The gig economy is a term that has been thrown around a lot lately, but what does it actually mean? This is your comprehensive guide to understanding the gig economy, the pros, and cons of participating in it, as well as examples of the gig economy.
What Is the Gig Economy?
The gig economy is a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Gig work is often done via online platforms that connect workers with customers, such as Uber, Lyft, and TaskRabbit.
The term “gig economy” has been used to describe a variety of work arrangements, but all of them share a common characteristic: workers are not employed by the companies they work for.
How Does the Gig Economy Work?
In the traditional economy, workers are employed by companies and receive a regular paycheck for their work. In the gig economy, workers are not employed by the companies they work for.
Instead, they are hired on a per-task basis and are paid only for the work they do. This arrangement gives workers a lot of flexibility, as they are not tied to one employer.
They can work as little or as much as they want, and they can switch between gigs as their schedules allow.
History of the Gig Economy
The gig economy is not a new phenomenon. It has existed in one form or another for centuries. The term “gig economy” was first coined in the early 2000s, but the concept has existed in some form or other for centuries.
For example, many artists have always worked on a freelance basis, selling their work to the highest bidder. The rise of the internet has made it easier than ever for gig workers to find customers and get paid for their work.
Types of Jobs in the Gig Economy
There are a variety of gig economy jobs available, ranging from traditional services such as car transportation and home repairs to more modern services such as digital marketing and website design.
Here are some examples of popular gig economy jobs:
- Ridesharing
- Home services, handyman
- Food delivery
- Art, media, creative work
Who Is the Gig Economy Best Suited For?
The gig economy is best suited for people who are looking for flexible work arrangements and are comfortable with the potential lack of job security that comes with gig work.
Gig work is also well suited for people who have a unique skill set or are knowledgeable about a particular subject matter.
Finally, the gig economy is a good option for people who are comfortable working independently and are self-motivated.
Benefits of the Gig Economy
There are both pros and cons to participating in the gig economy. On the plus side, gig work can be a great way to make extra money or earn a living if you don’t have traditional employment.
It can also be a flexible way to work, allowing you to set your own hours and work as much or as little as you want.
Side Hustle
If you need extra income, the gig economy provides an easy way to get it. You can work as little or as much as you want, and you can often find gigs that fit into your existing schedule.
For example, if you’re a stay-at-home mom, you can use gig work to earn money while still being available to take care of your kids.
The gig economy can work in conjunction with or in place of traditional employment, providing a side hustle or full-time gig.
Flexibility
9-5s provide little, if any, flexibility. The gig economy provides the ability to make your own schedule. Granted, there is only so much flexibility you can have when it comes to occupations like ridesharing because there is a demand only at select times of the day.
However, you can often find gigs that allow you to work around your existing commitments, such as childcare or school. And, if one day you don’t want to work, you have a say in taking off time rather than being at the mercy of an employer.
Independence
In the gig economy, you are your own boss. You can work as much or as little as you want, and you don’t have to answer to anyone but yourself. No micromanaging, no butting heads – it’s usually just you.
This can be a great way to achieve work-life balance. Plus, if you have a difficult client, you have the power to end the relationship – something that traditional employment wouldn’t permit you to do.
Potential Cons of Working in the Gig Economy
On the downside, the gig economy does come with a handful of cons as well. Here are a few to keep in mind, though they can always be avoided with the right tools in place.
Low Paying Jobs
Many of the jobs in the gig economy are low-paying. For example, a recent study found that full-time Uber drivers make an average of $18 per hour before expenses.
If you’re looking to make a living in the gig economy, you may have to work multiple jobs or put in long hours. Though, you can help to keep more money in your pocket by making switches like gas to electric vehicles if you’re a driver.
Lack of Job Security
In the gig economy, there is no guarantee of work. You may find yourself going from one gig to the next with no steady income in between. This is why many rely on a full-time job and use the gig economy for extra income, not full-time employment.
That’s not to say that gigging can’t provide a full-time living – it does for thousands. Rather, it can be more difficult as it requires diligence and hard work, plus a touch of luck.
And, if you get sick or injured, you may not be able to work at all. There is no sick pay for freelance workers like you may find as an employee.
No Employee Benefits
When you work in the gig economy, you are not an employee of the company you work for. This means you are not eligible for employee benefits, such as health insurance, paid vacation, or a retirement plan.
Every decision you make will need to come out of your pocket and be made and maintained by you.
Sure, gig workers can write off many expenses, but that doesn’t make the headache of keeping track of it all any easier.
How to Find Gigs and Make Money in the Gig Economy
The best way to find gigs is by using a gig economy app or website. These platforms connect workers with businesses that need their services.
When you sign up for a gig economy platform, you’ll create a profile that includes your skills, experience, and availability.
Then, you can browse through available gigs and apply for the ones you’re interested in. Once you’re hired, you’ll complete the gig and get paid through the platform.
The Best Apps and Websites for Finding Gigs
There are a number of different gig economy platforms to choose from, each with its own focus.
For example, Fiverr is a platform for freelance creatives and academics, while TaskRabbit focuses on odd jobs and errands.
If you’re not sure where to start, you can check out this list of the best gig economy apps.
Ride Sharing
- Uber
- Lyft
- Waze Carpool
- Heetch
Food Delivery Apps
- Postmates
- Grubhub
- Uber
- DoorDash
Talent-based Apps
- Upwork
- Fiverr
- Freelancer.com
- Contently
How to Stay Organized When Working Gigs
Wondering how you can keep things straight when you’re balancing different clients and jobs? There are a few methods!
Strong Calendar System
For some freelancers with due dates, an extensive calendar planning method can help to keep track of what matters.
Even those who need help tracking working hours or outlining which days to work may find a calendar or planner – whether virtual or on hand – to be life-changing.
Relying on Your App
The freelancing app(s) you operate in are built to be an all-in-one stop for managing your freelancing business. If there is a way to organize your tasks within the app, use it.
This way, you know what is happening, when it’s happening, and can plan accordingly! Don’t forget to track time spent to help make sure you’re hitting your markers.
If you’re looking specifically for help understanding and maintaining finances, check below!
How Taxes Work for Gig Workers
The way you’re taxed as a gig worker looks much different from that of an employee. If you are an employee, your company is responsible for withholding taxes from your paycheck and sending them to the government.
They will also send in payroll taxes (Social Security and Medicare). But, if you work for yourself, no one is submitting the social security or Medicare taxes on your behalf, which means you’re liable for 100% of them.
Luckily, self-employed individuals, including contractors and gig workers, can use tax deductions to help lower their tax obligations and save money in the end.
Tax Deductions for the Self-Employed
If you work in the gig economy, you are considered self-employed. This means you are responsible for paying your own taxes.
However, there are some tax deductions you can take advantage of as a self-employed worker.
For example, you can deduct business expenses, such as office supplies, internet service, and travel expenses.
You can also deduct a portion of your health insurance premiums and retirement contributions.
You’ll want to carefully look at all of your expenses to see where you may be able to cut some costs (plus, avoid missing out on common tax deductions that can have big savings!)
The golden rule, as outlined by the IRS, is:
“A business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” (IRS)
How to Manage Your Finances When You’re Self-employed
Being a freelancer means you’re in charge of your finances rather than having an employer manage them for you.
Because of this, you’ll need a few tools to help you stay on track. Here are a few recommendations:
Expense Tracking
Whether you’re a part-time or full-time gig worker, preparing for taxes should always be a priority.
You can work with companies like Quickbooks to help track expenses throughout the year. That way, you have everything you need when tax season rolls around.
Tax Help
Speaking of tax season, it’s important to have a plan early on. Will you be filing online by yourself? Do you have a tax professional that is going to help you?
By planning these things early on, you’re in the best position to maximize your earnings. For example, if you speak with a professional and find that incorporating is a good idea for your work, doing so sooner rather than later can be helpful.
For more information on incorporating and whether it’s right for you, visit here for information on forming an LLC.
Mileage Tracking
For rideshare drivers, there are few tax breaks greater than mileage tax deductions. In order to deduct a portion of mileage, you’ll need to track how many miles are driven for business purposes. There are plenty of apps out there to do so. Find a few free options to get you started here.
The Future of the Gig Economy
As the gig economy continues to grow, we can expect to see more businesses popping up that cater to gig workers.
For example, there are now companies that offer health insurance specifically for gig workers.
And, as more people become comfortable with the idea of gig work, we can expect to see even more growth in this area. Here are a few primary factors influencing the gig industry.
Treating Gig Workers as Employees
One battle that has been plaguing all sides of the gig economy is whether gig workers should be reclassified as employees.
Drivers in New Zealand just found success in their declaration as employees, but many don’t want to be.
As this continues to be discussed in the U.S. and far beyond, we can expect it to play a big role in the future of gig work.
A Growing Gig Workforce
2020 to present has helped pave the way for many to join the gig workforce.
Whether it be for high inflation rates or a loss of jobs due to the pandemic, gig working has quickly proved its importance in today’s economy.
The gig workforce is stronger than ever and is expected to continue growing as time goes on.
Self-driven Vehicles
A large focus of the gig economy is on self-driven vehicles. As this technology continues to develop, we can expect things to go one of two ways.
There may be less demand for human drivers as technology takes care of the demand.
Or, there may be even more growth in the number of available gigs. After all, if there’s no need for a driver, gig companies can offer services at an even lower cost, prompting more to use the services.