What Is a Gig Economy?

What Is a Gig Economy?

A gig economy, also known as the sharing economy or access economy, relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees.

Gig workers have flexibility and independence but little or no job security. In a gig economy, employers save money when they do not have to provide benefits such as health coverage and paid vacation time.

Job Types

The gig economy is a labor market characterized by temporary, contract, and freelance jobs rather than permanent positions. People earn money from providing on-demand work, services, or goods.

A wide variety of positions fall into the category of a gig. The work can range from managing short-term rentals, tutoring, writing code, driving for ride-share services, delivering food, or authoring freelance articles. Colleges and universities cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.

The gig economy experienced significant increases in 2020. COVID-19 lockdowns forced people to work from home and rely more on purchasing goods and services online, and these trends continued when restrictions were lifted. In 2023, nearly 64 million Americans, 38% of the U.S. workforce, were freelancers or gig workers, according to an Upwork report. Independent contract workers contributed $1.27 trillion to the U.S. economy.

Benefits for Employers and Employees

Downside of a Gig Economy

The gig economy trend can make it harder for full-time employees to develop careers and establish a long-term reputation. The gig economy is often associated with eroding worker rights, loss of health insurance, and sick and vacation pay.

Employers are under little pressure to pay higher wages. Opening up positions to people living anywhere in the world, including places where the cost of living is much cheaper, allows employers to seek places with lower wages.

The flexibility of working gigs can disrupt the work-life balance, sleep patterns, and daily life. Long-term relationships between workers, employers, clients, and vendors can erode. This can eliminate the benefits of building long-term trust, customary practice, and familiarity with clients and employers.

The Bottom Line

Temporary, freelance, and part-time work, collectively known informally as the gig economy provides workers with more flexibility and allows companies to cut down on certain costs. While employers save money on health benefits or paid vacation time, gig workers must cover all business and personal expenses and report all earnings on their tax returns.