Gig economy
The gig economy is characterized by short-term contracts and freelance work, allowing individuals to take on jobs—commonly referred to as "gigs"—at their discretion. This model offers significant flexibility and autonomy, as freelancers can choose when and how much they work. However, it also comes with downsides, including a lack of job security and benefits typically associated with traditional employment, such as health insurance and retirement plans. The rise of digital technology, particularly the internet and mobile apps, has fueled the rapid expansion of the gig economy, making it easier for companies like Uber and Airbnb to connect service providers with customers.
In the United States, participation in the gig economy has grown significantly, driven by shifts in the labor market and consumer demand for on-demand services. For instance, during the COVID-19 pandemic, many individuals turned to gig work due to job insecurities and increased demand for delivery services. Critics of the gig economy raise concerns about worker protections, arguing that the lack of consistent employment terms can undermine workers' bargaining power and financial stability. As this sector continues to evolve, discussions about regulation and the classification of gig workers remain prominent, reflecting the complexities and varied experiences within this modern employment landscape.
On this Page
Subject Terms
Gig economy
A gig economy refers to a working arrangement that revolves around individual jobs. In a gig economy, employers utilize short-term contracts instead of long-term employment arrangements. Freelancers or contractors can opt to take these contracts, allowing them to work whenever they choose to do so. In this manner, freelancers are given an unprecedented amount of freedom. However, in exchange, they lose much of the job security associated with traditional forms of employment. Freelancers are never guaranteed that work beyond their immediate contract will be available in the future.
Overview
In a traditional economy, most workers are long-term employees. They are paid an hourly wage or salary by their employer in return for an expected amount of work. This applies to both skilled and unskilled labor. If employees do good work for their employer, they can often expect to be paid more or promoted. However, if they displease their employer, they can expect to be paid less or demoted, or even fired. Many economic experts and business owners believe that long-term employees of a business who have been paid and treated well will develop a sense of loyalty to their employers. This sense of loyalty will push the employees to work hard and deliver excellent service for their employer.
In a gig economy, employers do not use long-term employees. Instead, they pay freelancers, also called contractors, to complete individual jobs. In this style of economy, freelancers can take as many jobs, or "gigs," as they desire. They are paid on a job-by-job basis, and are compensated only for the work they complete. They do not have set hours.
Freelancers have less job security than their traditional counterparts. If the employer stops offering work to a freelancer, the worker has little recourse. It is never a guarantee that an employer will continue to offer contracts to a particular freelancer. Additionally, the rate at which any freelancer is paid can be renegotiated with each contract offered. They are also rarely offered benefits, such as health, eye, or dental insurance, which are associated with many traditional forms of employment.
Gig-based work has long existed, but historically was mainly limited to certain industries and did not account for a significant portion of workers in the United States or most other countries. However, the gig economy expanded rapidly in the early twenty-first century, driven largely by advances in digital technology, especially the internet and the proliferation of personal computers and smartphones. Such technology not only made it easier to coordinate independent, on-demand work, but also contributed to complex, large-scale economic disruptions that caused many people to seek alternative forms of work. For example, improved digital communications helped accelerate globalization, which led to outsourcing and the decline of manufacturing jobs in developed nations, which in turn meant more blue-collar workers looking for ways to generate income. According to a 2018 Gallup poll, more than one-third of US workers participated in the gig economy, although many of these workers also had traditional day jobs.
The gig economy model became particularly popular in the transportation industry. Pioneering ridesharing businesses like Lyft and Uber developed mobile applications (app) to allow drivers to work as taxis. Drivers set their own hours, simply logging on to the app when they want to work. The driver is told where to go through the app to pick up their next customer. Unlike traditional taxi drivers, however, rideshare drivers must pay for things like gasoline, car maintenance, and fees related to licensing; this lowers their net income compared to a traditional taxi driver making the same amount per hour. Some observers have also criticized rideshare businesses for not being subject to the same training and safety requirements as traditional taxi services. Considerable debate soon emerged over the classification of rideshare drivers as independent contractors rather than traditional employees. Notably, in 2019 California passed a law that recognized rideshare drivers and many other gig workers as employees, giving them stronger worker protections, but stiff opposition from Uber, Lyft, and other companies led to a ballot initiative that overturned the law the following year (though some worker protections were retained).
Beginning in 2020, the coronavirus disease 2019 (COVID-19) pandemic had a large impact on the numbers of people employed in gig-based work. As schools and businesses closed, many people sought the flexibility of gig work. Additionally, more workers were needed as demand for services such as grocery delivery increased during the pandemic. On the other hand, some workers left jobs out of fear of contracting COVID-19, especially in those jobs that had frequent close contact with others, such as Uber drivers. Government economic assistance to workers affected by the pandemic made some special provisions for gig workers, such as
By 2021, according to a Pew Research survey, 16 percent of Americans had earned money doing some kind of online gig work. The most common of these jobs included rideshare driving, delivering groceries or restaurant food (well-known companies in this sector included Instacart and DoorDash), and completing household tasks (TaskRabbit). Hispanic Americans and people with lower overall income were more likely to have participated in the gig economy. For survey respondents who had earned money from an online gig platform in the previous year, 31 percent did so as their main job while 68 percent did so as a side job. Meanwhile, many estimates suggested that the number of gig workers was likely to continue to grow substantially as the national and global economies continued to evolve into the 2020s.
The rise of the gig economy brought much media attention, as well as increased scrutiny from economists, labor activists, and politicians. While supporters claim that the gig economy is innovative and offers both workers and consumers more options, in many cases it has nevertheless drawn sharp backlash. Some critics argue that gig economies remove too much of the workers' bargaining power. They claim that the inconsistent nature of the work makes freelancers often unable to refuse work when a company offers contracts, and that those who do turn down a contract may be unfairly refused work in the future. Furthermore, the on-demand nature of gig work can pose many problems when workers come to rely on it as their main source of income; for example, it may become more difficult for workers to operate on a normal daily schedule or sleep cycle, with potential negative ramifications on their mental and physical health. For their part, companies may try to exploit loopholes to classify workers as contractors rather than employees in order to avoid providing benefits.
As a result of these and other concerns, there has been much debate over government regulation and oversight of the gig economy. In October 2022, the administration of President Joe Biden released a proposed rule that would make it easier for some gig workers to claim full employee status under the Fair Labor Standards Act (FLSA). The rule was enacted in March 2024, but immediately faced legal challenges backed by many business interests that argued the regulations would increase labor costs and cause major economic problems. Many businesses also continued to challenge state-level legal restrictions on independent contractor arrangements, most prominently in California. Similar debates emerged in other countries as governments considered and in some cases implemented their own regulations on gig work.
Bibliography
Anderson, Monica, et al. "The State of Gig Work in 2021." Pew Research Center, 8 Dec. 2021, www.pewresearch.org/internet/2021/12/08/the-state-of-gig-work-in-2021/. Accessed 25 Jan. 2022.
Bhattarai, Abha. "Now Hiring, for a One-Day Job: The Gig Economy Hits Retail." The Washington Post, 4 May 2018, www.washingtonpost.com/business/economy/now-hiring-for-a-one-day-job-the-gig-economy-hits-retail/2018/05/04/2bebdd3c-4257-11e8-ad8f-27a8c409298b‗story.html. Accessed 8 Mar. 2019.
Chapman, Michelle, and Alexandra Olson. "Labor Department Proposal Could Upend Rules for Gig Workers." PBS News Hour, 11 Oct. 2022, www.pbs.org/newshour/economy/labor-department-proposal-could-upend-rules-for-gig-workers. Accessed 6 Mar. 2023.
Charlton, Emma. "What Is the Gig Economy and What's the Deal for Gig Workers?" World Economic Forum, 22 Nov. 2024, www.weforum.org/agenda/2021/05/what-gig-economy-workers/. Accessed 7 Jan. 2025.
"Gig Economy: Definition, Factors Behind It, Critique & Gig Work." Investopedia, 22 July 2024, www.investopedia.com/terms/g/gig-economy.asp. Accessed 7 Jan. 2025.
Henderson, Rebecca. "How COVID-19 Has Transformed the Gig Economy." Forbes, 10 Dec. 2020, www.forbes.com/sites/rebeccahenderson/2020/12/10/how-covid-19-has-transformed-the-gig-economy. Accessed 25 Jan. 2022.
Ingall, Julia. "Millennials Guide: Be a Freelancer vs. an Employee." Investopedia, 30 Dec. 2024, www.investopedia.com/articles/personal-finance/082315/millennials-guide-be-freelancer-vs-employee.asp. Accessed 7 Jan. 2025.
McCue, T. J. "57 Million US Workers Are Part of the Gig Economy." Forbes, 31 Aug. 2018, www.forbes.com/sites/tjmccue/2018/08/31/57-million-u-s-workers-are-part-of-the-gig-economy/. Accessed 8 Mar. 2019.
Moy, Richard. "4 Questions to Help You Decide between Accepting a Full-Time Offer or Keeping Your Freelance Freedom." The Muse, www.themuse.com/advice/4-questions-to-help-you-decide-between-accepting-a-fulltime-offer-or-keeping-your-freelance-freedom. Accessed 7 Nov. 2017.
Pfeffer, Jeffery. "The Case against the 'Gig Economy.'" Fortune, 30 July 2015, fortune.com/2015/07/30/freelance-vs-full-time-employees/. Accessed 7 Nov. 2017.
Lutkevich, Ben, and Alexander S. Gillis. "Gig Economy." WhatIs?, TechTarget, whatis.techtarget.com/definition/gig-economy. Accessed 7 Jan. 2025.
Solomon, Michael S. "The Real Cost of Freelancers vs. Full-Time Employees." Huffington Post, 13 Apr. 2017, www.huffingtonpost.com/entry/the-real-cost-of-freelancers-vs-full-time-employees‗us‗58efd87de4b0156697224d86. Accessed 7 Nov. 2017.
Uzialko, Adam C. "A Mixed Bag: Navigating the Ups and Downs of the Gig Economy." Business News Daily, 13 July 2017, www.businessnewsdaily.com/10077-gig-economy-pros-cons-workers-employers.html. Accessed 7 Nov. 2017.