What is the gig economy and its benefits and challenges?

The gig economy has gained increased coverage over the past 12 months due to the COVID-19 pandemic, as increasing numbers of people have searched for ways to replace lost income. For many, the gig economy has become a “side-hustle” they will continue to pursue in the coming years. For some, it has even brought an opportunity for a career change they did not even realize they wanted!

Despite this, the truth is the gig economy has been thriving since at least the beginning of the last decade.

What is the gig economy?

The simplest way to define the gig economy is as a free market where companies and contractors (more on who these are shortly) agree on mutually beneficial, short-term working relationships.

Companies fulfill the services they need to perform for their customers and save on employment costs and admin by hiring on-demand labor. Such an approach can be advantageous where companies need to hire experts like consultants on a temporary or project basis. Depending on the role and skills required, companies can hire people worldwide to work on their tasks.

Contractors can highlight their skills, have the flexibility to set their price, manage their time and workload, and accept or turn down work as they wish. Depending on the specific role they are fulfilling, contractors may also have the flexibility to work anywhere in the world.

Who is working in the gig economy?

The gig economy is incredibly diverse.

The gig economy was previously defined primarily as freelancers who would pitch for work on platforms like Fiverr. Today's gig economy encompasses a vast range of services, platforms, and opportunities for both companies and contractors to benefit.

Who is working in the gig economy, and what type of work are they doing?

The “old school” gig economy

Traditional freelancers remain a massive part of the gig economy. They often pitch their services and bid for work on platforms like Fiverr and Upwork. While these platforms are primarily associated with digital services, such as SEO or finding low-cost virtual assistants and offshore workers, you can also use them to find everything from IT support to architects.

Alongside these platforms sit services like Handy and Trust a Trader, where you can get quotes for home improvement projects and hire the person you think will be best for the job. Although these are part of the gig economy, such platforms are effectively just a new way for tradespeople to attract work.

The “new” gig economy

The “new” gig economy encompasses a vast range of companies and opportunities for people to have a different type of job or make extra cash on the side. Often, companies who operate in the "new" gig economy do so as they wish to work at scale with minimal employment costs and admin commitments.

While the “new” gig economy is often characterised by businesses like Uber or Deliveroo, the reality is that businesses in various sectors, including the legal and accounting industries, as well as creative sectors, form part of the gig economy.

For example, a law firm or accountancy practice may look to hire someone with a specific skillset. However, they do not need such a person on the books full-time, so instead they hire on a short-term or project basis. The beauty of these arrangements is that millennials and Gen Z-ers are looking for such opportunities, too. Young professionals increasingly do not wish to tie themselves to one employer, and enjoy the flexibility of working in different locations. They value things like the variety in their work and the opportunity to learn new things rather than the stability (and sometimes monotony!) of a steady job in the same office every day.

Why are people working in the gig economy?

People work in the gig economy for a variety of reasons. The COVID-19 pandemic has led to a vast increase in the number of gig economy workers. People who lost their jobs or were placed on unpaid or limited salary leave turned to the gig economy in considerable numbers to maintain a degree of their income.

Even before the pandemic, millions of people worldwide worked in the gig economy for a living. Millions of others did so for reasons from topping up their income to wanting an opportunity to meet new people.

Many people choose to work in the gig economy because it gives them the freedom to set their own working agenda. Whether through a personal website or a freelance platform, for many people, working in the gig economy is a chance to develop a personal brand and effectively build your own self-sustaining business.

Benefits, challenges, and why the gig economy is controversial

There are significant potential benefits and challenges for both companies and contractors working in the gig economy.

We covered the benefits earlier in explaining what the gig economy is;  the flexibility both sides enjoy is crucial throughout them all.

Likewise, the gig economy can be challenging for both parties, also for similar reasons.

For example, if there are not enough Deliveroo drivers available, or a business can’t find a designer on a freelance platform to help them complete work for a client, the brands involved take a hit to their reputation.

From a contractor’s perspective, the gig economy is challenging primarily due to the lack of job security, with freelance platforms in particular often resembling a “race to the bottom.” Thankfully, these platforms are so well known and widely used these days that they are not just filled with companies looking for labor at the lowest possible cost. However, with more people entering the gig economy, the landscape is becoming increasingly competitive, with "produce or perish" a mantra often attached to contractors' outlook, whatever their niche.

Almost all the controversy surrounding the gig economy comes about through companies treating their workers like employees but denying them typical employment benefits like guaranteed salary and paid vacation. Such controversy has already been challenged in court, with the UK Supreme Court ruling in February 2021 that Uber drivers are employees.

What is the future of the gig economy?

From a freelancer perspective, the future of the gig economy is secure. With increasing numbers of companies committing to remote working for the long-term, opportunities to work on short-term and longer-lasting projects are only set to grow. Freelancers already not at the stage of effectively being "portfolio consultants" will have the opportunity to build such a business throughout 2021 and beyond.

The “new” gig economy will likely tread a similar path and continue to grow. Businesses might not need full-time lawyers, designers, or project managers, for example, but they will likely need them at some point. However, by seeking workers who operate within the gig economy, they can ensure their internal operations are efficient and wait until their internal workforce is fully utilized before bringing in gig economy labor.

Businesses get to hire specialists for specific projects, while workers get to choose which projects they work on and not be dictated to by what lands in their inbox each morning.

While there are benefits on both sides, there will undoubtedly be a continued evolution on what the “contract” governing what is still a non-traditional employer-employee relationship looks like. As this evolution happens, the gig economy relationship will simultaneously become the traditional way we work. Businesses will be able to access the best talent for every project and not have to rely on who they have in house, while talented individuals will be able to set their market value to get the work they love to do. Everyone wins!Gig economy: overall takeaways

While some elements of the gig economy have proven controversial, the amount it contributes to global economies highlights how successful it is. It is also worth noting that for all the court cases brought against companies who operate within the gig economy, vast numbers of workers enjoy the flexibility and earnings potential the gig economy delivers.

It will be fascinating to see how the gig economy evolves in the coming decade. Still, you can take it as a given that it is here to stay, and not just for freelancers!