While you may be aware that many workers have recently bid their full-time jobs goodbye for consulting, freelancing, or performing other short-term assignments, if you haven't heard the term "gig economy" used to describe this type of work, you're not alone. In fact, a recent survey revealed that 75 of workers had never heard of the "gig economy" even though some of these workers were participating in this economy themselves by working as independent contractors.
This week you’ll learn more about the gig economy: who's participating, who's benefiting, and how stringing together a series of gigs can dramatically differ from heading into the office every day for your 9-to-5 shift.
What types of workers are participating in the gig economy?
The gig economy comprises a wide variety of sectors, from private taxi services like Uber and Lyft to vacation rental companies like Airbnb, peer-to-peer sales sites like Etsy and eBay, and "shared economy" platforms like Freelancer and Upwork. In addition to companies that specialize in gig work, many larger businesses are moving away from the employer-employee model and hiring consultants or contractors to work in once-salaried positions.
As a result, gig workers can include everything from freelance writers to software engineers, taxi drivers, interior designers, manual laborers or construction workers, and knitters, crafters, and music teachers.
What are some of the fundamental differences between gig work and full-time employment?
Some of the main differences between gig work and W2 jobs involve the legalities of the independent contractor arrangement.
Unlike traditional employers, gig businesses aren't required to pay payroll taxes (or withhold federal or state income taxes) for their workers. This practice leaves workers responsible for tracking their own tax liabilities and, in most cases, making periodic estimated tax payments on any income earned.
Independent contractors also aren't entitled to fringe benefits like employer-paid health insurance, paid sick or vacation days, 401(k) matches, or employee discounts.
How does the gig economy benefit businesses and workers?
For many, the rise of the gig economy can present a win-win situation for all involved. For companies that need certain tasks or services performed but whose volume or capacity needs can vary widely from day to day, having a large pool of independent contractors on standby to compete for these jobs is far cheaper than maintaining a staff of full-time employees.
Peer-to-peer networks can also provide consumers with the feeling that they're helping (or being helped by) a neighbor rather than spending their hard-earned money to merely pad a large corporation's bottom line.
On the worker side, gig work can provide flexibility and income transparency often not present with full-time working arrangements. Gig businesses have also provided an outlet for stay-at-home parents, new retirees, and college students to dip their toes into the wage-earning economy without taking on a 40-hour-a-week obligation.
