In recent years, the traditional landscape of the world of work has shifted drastically owing to the rise of The Gig Economies. In the United States, a Bureau of Labor Statistics (BLS) report in 2020 indicated that about 34% of the U.S. workforce participated in gig work in some capacity. Globally, a McKinsey report estimated that around 20-30% of the working-age population in the U.S. and the EU-15 countries engaged in independent work. The change is an extremely important one and it has various paths to explore, but first we must understand what the gig economy actually is.

What?

The gig economy involves an exchange of labour 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. The key thing to note is that these are short term contracts, rather than permanent jobs. The Gig Economy consists of jobs like: Food delivery, dog walker, Uber driver and freelancing. Take a food deliverer: they are paid by a company such as Deliveroo or Ubereats for each order they take. They do not have permanent jobs (per se), and they can decide their own working hours. It is vastly different to the more traditional idea of a steady job.

Pros:

There are various upsides to the emergence of a Gig economy, both for the employer and the employee. Flexibility is becoming an increasingly important aspect for jobs. A study published in the Harvard Business Review found that workers in a flexible work environment reported higher levels of job satisfaction and were 55% more engaged in their work compared to those without flexibility. Gig workers are not bound to any contract, thus meaning they are able to choose their own working hours and are not obliged to any long-term employment commitments.  Similarly the flexibility of gig workers allows companies to avoid the high costs of a permanent workforce by hiring only as much help as required. Companies can easily vary the number and composition in their workforce in response to changes in demand, which in turn allows for a more efficient use of available resources.

In contrast to regular arrangements, fixed incomes do not exist in the world of the gig economy. This gives workers unlimited earning potential. It provides access to greater income opportunities, enabling people to maximise their income, achieve financial security and maximise their well being. An Upwork and Freelancers Union report indicated that skilled freelancers earned a median rate of $28 per hour. This is over $20 higher than the federal minimum wage in the US. This high wage combined with the unlimited working hours leads to greater financial prosperity within the gig economy. Independence is yet another important factor when deciding a job, and the gig economy seemingly provides exactly that. The vast majority of gig workers assignments are discrete projects which gives workers the ability to use their own talents without the need for management. Freelancer roles such as graphic design are massively independent, since you can choose clients, set your schedule and even work remotely. As a result, employees are more satisfied in their jobs despite receiving less guidance as perhaps a regular job might provide.

Cons:

As with anything, the gig economy comes with drawbacks. The lack of job security that comes with a gig job is a significant issue. Gig workers frequently have little to no idea where their next ‘gig’ will be. Only half of gig workers perform tasks at least once a month, and just 12% deliver 2-3 times a week.  This creates issues such as stress, and potential financial instability if workers go a long time without finding a job.  

Another problem that could be overlooked is the legal challenges that the gig economy face. There are no laws which protect gig workers, as their jobs are not recognised by regulations. Gig workers face challenges in asserting their rights, such as fair compensation, protection from discrimination, racism and so on. Moreover traditional benefits such as health insurance, retirement plans, and paid holiday are often not given to gig workers. For instance, up until February 2021 Uber drivers in the U.K. were classified as self employed. This means they lacked benefits such as holiday pay, rest breaks and sick days.

For the gig economy to knock the traditional style of work on its head these problems need to be solved. Fortunately, they seem to have fairly easy solutions and some like the workers rights problem are already starting to be solved. In a landmark case in 2021 the U.K Supreme Court ruled in favour of the Uber drivers, entitling them to all the rights other workers were afforded.

Economic impacts:

Possibly the biggest economic impact that the Gig Economy brings is an increase in employment. Low unemployment is a key government macroeconomic objective, and the gig economy is a way to fulfil this aim. In Great Britain, a study conducted between July and August 2017 estimated that 4.4% of the population had worked in the gig economy in the last 12 months, which was roughly 2.8 million people. In the United States, it is estimated that about one-third of the population is operating in some form of gig capacity. Furthermore, delving deeper into the UK’s gig economy reveals that the number of regular gig workers in the UK amounts to approximately 22.1% of the total UK workforce, which is an increase compared to the estimated 14.7% in 2021. It’s clear the number of jobs the gig economy provides. Apart from increasing the standard of living, it also means that the government does not need to spend as much money in the form of welfare payments. This saved money could be used on improving public services, decreasing taxes or other important things.

Economic growth is arguably the most important thing for an economy. The increased output that the gig economy provides could lead to exactly that. We’ve already looked at the increased employment levels that comes off the back of the gig economy. More jobs will increase the output of the economy hence leading to economic growth. More workers will also mean that spending within the economy increases. This occurs because the wages that workers receive will then be spent which in turn contributes to growth. This allows for higher levels of consumption by individuals. We assume that as a result of this people’s happiness increases (more consumption=increased happiness). Thus growth is paramount and the gig economy is a way for the economy to grow.

Social and cultural shifts:

The impact that the gig economy is having is difficult to ignore. In particular its social and cultural impact is becoming increasingly evident. Traditional attitudes towards work are shifting. In the past workers have been encouraged to stay in the sector or even the same company for their entire career. Workers have had yearly salaries, structured work days, limited holidays and just, in general, work life was much more fixed and ordered.  As we have discovered, this is in complete contrast to the gig economy. As workers turn towards the gig economy the attitude towards work is likewise beginning to change. We are beginning to value a work-life balance more and more. We are embracing individuals choices increasingly. We are going down none traditional work paths. This change is as a result of the gig economy and the shift will only increase.

Case studies:

Doordash is one of the biggest companies that participates in the gig economy. It is an American company based in San Francisco that operates as an online food ordering and delivering platform. It is the largest food delivery company in the United States. Since the platform launched in 2013 there have been more than 13 million active ‘dashers’  and it has more than 2 million monthly active ‘dashers’. Doordash is thriving within the gig economy. It has experienced significant growth in its revenue and user base. The company’s revenue increased from less than $1 billion in 2019 to $6.58 billion. On top of this its total orders grew by 27% year over year to 512 million, and its gross order volume grew by 29% to $15.9 billion in 2023. Evidently Doordash is taking advantage of the gig economy. The lack of contracts and flexible workers allows for it to grow because it means the company can adapt to different workloads and enhance their efficiency.

It’s not only companies utilising the gig economy. Individuals are also thriving in this new environment. Alexey is a computer software engineer who lives in Ukraine. He is a gig worker on a platform called Upwork which is a freelancing company. He sells his work to people in the United States. Upwork has provided him with a whole new client base. He is now able to reach an audience outside of Ukraine and the gig economy has given him opportunities which he otherwise wouldn’t have. Another example is an Uber driver who lives in Sacramento. At the beginning of each week, he drives down from Sacramento to the Bay Area. He then spends four or five days in the Bay Area typically driving clients around for 14 hours a day. As a result of this hard work he is making a lot of money working for Uber.

This highlights the opportunities the gig economy can bring, whether for companies or individuals. It’s a new style of work, but that doesn’t mean it comes without benefits. The flexibility of the gig economy allows companies to adapt and innovate, while the limitless salaries allows individuals like Alexey and the Uber driver to achieve financial stability.

Conclusion:

On a global scale, the gig economy accounts for up to 12% of the labor market, according to data from The World Bank. The gig economy grew by 33% in 2020, expanding 8.25 times faster than the US economy as a whole. The growth is undeniably going to continue, but the more pressing questions are how big will it get and will it replace the traditional ideas about work permanently? The numerous upsides to the gig economy make it a very attractive proposition for both employers and employees. While it does not come without its faults, I could certainly see the growth continuing especially with the growing impetus put on a work-life balance.