The gig economy is referred to as a free-market system where independent contractors, short-term workers, and freelancers are hired by traditional businesses. Their task is to perform individual jobs, assignments, or tasks. This term is derived from performing arts, where comedians and musicians are paid for individual appearances known as ‘gigs’. Millennial generation workers seem to be interested in deriving greater flexibility to balance their life-work demands. This compels them to change jobs numerous times throughout their lifetimes. This economy thrives due to advancements in technology, the fast-speed internet, and the ability to work remotely.
What is the size of the present gig economy?
As per reports, about 36% of U.S. workers in 2018 were gig workers. The primary job of 29% of workers was found to be alternative work arrangements. It included 24% of full-time workers and 49% of part-time workers. The percentage meant that approximately 57 million Americans were in multiple gig jobs.
Moreover, the digital economy also grew by 5.6% annually on average between 2006 and 2016. This is when compared to a growth of 1.5% in the overall economy. This economy supports 4 percent of the total employment in the U.S., which is approximately 6 million jobs. It is quite similar to industries such as warehousing, transportation, wholesale trade, insurance, and finance.
Industry experts believe that the Gig economy is likely to develop much faster. The reason is people have started to realize the benefits of adopting mobile devices. By 2020 end, approximately 70 percent of people across the globe (6.1 billion people) are expected to use a smartphone. This is a sharp increase since 2014 from 2.6 billion users.
Pros and Cons
This economy is considered to be a win-win proposition for employers. Businesses can easily and quickly contract experts to assign individual projects. They can save on overhead expenditures like training, benefits, office space, etc.
Know the advantages
1. Independence
This type of work is quite ideal for those who prefer to work alone while engaging in an assignment. They will not face traditional office interruptions such as gossip sessions, progress reviews, and staff meetings. They can enjoy greater independence and perform their work at their convenience and according to project needs.
2. Flexibility
Gig workers can choose any type of work depending on their convenience and the place available. They can work from home, thus managing family and work schedule demands.
3. Variety
The work rendered can be interesting as it will be a mixture of different types of tasks. This way, gig workers can be creative and enthusiastic in their work.
Know the cons
1. Very few or no benefits
There is only a handful of gig workers who are offered retirement or health benefits. Some long-term contracts might offer limited benefit packages.
2. Modest pay
Although earning potential is $15,000 annually, studies revealed that approximately 85% of workers earn $500 or even less a month. Hence, they are compelled to work on multiple gigs.
3. Stress
They are likely to face increased stress due to multitasking. They are to complete the assigned tasks within the specified timeframe.
4. Expenses and Taxes
Legally, they are not classified as ‘employees’. This is because Social Security taxes or income tax are not deducted from their paychecks. However quarterly tax payments are to be made to the IRS, depending on their earnings. Tax payment generally ranges around 25-30 percent from their paychecks. They are held responsible for owning work-related equipment such as computers, the Internet, smartphones, cars, bikes, etc. Only a few expenses are tax-deductible. They are also to consider expenses on tax preparation software or accountant services.
However, the pros seem to outweigh the cons, thereby helping the Gig Economy to enjoy greater demand in 2021.
