What Is the Gig Economy?

In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.

Key Takeaways

  • The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform.
  • The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and demand for flexible lifestyles.
  • At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients.

Understanding the Gig Economy

In a gig economy, large numbers of people work part-time or temporary positions. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them. Those who don't engage in using technological services such as the Internet tend to be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy.

There is a wide range of positions that fall into the category of a gig. For example, adjunct and part-time professors are contracted employees as opposed to tenured or tenure-track professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.

The Factors of a Gig Economy

America is well on its way to establishing a gig economy, and estimates show as much as a third of the working population is already in some gig capacity. Experts expect this working number to rise. In the modern digital world, it's becoming increasingly common for people to work remotely or from home. This facilitates independent contracting work as many of those jobs don't require the freelancer to come in to the office to work. Employers also have a wider range of applicants to choose from as they don't have to hire someone based on their proximity. Additionally, computers have developed to the point that they can take the place of the jobs people previously held.

Economic reasons also factor in to the development of a gig economy. Most times, employers cannot afford to hire full-time employees to do all the work they need done, so they hire part-time or temporary employees to take care of busier times or specific projects. On the side of the employee, people often find they need to move around or take multiple positions to afford the lifestyle they want. People also tend to change careers many times throughout their lives, so the gig economy can be viewed as a reflection of this occurring on a large scale.

Criticisms of the Gig Economy

Despite its benefits, there are some downsides to the gig economy. While not all employers lean toward hiring contracted employees, the gig economy trend can make it harder for full-time employees to develop fully in their careers since temporary employees are often cheaper to hire and more flexible in their availability. Workers who prefer a traditional career path and the stability and security that come with it are being crowded out in some industries.

For some workers, the flexibility of working gigs can actually disrupt work-life balance, sleep patterns, and activities of daily life. Flexibility in a gig economy often means that workers have to make themselves available any time gigs come up, regardless of their other needs, and must always be on the hunt for the next gig.

In effect, workers in a gig economy are more like entrepreneurs than traditional workers. While this may mean greater freedom of choice for the individual worker, it also means that the security of a steady job with regular pay, benefits, and a daily routine that have characterized work for generations are rapidly becoming a thing of the past. It also means that workers are taking upon themselves a much larger share of the market risk of economic ups and downs, changing trends, and fickle consumer preferences, which were traditionally borne by capitalist business owners who employed wage and salaried workers. The lifestyle and exposure to risk that come with being an entrepreneur or freelancer may simply not be for everyone.

Lastly, because of the fluid nature of gig economy transactions and relationships, long-term relationships between workers, employers, clients, and vendors can tend to erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. It could also discourage investment in relationship-specific assets that would otherwise be profitable to pursue, since no party has an incentive to invest in significantly in a relationship that only lasts until the next gig comes along.