do or don't have time for.
Creating a culture of accountability, you take a project and ensure it is completed in that time delegated.
This can create a long-standing relationship between the gig worker, the business, and the full-time employees. Gig workers want steady work, companies need the job done, and full-time employees have the option of taking off for a school function, knowing that a gig worker can take a task and still have the whole project run smoothly and stay on time. It gives companies and full-time employees a backup plan that was not offered in the past.
As gig work hits an all-time high, there will be a need to create a benefits package on either a corporate or federal level. If 57% of the workforce is working without benefits, you have the workers, their spouses, and children without medical and dental, that is more than our present healthcare system can absorb.
The gig economy is here to stay; although it is not replacing traditional jobs. Digital technology and the internet led us to gig work and digital platforms. This is a progression like a smartphone was for apps.
The employment shift started in the 70s and 80s when management saw employees as cost deficient and not as a source of profit. The unemployment they created led to temp agencies and a new source for employment, laying the foundation for the gig economy!
If you are interested in the gig economy or are already a gigger, in need of some resources, you may want to look into the following resources:
Gigs Done Right is a fantastic one-stop resource with everything you'll need, including freelancing resources, gig-based resources, blogs on the gig economy, resources for actual money-making gigs, and side hustles.
Additional US Government IRS information about tax management for gig workers is offered by the IRS that has forms, information on when and how to pay estimated taxes, and how to track expenses. If you're going to be a gig worker, there is a goldmine of how-to tax knowledge on one site.
If you're looking for more Thoughts of a Random Citizen, head to the podcast section. You will find some fascinating podcasts and other information.