What is the Gig Economy
The gig economy refers to a labor market characterized by the prevalence of short-term or freelance work arrangements, often facilitated through digital platforms or online marketplaces. In the gig economy, individuals typically work on a project-by-project basis or provide services on a flexible schedule, rather than pursuing traditional, full-time employment. Some common examples of ‘gigs’ are ride-hailing, food delivery, freelance writing, and web development.
The origins of what we now know as the gig economy are debated, some say that it started with the rise of jazz music in the 1910s. The service-based aspect of the concept came into play with the invention of Craigslist in the mid-90s. After many decades of development of this loose idea of freelance work, we now think of Doordash drivers as some of the main contributors to the gig economy. In short, the idea encapsulates nearly anything that isn't full-time employment, hired by someone other than yourself.
The largest movement of mainstream workers into the gig economy was during the COVID-19 pandemic, bringing months of unemployment for many. From the fourth quarter of 2019 to the second quarter of 2020 the U.S. unemployment rate tripled to 13 percent.
However, despite the obvious challenges of the pandemic, the isolation and lockdown led the working-class American populace to find new ways to get by. Hourly pay rose in some industries by more than 10 percent. Many older Americans moved into early retirement rather than going back post-pandemic. Additionally, the federal government sending COVID relief cash allowed families to live a bit more comfortably in unemployment. Balances for lower-income families rose 70 percent and 35 percent for higher-income families.
The American workforce was turned on its head and just like the pandemic itself, brought unprecedented times.
Freelance job postings during the pandemic rose by 41 percent and in 2020, 2 million American workers joined the gig economy. The percentage of workers in freelancing jumped from 8 percent to 36 percent.
Normalcy has been nearly restored as the Treasury Department says that the U.S. economy recovered much faster compared to the state after previous recessions. However, now that we stand in the aftermath, there is an entire group of people who are opting not to return to their 9-to-5s,
As companies and individuals are figuring out how to manage freelance workers, some obvious challenges have come to the forefront.
After the pandemic, the demand for jobs like delivery services and ride-hailing has fallen as people are fully capable of these services on their own, and the need for social distancing has dissipated.
Additionally, the lack of employment benefits leave workers vulnerable to extreme health-related expenses. Gig workers typically do not have access to traditional employee benefits such as health insurance, sick leave, or unemployment benefits. These workers could face health-related expenses and income instability without the safety net provided by traditional employment. According to a study done by NPR, 51 percent of freelance workers do not receive benefits such as sick leave, retirement savings, and unemployment insurance.
Another huge issue faced by the gig economy has to do with any regulation whatsoever. The classification of gig workers as independent contractors rather than employees has been a subject of debate in many jurisdictions, with implications for labor rights, benefits, and legal protections
Actual legislation has been slow to come for these workers, for most of what we’ve seen so far is on a company-to-company basis, providing workers compensation in emergencies that put them out of work. California is the first state to put an emphasis on the protection of workers with the passage of the California Assembly Bill 5. Ultimately, the bill expanded the definition of employment and included rideshare drivers and other gig workers as employees of the company they work through, thereby deserving of benefits. There was a lot of pushback, but this first step may be the key to solving arguably the largest issue of the gig economy.
An often overlooked implication of the gig industry is the emotional and physical stress put on the workers. In step with the pandemic, from which this line of work came into popularity, gig work necessitates isolation and self-sufficiency. "Being a freelancer, you really have to be on top of your emotional and mental health," says Carolina Salas, a New York City freelance marketing expert in an interview with NPR. Salas said that the stress of her freelance work led to a pinched sciatic nerve which immobilized her for months.
However, on the other hand, that which brings stress is the appeal of the gig economy. Working remotely or independently brings freedom and independence that is impossible in a traditional employment situation. For the first time, many Americans are able to choose their own schedule, working style, and the effort they put in. This freedom is particularly appealing to the rising generation entering the workforce who were raised on technology and proficient in the type of work that this industry demands.
While many of the harms of the gig economy affect the individual directly, the benefits affect the national economy as a whole. With this line of work, we can expect to continue to see further development in technology. The IMF said that during the pandemic, digitalization increased by an average of 6 percentage points. The acceleration happened primarily in economies or industries that were lagging. This sticks true to the adage ‘competition breeds innovation’, the gig economy fosters innovation and agility as gig workers bring fresh perspectives, diverse skill sets, and adaptability to their work. They can quickly respond to market demands, industry trends, and emerging technologies, making businesses more agile and competitive.
The ease of accessibility is also pulling many workers who were unable to work in typical employment conditions out of unemployment, which in turn, increases greater economic activity. Those who previously might have been limited by physical, mental, or situational inability are now able to become wage earners with just a computer and internet access.
Even traditional workers will likely see benefits of the rise of the gig economy as this new line of work is sparking debate on worker’s rights across all industries.
According to Forbes, the gig workforce is on track to surpass the traditional full-time workforce by 2027. The lasting unemployment issues following the pandemic are forcing larger corporations to turn to temporary freelance workers to handle projects, giving a steadier demand for these workers.
All signals insinuate freelance gig work will be the future of the American economy as more and more are leaving their cubicles to work from home on their own schedule.
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