What is the gig economy?

What is the gig economy?

The gig economy is characterised by a high proportion of workers on short-term or task-based contracts, without any longer-term contractual obligations. Workers are paid by task, project or short-term objective ("gig"). And the market is growing very rapidly. According to a survey by McKinsey, up to 162 million people in Europe and the US (around 20% to 30% of the working-age population) do some sort of independent work.

Who are the gig economy workers?

Who are the gig economy workers?

The gig economy is sometimes talked about as a 21st century, pandemic-boosted phenomenon. But it's far from new. Alternative and project-based work arrangements have been in place as early as the 1900s, often referred to as "casual labour", "freelance" or "cash-in-hand" arrangements between employers and workers.

During tough times, like the 2008 financial crisis, task-based working arrangements become more popular. Companies are forced to lay off permanent employees and workers find themselves in need of extra income. And with the current cost of living crisis affecting countries worldwide, many workers will be looking to supplement their existing salaries or wages with extra work "on the side".

But it isn't just about taking on gig work because of need. The pandemic and the following Great Resignation have caused many people to rethink the way they work and choose flexible arrangements over long-term career contracts. And there's no doubt that huge advances in technology have made it all possible, enabling both remote working and matching freelancers with employers. According to McKinsey, 15% of independent workers have used a digital platform to find work.

The profile of gig workers has also changed hugely. Old-style casual labour was largely characterised by a blue-collar workforce working in agriculture, industrial processing and the building trades.

Now, marketers, designers, developers, specialised experts and consultants – and even C-suite executives – are choosing to immerse themselves in the gig economy as a more attractive way to a desirable work/life balance. Going independent for some, or all, of your working life is now a legitimate, and even superior, career move.

It's also clear that this significant group isn't unified by any traditional demographic, such as age, income bracket, education level or physical geography. In fact, gig economy workers are more easily classified through the reasons why they choose to turn to more flexible working. According to business incubator Velocity, some 70% of gig workers in the US are freelance by choice, deriving their primary income from it, while 56% are using gigs to top up their main source of income.

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How the gig economy works

How the gig economy works

The biggest single factor supporting the growth of gig working is the development and spread of the Internet and mobile technology. In the modern gig economy, digital platforms connect freelancers to customers. This creates large-scale marketplaces across all demographics and geographies, opening truly global opportunities for all.

As well as cross-industry platforms linking workers to businesses and opportunities, there are increasing numbers of industry and profession-specific sites. With their help, lawyers, executives, teachers, artists, musicians, plumbers and electricians can find work and each other. Plus, they help build wider networks which can boost professional experience, and offer training and career development for independent workers in specialist fields.

Who's leading the gig economy?

Who's leading the gig economy?

The growth of the gig economy is truly global, with the US leading the way. According to Gigonomy, there were 57 million people doing freelance work in the US in 2019, contributing nearly USD 1 trillion to the economy. The UK is right behind with the number of freelancers increasing in 2018 by 31%. Other nations picking up the pace in independent working are Brazil, Pakistan, Ukraine, the Philippines and India.

Airbnb is one of the world's top gig economy businesses, with property owners earning an average of just over USD 900 a month. Other top employers supported by significant numbers of gig workers include Amazon Flex, which employs freelance workers to drive deliveries across the US and the UK, Etsy, which provides a sales platform for artists and handicrafts professionals, and Fiverr, which links businesses looking to develop their web-based services with designers, software developers, content creators, social media marketers and voiceover artists.

What is driving the growth of the gig economy?

What is driving the growth of the gig economy?

There's no doubt that COVID-19 promoted an increased number of workers and businesses to turn to flexible and short-term work. The nine-to-five working week and the traditional workplace were suspended for almost two years, and even as more traditional businesses return to the office, it's clear that patterns which build in flexibility and worker-led agreements are new drivers of business success.

Traditional workers are demanding more independence, and many workers have found that the gigs they took on just to survive during the pandemic are providing as good, if not better, in terms of incomes and work/life balance.

According to Forbes, before the pandemic, over 70% of gig workers participated in the economy out of choice. However, post-Covid, many full-time employees are now joining out of necessity. Many have found that their jobs no longer exist, or that their own situations mean traditional full-time office-based work is no longer possible, as schools and care institutions were closed, and they had to give up work to care for others. Together with the cost-of-living crisis, this means that many workers are finding that their old salaries no longer meet their expenses, and they're turning to the gig economy to top up, if not replace, their previous income.

Gig economy examples

Gig economy examples

Apart from the major global businesses, which are leading the way in employing workers on a gig basis, the following sectors are all seeing rapid growth. From 2016 to 2021 in England and Wales, delivery driving rose by 350%, household services by 166%, errand running rose 200% and digital tasks, which can be carried out remotely rose by 100%. Food delivery, transportation and asset sharing (such as holiday rentals) are all experiencing an upturn, fuelled by the availability of freelance and gig workers.

Advantages of operating in the gig economy

Advantages of operating in the gig economy

Benefits for companies:
Flexibility

Businesses that experience fluctuations in demand, whether through seasonality, growth, downsizing or market forces, can adapt the size of the workforce easily and at short notice.

Productivity

Happier workers have been shown to be more productive. So, employing people who choose to run their own working lives can lead to greater motivation and job satisfaction across the whole workforce. What's more, workers without long-term contracts may be motivated to perform better to keep a good relationship with the business and attract further work.

Cost effectiveness

Employers using gig workers can reduce their employment costs, including expenses relating to hiring and firing, employee benefit packages, retirement funding and paid sick and holiday leave.

Access to talent

With a widespread pool of ability and experience available on a short-term freelance basis, employers can select workers who meet their exact criteria – whether that's skills required or ability to work to a particular schedule.

Advantages for gig employees:
Choice

Gig workers can decide what work they take on and when, maximising their working hours to suit their lifestyle and income requirements. And, thanks to the growing number of digital platforms, workers access an ever-wider variety of tasks and jobs at any time.

Opportunity to explore new careers

Freelance workers can try new jobs, get training and even switch careers without making long-term commitments, and while keeping a steady income.

Variety

Workers in the gig economy can take on several jobs at the same time, or switch between industries and environments, avoiding burnout1 and boredom.

Flexibility

Gig working gives the flexibility to manage a career around other aspects of life, including family commitments, childcare and hobbies.

Independence

Freelancers managing themselves get a taste of other aspects of business management, such as accounting and budgeting. And they can embrace all the independence that working for themselves brings.

Disadvantages of operating in the gig economy

Disadvantages of operating in the gig economy

Disadvantages for companies:
Disadvantages for companies:
Lack of engagement and commitment
Lack of engagement and commitment

Companies which build workforces from the ranks of freelancers can experience a lack of engagement with corporate goals. And building customer relationships can be more difficult when the workforce is constantly changing.

Constant need to train
Constant need to train

In-house training, upskilling and reskilling can all be expensive and time-consuming when they have to be done repeatedly with new staff.

Responsibility for compliance
Responsibility for compliance

With a constantly changing workforce, responsibility for compliance with workplace and product-related legislation can be difficult to establish and maintain.

Lack of availability
Lack of availability

As gig workers develop their own careers and become successful, employers may find key staff difficult to access, as they may be working for different companies.

Negative-impact-on-work-culture
Negative impact on work culture

Frequent churn can have a negative effect on permanent teams.

Disadvantages for employees:
Lack of employment rights
Lack of employment rights

In many cases, freelance, temporary or short-term workers have very few employment rights. They may not qualify for protection or compensation for unfair or constructive dismissal, redundancy, sick pay or holiday entitlement. And they don't build up any company-backed pension contributions.

Lack of investment in careers
Lack of investment in careers

Companies using gig workers don't need to invest in their workers' career development, such as training or promotion planning. It may be difficult for workers, even those who have done worked successively for the same company, to show career progression or increases in skills or experience.

Lack of security
Lack of security

The major downside of freelance and short-term contract work is a lack of job security. Although it can be possible to earn as good, or better, income than in a fixed-term contract, success depends on a steady supply of the jobs you want to do. Even a good pay packet for a job done well dissipates quickly when it takes a long time to secure the next one.

The future of the gig economy
The future of the gig economy

The number of global gig workers is expected to rise from 43 million in 2018 to 78 million in 2023. And some predict that freelance workers will make up over half of the US workforce by the end of the same year. This means that businesses will have more gig workers to choose from, and gig workers themselves will face more competition.

The growing gig economy has other implications. As the number of workers who fall outside traditional workforce protections increases, there will be more and more people without pension contributions, holiday or sick pay entitlement, or cover for redundancy or dismissal. The law will need to adapt to protect the rights, benefits and protections which businesses need to offer, and gig workers need to secure for themselves.

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