Uber, Lyft, AirBnB, Upwork, Postmates, Instacart, DoorDash, Grubhub and other on-demand delivery, rideshare companies have some of the most anticipated future IPOs that make investors salivate. They also are all members of the new freelance, self-employed and no-minimum hours sector often called the gig economy.
This workforce is growing rapidly all over the world as how workers engage with the economy have shifted dramatically. Today workers not only tele-work and tele-commute but also consult and provide services in multiple and flexible ways.
But what exactly is the gig economy? What are its plusses and minuses for the average worker?
A clear definition has proven difficult. Freelancing, self-employment and no minimum to the required hours of work: None of these terms entirely encapsulates the phenomenon. The Chartered Institute of Personnel and Development (CIPD) of the U.K. says, "The gig economy can be defined as a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer." The Oxford Dictionary of English says, “A labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.”
The website WhatIs.com has perhaps the most comprehensive definition:
A gig economy is a free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements … Examples of gig employees in the workforce could include freelancers, independent contractors, project-based workers and temporary or part-time hires.
The obvious next question is, how big is this economy? Some reports indicate that more than half of the American workforce will be participating in the gig economy within the next decade. The U.S. population is also increasingly engaging in on-demand, just-in-time services both as workers and consumers, causing this type of work to become integral to their livelihoods. Depending on the definitions in individual studies, gig workers currently make up anywhere from 4 percent to about 36 percent of the U.S. workforce – and that’s because this economy can potentially include every worker who doesn’t have a simple nine-to-five job.
Depending on your definition, that could mean part-time work completed in addition to a full-time job, contract employment or working full-time but through an online intermediary like Uber.
The gig economy comes with clear advantages: work-life flexibility, the chance for you to pursue a job you feel passionate about and the chance to plug in to an established work infrastructure. You should also realize the gig economy comes with drawbacks such as inconsistent employment, lack of protection regarding such employment rights as Workmen’s Comp and such complex tax obligations as filing quarterly and maintaining excellent records. Also, expenses like appropriate insurance coverage and fuel cost can reduce your actual take home pay to an hourly rate lower than what you might except from a direct employer.
Disadvantages of taking a gig in this new economy can include inconsistent employment, lack of protection regarding such employment rights as Workmen’s Comp and such complex tax obligations as filing quarterly and maintaining excellent records.
If you have the discipline and handle those factors, however, then you can make it work for you. There’s no doubt that the gig economy is an idea whose time has come.
© Financial Management Strategies, LLC
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