Gig Economy: Definition, Factors Behind It, Critique & Gig Work

What Is a Gig Economy?

A gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security. Many employers save money by avoiding paying benefits such as health coverage and paid vacation time. Others pay for some benefits to gig workers but outsource the benefits programs and other management tasks to external agencies.

Understanding a Gig Economy

Large numbers of people work in part-time or temporary positions or as independent contractors in a gig economy. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them.

People who don't use technological services such as the Internet may be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy.

A wide variety of positions fall into the category of a gig. The work can range from driving for Uber or delivering food to writing code or freelance articles. Adjunct and part-time professors, for example, are contracted employees as opposed to tenure-track or tenured professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.

Gig workers make up a significant portion of the employment pool in the U.S. As many as 64 million Americans are freelancers or gig workers, according to a 2023 Upwork report. This represents 38% of the U.S. workforce. These workers contributed as much as $1.27 trillion to the U.S. economy This figure could rise, as these positions facilitate independent contracting work, with many of them not requiring a freelancer to come into an office.

The Factors Behind a Gig Economy

Employers have a wider range of applicants to choose from within the gig economy because they don't have to hire someone based on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person.

Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects.

On the employee's side of the equation, people often find they need to move or take multiple positions to afford the lifestyle they want. It's also common to change careers many times throughout a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale.

The gig economy experienced significant increases in 2020 as gig workers delivered necessities to home-bound consumers. Those whose jobs were eliminated turned to part-time and contract work for income.

Criticisms of Gig Economies

Despite its benefits, there are some downsides to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries.

The flexibility of working gigs can disrupt the work-life balance, sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available any time gigs come up, regardless of their other needs. As such, they must always be on the hunt for the next gig. And unemployment insurance usually doesn't cover gig workers who can't find employment although 2020's CARES Act made an exception.

Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits, including a retirement account, and a daily routine are rapidly becoming a thing of the past.

Long-term relationships between workers, employers, clients, and vendors can erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. The gig economy may also discourage investment in relationship-specific assets that would otherwise be profitable to pursue since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along.

The Bottom Line

The employment and labor pool has shifted, especially since the onset of the COVID-19 pandemic. Temporary, freelance, and part-time work, collectively known informally as the gig economy, is now more common. This provides workers more flexibility while allowing companies to cut down on certain costs.