What’s the “gig economy”?

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How we work and how we share goods and services is changing rapidly – even if most of us aren’t yet familiar with the terminology.

More Americans are now engaged in what is often called the gig economy – an environment in which temporary positions are common, businesses contract with independent workers for short-term jobs or “gigs," and workers can work at home, remotely, or pretty much anywhere they choose.

For now, much of this activity is concentrated among the country’s young, urban population. In fact, most Americans are still unfamiliar with the terms “gig economy” or “sharing economy,” and don’t have much experience in it. A recent Pew Research study, for example, found that only 15 percent of US adults have used ride-hailing services like Uber and Lyft, and only 6 percent have ever had their groceries delivered. Just 4 percent of Americans have hired someone online to perform errands and tasks.

That said, many researchers expect that the gig economy will expand rapidly. A recent study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors.

Technology is driving the gig economy

A big piece of the change is driven by how technology is changing our lives. Platforms have been created that allow people to rent out their homes, their cars to give people rides or deliver groceries.

In the digital age, the workforce is increasingly mobile and more work can be done from anywhere, meaning you, the worker, can live anywhere. Since geography is less of a restriction, freelancers have a much bigger universe of jobs to choose from, allowing access to temporary jobs all over the world.

The same is true for employers – they’re not restricted to a potential labor pool in a certain place and can better match individuals to specific projects, oftentimes even globally.

Benefits of gig work

The higher degree of freedom for job seekers tends to be one of the huge draws for people considering a life in the gig economy. In effect, you are your own boss offering your services to “client” employers. In an ideal scenario, freelancers can have a work-life balance that resonates with them, and lets them choose jobs they really want rather than being forced into jobs they have to take.

A recent study by two Ivy League economists showed that more than eight out of 10 independent contractors who like their status do so despite some perceptions that such workers are anxious about the volatility of their incomes. The study suggested that the flexibility that gig workers get from working for themselves appears to offset other considerations.

Drawbacks of gig work

That’s not to say that working in the gig economy is always a dream existence. The aforementioned volatility in income is no small thing. Most of us have regular bills to pay: rent, utilities, student loans, etc. Those obligations require a minimum amount of income every month. Even if you go a few weeks between jobs, that could mean some frantic scrambling to meet your financial obligations.

It’s also worth considering some of the other benefits that come with regular employment. For starters, gig workers have no unemployment insurance. If your employer-client decides to terminate the agreement, you lose the income and have no guaranteed wage while you scramble to replace your earnings.

Retirement planning is another area where freelancers can be at a disadvantage, since they don’t have access to employer-sponsored pensions or 401(k) plans. Similarly, gig workers are on their own to pay for health insurance. While access has been helped by the Affordable Care Act, you don’t have the same financial leverage that company employees get by being part of a pool that can bargain with insurance providers.

Is gig work right for you?

Ultimately, whether a gig economy job is right for you depends on how well it fits your ideal lifestyle and keeps your financial risks at a comfortable level. But assuming you can still pay your bills, maintain insurance coverages and fund your retirement, this new economy could be tailor-made for you.

Have you tried earning money with gig work? How has your experience been? Let us know in the comments.

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