What Is the Gig Economy? Definition, Pros & Cons, Trends

A gig economy is an economic transformation in which work in many sectors is becoming temporary, unstable, and patchworked. The gig economy involves the exchange of labor for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment by task basis.

It entails workers spending less time at one job, risk of time spent without income, workers undertaking more jobs (possibly at the same time), and unpaid time spent searching for tasks or gigs.

An Overview of the Gig Economy

The gig economy is the collection of markets that match providers to consumers on a gig (or job) basis in support of on-demand commerce. In the basic model, gig workers enter into formal agreements with on-demand companies to provide services to the company’s clients.

Prospective clients request services through an Internet-based technological platform or smartphone application that allows them to search for providers or to specify jobs. Providers (i.e., gig workers) engaged by the on-demand company provide the requested services and are compensated for the jobs.

Business models vary across companies that control tech platforms and their associated brands. Some companies allow providers to set prices or select the jobs that they take on (or both), whereas others maintain control over price-setting and assignment decisions.

Some operate in local markets while others serve a global client base. Although driver services (e.g., Lyft, Uber) and personal and household services (e.g., TaskRabbit, Handy) are perhaps best known, the gig economy operates in many sectors, including business services (e.g., Freelancer, Upwork), delivery services (e.g., Instacart, Postmates), and medical care (e.g., Heal, Pager).

With some exceptions, on-demand companies view providers as independent contractors—not employees—using their platforms to obtain referrals and transact with clients. This designation is frequently made explicit in the formal agreement that establishes the terms of the provider company relationship.

In addition, many on-demand companies give providers some (or absolute) ability to select or refuse jobs, set their hours and level of participation, and control other aspects of their work. In some ways then, the gig economy can be viewed as an expansion of traditional freelance work (i.e., self-employed workers who generate income through a series of jobs and projects).

However, gig jobs may differ from traditional freelance jobs in a few ways. The established storefront and brand built by the tech-platform company reduce entry costs for providers and may bring in groups of workers with different demographic, skill, and career characteristics. Because gig workers do not need to invest in establishing a company and marketing to a consumer base, operating costs may be lower and allow workers’ participation to be more transitory in the gig market.

Occupations For Gig Employment

Gigs are more likely in some occupations than in others. Work that involves a single task, such as writing a business plan, lends itself well to this type of arrangement. Any occupation in which workers may be hired for on-demand jobs has the potential for gig employment.

Transportation and material moving. Ridesharing apps have helped to create opportunities for workers who provide transportation to passengers as needed, and on-demand shopping services have led to gig jobs for delivery drivers.

Media and communications. The services of technical writers, interpreters and translators, photographers, and others in this group are often project-based and easy to deliver electronically, fueling a market for gig workers

Arts and design. Many occupations in this group, including musicians, graphic designers, and craft and fine artists, offer specific one-time services or customized products, which makes them good candidates for gig work.

Computer and information technology. Web developers, software developers, and computer programmers are among the occupations in this group in which workers might be hired to complete a single job, such as to create a small business website or a new type of software.

Construction and extraction. Carpenters, painters, and other construction workers frequently take on individual projects of short duration, a hallmark of gig jobs.

Trends In Gig Economy

Along with the popularity of gig work outsourcing platforms like Upwork, Guru, freelancers.com, etc., it has been found that the demand-supply of gig work became more globally dispersed. Demand comes mostly from advanced nations like the USA, UK, Canada, Australia, etc.

However, supply comes from low-income countries like India, the Philippines, etc. Freelancers in the USA get 75 percent of their gig work from local clients, whereas in developing nations (India, Pakistan, Philippines), freelancers get about 90 percent of gig works from overseas clients.

Since USA gig workers work for their local clients, their hourly wages are historically higher than their counterparts in other nations. Recent trend shows freelancers in low-income countries can charge higher per hour wages (USD 4/hr. to USD 20/hr.) after upskilling in IT/programming domains.

However, employers from the developed nations can have access to freelancers in low-income countries on digital platforms. Hence, they play the “labor arbitrage” and hire the workers at the cheapest rate. So, in the global context, the gig economy is predominantly pro-employers and there is downward pressure on labor wages.

Pros

Variety. Gigs may provide workers with a chance to try several types of jobs. As a result, they present variety and career exploration to both new and experienced workers.

Flexibility. People who want to work without having set hours may look for gigs to fit their schedules.

Passion. You might want to select gigs the same way you would traditional employment: by finding work in which you pursue your interests. And depending on how you schedule your gigs, you might be able to choose among many passions.

Cons

The gig economy, however, also has a dark side. Emerging evidence is pointing towards a range of negative outcomes for workers: low pay, precarity, stressful and dangerous working conditions, one-sided contracts, and a lack of employment protection.

This can result in ‘a raw deal’ for workers, which in the US context can also be seen as an attempt to ‘replace the New Deal’. Some platforms have replaced previous kinds of work – for example, minicabs being replaced by Uber – whereas others are creating new kinds of jobs – the training of machine learning systems by image tagging and data entry, for instance.

In all cases, existing working practices are being transformed. The so-called ‘standard employment relationship’ is being undermined through fragmented work and increased casualization. Activities that were previously considered to be a formal or standard job can
be mediated through platforms to try and bypass rules, standards, and traditions that have protected working standards.

One example of this is the new platform being proposed for the UK’s National Health Service that would have nurses bid for shifts under the guise of offering flexibility rather than being provided with more stable contracts.

In conclusion, a gig economy helps employers much more than workers, but the insecurity of temporary employment prevents peak productivity that comes with experience doing a job and the security that comes from knowing that the job will be there for an extended period of time.