October 14, 2020
The gig economy, also referred to as the freelance economy, provides an alternative to traditional employment, allowing skilled professionals to complete tasks or services through short-term contracts. With this, self-employed individuals can take on multiple clients or projects at once, contributing their skills to a variety of companies. With unemployment skyrocketing due to the recent pandemic, the gig economy has flourished. According to Upwork, ⅓ of the American workforce has turned to freelance amidst COVID-19, contributing $1.2 trillion to the U.S. economy. From Marketing, IT, ride-sharing, and more, the gig economy provides opportunities for people of virtually all professions and skillsets.
Benefits of Gig Economy:
The gig economy provides flexibility to both workers and businesses, eliminating geographic barriers while allowing employees to pick their projects and weekly hours. According to a study by Edelman Intelligence, flexibility is the main reason people freelance full-time, whereas extra income remains the key driver for part-time freelancers. For businesses, utilizing freelance and contract workers may reduce long-term costs, as these employees do not require an annual salary or benefits. Hiring temporary workers may also save money on training, as companies can hire for a specific skill, instead of a long-term employee who may have to learn on the job.
2. Worker Satisfaction
Gig workers tend to be more satisfied with their careers compared to full-time employees, as 79% of full-time independent workers claim to be happier working on their own than at a traditional job, as stated in a study by MBO Partners. Key drivers of this satisfaction include working on more meaningful projects, having flexibility, as well as being self-employed, according to BCG Henderson.
Unlike full-time positions where employees receive an annual salary, freelancer’s yearly incomes are inconsistent and unpredictable, as they remain dependent on the length of their contracts and the number of gigs they have. Once a project comes to a close, gig workers must search for other opportunities to make up for their pay cut. Due to this financial uncertainty, only 44% of gig workers rely on their work in the freelance economy as their primary source of income, according to Edison Research.
2. Fewer Protections and Benefits
A downside of the gig economy remains the lack of company benefits and employee protections. Without signing a full-time contract, companies have no obligation to provide contractors and freelancers benefits, leaving them with no safety net if they were suddenly unable to work. Due to this lack of protection, many workers who rely on gigs as their primary source of income end up purchasing their own insurance. However, these plans can be expensive, making them difficult to afford with an unsteady income.
The Future of Freelance
With a study by Mckinsey showing 1 in 6 traditional workers wanting to become a primary independent earner, the future of the gig economy looks promising. By the year 2028, 50.9% of the total U.S. workforce will be freelancers, as forecasted by Statista. As the freelance economy grows, more gig workers are advocating for laws to ensure benefits and protections to freelance and contract employees. Though there are many hurdles to overcome as the market grows, it looks as if the gig economy is here to stay.