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What Is the Gig Economy? 5 Things to Know for Gig Workers

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What is the gig economy?

The IRS defines the gig economy as “activity where people earn income providing on-demand work, services or goods,” often through an app or website [0] Internal Revenue Service . Gig Economy Tax Center . Accessed Oct 16, 2023. View all sources . This area of the job market consists of temporary, contract and freelance jobs.

The term “gig economy” gets thrown around most often in reference to jobs like working with a rideshare company, such as Uber or Lyft , making deliveries or walking dogs. But the gig economy represents a large part of the workforce and spans virtually every industry. For instance, a 2022 survey commissioned by Upwork among 3,000 professionals found that 60 million Americans had freelanced within the previous 12 months [0] Upwork . Upwork Study Finds 60 Million Americans Freelancing in 2022 . Accessed Oct 16, 2023. View all sources .

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What is gig work?

Gig work varies widely, so it isn’t always easy to pinpoint. Common examples include renting out a room on a short-term rental site, selling clothes online, driving for a rideshare company and making deliveries for Amazon Flex or another service. It also includes jobs like freelance writing, tutoring, design, caregiving and many more. If you are looking to work from home , gig work may be just the ticket, particularly if you already have hobbies that make money .

A “gig” (sometimes called a “side hustle”) is generally a short-term task, project or job that a person takes up to make extra cash . But many do gig work long term or as a main source of income. Some gig workers get paid per task or assignment. Others earn an hourly rate.

» MORE: 9 ways to make money as a kid

What is a gig worker?

A gig worker is someone who works within the gig economy as an independent contractor or freelancer. Gig workers are typically classified as self-employed, rather than employees, for tax purposes. For this reason, they don’t receive regular employee benefits such as health insurance, retirement plans or paid time off.

What to know about working in the gig economy

Working in the gig economy can come with flexible hours, quick cash or the ability to set your own pay, depending on the job. However, it can also mean irregular income, a lack of benefits, and complicated taxes. If you’re considering gig work, keep a few things in mind:

1. Research the pay

Rates can vary by location, experience and demand. Plus, the platform you get gig work through may take a cut of your earnings. It’s also a good idea to find out how often you get paid, so you’ll know when to expect each paycheck. Check the company’s website, reviews and Better Business Bureau page for details.

2. Be aware of potential costs

Some gigs require you to pay for certain expenses related to the job. For example, you may be on the hook for insurance, gas and car maintenance if you transport goods or people. (Learn how gas expenses affected the earnings of a Nerd who tested how much DoorDash pays .)

3. Budget for taxes

Traditionally, employees automatically get payroll taxes withheld by their employers. Most gig workers, on the other hand, are responsible for doing the math themselves. Build self-employment tax into your budget so you don’t face a surprise bill when it’s time to file.

4. Watch for scams

Gig work is high in demand — and scammers know this. Be on the lookout for red flags. If you’re asked to pay money upfront, or a position promises to pay more than your skills and experience warrant, it’s probably a scam. Learn more about how to spot a bogus job .

If you’re interested in starting a remote gig, you can learn about more tips and opportunities in our work from home guide .

5. Watch for burnout symptoms

The unpredictable income and work schedule that comes with many types of gig work can be stressful, which may lead to poor health, depression, anxiety, sleep problems and more.

And high stress levels could lead to job burnout, which the Mayo Clinic says is “a state of physical or emotional exhaustion that also involves a sense of reduced accomplishment and loss of personal identity.”

Keep an eye out for burnout symptoms, especially if you are working more than one gig. Symptoms include:

Difficulty concentrating.

Lack of energy.

Changes in sleep habits.

Irritability and impatience.

Consider looking at your living expenses and seeing whether you can lower or eliminate some expenses. That might allow you to work fewer hours or better hours.

And there’s also no shame in looking for resources to help with paying your bills if you are struggling to make ends meet.

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What Is a Gig Economy?

Understanding a gig economy, the bottom line.

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Gig Economy: Definition, Factors Behind It, and Criticism

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

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A gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security.

Many employers save money by avoiding paying benefits such as health coverage and paid vacation time. Others pay for some benefits to gig workers but outsource the benefits programs and other management tasks to external agencies.

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 the 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.

Large numbers of people work in part-time or temporary positions or as independent contractors in a gig economy. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them.

People who don’t use technological services such as the internet may 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.

A wide variety of positions fall into the category of a gig. The work can range from driving for Uber or delivering food to writing code or freelance articles. Adjunct and part-time professors, for example, are contracted employees as opposed to tenure-track or tenured professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.

Gig workers make up a significant portion of the employment pool in the United States. As many as 64 million Americans are freelancers or gig workers, according to a 2023 Upwork report. This represents 38% of the U.S. workforce. These workers contributed as much as $1.27 trillion to the U.S. economy. This figure could rise, as these positions facilitate independent contracting work, with many of them not requiring a freelancer to come into an office.

The term “gig economy” is borrowed from the music world, where performers book gigs that are single or short-term engagements at various venues.

The Factors Behind a Gig Economy

Employers have a wider range of applicants to choose from within the gig economy because they don’t have to hire someone based on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person.

Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects.

On the employee’s side of the equation, people often find they need to move or take multiple positions to afford the lifestyle they want. It’s also common to change careers many times throughout a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale.

The gig economy experienced significant increases in 2020, as gig workers delivered necessities to homebound consumers. Those whose jobs were eliminated turned to part-time and contract work for income.

In the modern digital world, it’s becoming increasingly common for people to work remotely or from home. This trend accelerated during the 2020 COVID-19 pandemic.

Criticisms of Gig Economies

Despite its benefits, there are some downsides to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers, since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries.

The flexibility of working gigs can disrupt the work-life balance , sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available anytime gigs come up, regardless of their other needs. As such, they must always be on the hunt for the next gig. And unemployment insurance usually doesn’t cover gig workers who can’t find employment, although 2020’s Coronavirus Aid, Relief, and Economic Security (CARES) Act made an exception.

Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits—including a retirement account —and a daily routine are rapidly becoming a thing of the past.

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

What Is an Example of a Gig Economy?

Examples of a gig economy are those jobs that individuals discover and access through online platforms that list such jobs. These jobs are often one-time or short-term contract jobs. These include driving for a ride-sharing service, painting someone’s house, freelance work, coaching, fitness training, and tutoring. The job is exchanged for cash and there are no other benefits, such as health insurance.

What Are the Benefits of the Gig Economy?

The gig economy has many benefits for both the employee and employer. An employer has access to a wide range of talent that they can hire. If the talent proves to be less than acceptable, there is no contract to keep the employee on or issues of letting them go. In addition, in a time when it has become difficult to attract full-time workers, employers can hire from the gig economy.

In addition, hiring gig workers can be more affordable, as companies don’t have to pay for health insurance or other benefits. For employees, the gig economy’s benefits include having the option to do multiple jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine.

Is the Gig Economy Worth It?

To the individuals working in the gig economy, it is worth it. Studies show that 79% of individuals who work in the gig economy are more satisfied than when they were working traditional jobs.

The employment and labor pool has shifted, especially since the onset of the COVID-19 pandemic. Temporary, freelance, and part-time work, collectively known informally as the gig economy, is now more common. This provides workers more flexibility while allowing companies to cut down on certain costs.

Upwork. “ Freelance Forward 2023 .”

Brodmin. “ Gig Economy—The Economic Backbone of the Future? ”

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Gig Economy: A Research Guide

Gig economy overview.

• Introduction
• Gig Types, Search Strategies and Definitions
• Marketing Strategies
• Statistical Data
• Industry Associations
• Industry News and Analysis
• Industry Laws and Regulations
• Subscription Databases
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• Using the Library of Congress

The term "gig" originated in the world of music and entertainment to describe a single performance by a musician or entertainer. It's important to note that the gig economy is not new but has existed for centuries. Traditionally, workers found jobs through word of mouth, networking, newspapers, and bulletin boards. Jobs included handyman, creative writer, street performer, delivering food or other products, driving passengers, tutoring, and renting personal property. These small jobs have long been a way for people to supplement their income or meet their needs, providing them with a steady flow of extra income. 

Over time, the gig economy has grown significantly as an alternative to traditional 9-5 work schedules and part-time employment. The gig economy's growth has been fueled by technological advancements, particularly in the recent years. Digital platforms have made it more convenient for companies to advertise, hire, and organize gigs more efficiently, resulting in freelancers and independent workers seeking short-term and part-time assignments, often promoting themselves through social media apps.

Technology has made it easier for job seekers to work remotely, find suitable jobs that align with their skill level, and apply for them. The gig economy includes various positions across industries such as transportation, food delivery, entertainment, freelancing, handyperson services, pet care, and babysitting.

Participating in the gig economy has several advantages and disadvantages. The advantages include flexible schedules, quick income, diverse opportunities, the ability to work globally, and entrepreneurial prospects. The disadvantages include a lack of benefits, unstable pay, job insecurity, social isolation, and limited worker rights.

The gig economy has become an important part of the traditional workforce, which offers opportunities and challenges to workers and companies. 

Print Resources

The following titles link to fuller bibliographic information in the  Library of Congress Online Catalog . Links to additional online content are included when available.

Periodicals

The periodicals listed are business opportunity magazines offering knowledge resources inspiration, and connections. The articles cited on this page provide more information about the Gig Economy.  Each title links to fuller bibliographic information in the  Library of Congress Online Catalog . While these titles are held by the Library, many of them will also be available through your local public or academic library. These articles may also be accessed in electronic form through our subscription databases, all of which may be found via our  E-Resources Online Catalog . Access to these databases is limited to researchers on-site.

This periodical covers topics on business news, data analysis, and trends that shape the world. Some current articles are available online from Bloomberg's website.

The periodical also covers topics on entrepreneurship, start-ups, small business and business management. Some current articles are available online from Entrepreneur's website.

This periodical covers topics on business finance, entrepreneurship, leadership, and profiles successful professionals. Some current articles are available online from Forbes' website.

This periodical covers topics on business management, leadership, marketing, finance, and entrepreneurship. Some current articles are available online from the Harvard Business Review's website.

This periodical covers topics on business news, technology, and politics. Some current articles are available online from Newsweek's website.

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The Wonolo Blog

What is the Gig Economy? How It Works, Benefits, and More

June 28, 2017

Gig Economy

Freelancing has been a thing for decades, but in recent years, the number of independent contractors has skyrocketed. Whether you attribute the shift to a tumultuous economic climate or generational trends (milennials place a higher value on flexbile work  and a meaningful work purpose than they do salary, for instance), it’s clear that the gig economy is here to stay.

Definition of the Gig Economy

The term “gig economy” refers to a general workforce environment in which short-term engagements, temporary contracts, and independent contracting is commonplace. It’s also referred to as the “ freelancer economy ,” “agile workforce,” “sharing economy,” or “independent workforce.” You might think it’s a buzzword, and you’d be right, but the widespread growth of startups supporting the gig economy (and the number of workers leveraging them) are a sure indication that the nature of work as we know it is changing.

The freelancer economy (or freelance economy) differs from traditional employment in that jobs are not permanent, but more specifically, the term relates to many one-off tasks or individual shift assignments. However, the term may also be used to reference longer-term freelance arrangements and independent contracting assignments.

How the Gig Economy Works

Increasingly, the gig economy operates on technology platforms that aim to connect workers looking for flexible work arrangements with the companies who need them in a centralized location, such as an app or website. Some platforms are focused on certain niches, such as hospitality and warehouse workers, dog-walking services, or other specific services, while others are broader, connecting gig workers with companies and clients for tasks ranging from housekeeping services to writing.

In the freelance economy, workers operate as independent contractors, meaning their clients pay them an agreed-upon rate for services rendered. In an independent contracting arrangement, workers are responsible for saving and paying their own taxes and aren’t eligible for the typical benefits of full-time employment such as access to group health insurance or retirement investments and savings accounts. But thanks to the rise of the independent workforce, benefits such as health insurance coverage, independent retirement accounts (IRAs), and liability and accident insurance are more accessible than ever before. Plus, workers operating as independent contractors get to take advantage of the tax benefits of operating their own business, including tax deductions for non-reimbursed operating expenses such as travel, supplies, and the like.

Benefits of the Gig Economy

Workers who leverage the freelance economy to earn or supplement their incomes often cite flexibility as the biggest appeal. When a professional isn’t committed to a single employer in a full-time employment arrangement, they maintain greater control over their work schedules thanks to the ability to accept only the gigs, assignments, or shifts that don’t interfere with their other commitments.

Members of the workforce with full-time careers who want to supplement their income can easily pick up a few gigs in the evenings or on weekends. Skilled professionals can exert more control over their career trajectory by engaging in challenging projects and building an impressive resume of results, enabling them to secure higher-level and better-paying full-time positions. Many, however, simply opt to remain a part of the independent workforce thanks to the flexibility and earnings potential it affords them.

The rise of the independent workforce benefits not only workers but also companies who can reap the cost savings of enlisting short-term help to accommodate demand without the administrative costs of hiring full-time staff. Companies aren’t making employer contributions to retirement savings accounts, for instance, or contributing to the cost of group health insurance coverage for gig workers, so the overall cost of hiring help is often less compared to the cost of hiring a full-time employee.

Companies can easily leverage skilled professionals for specific, short-term projects who would otherwise be too costly for a growing company to maintain as a full-time staffer. As an example, a growing startup may not have the capital to fund a six-figure executive salary, but a five-figure fee for a three-month consulting engagement may be within budget.

Additionally, it boosts the economy at large by making it possible to deliver goods and services faster and more efficiently.  Studies estimate that by the year 2020 , 43 percent of the American workforce will consist of independent contractors. With digitization and automation threatening some traditional jobs, the freelance economy can provide job security, but not in the traditional sense. While that may seem backwards (how can embracing temporary work possibly contribute to long-term job security?), it pays homage to the idea that you shouldn’t put all your eggs in one basket; in the independent workforce, having your position downsized doesn’t mean you’ve suddenly lost your entire income. 

Best Practices for Leveraging the Gig Economy

It’s easier than ever for companies in practically every sector to leverage the gig economy, and workers with a variety of skills at all levels can readily secure short-term gigs to earn a living or supplement an existing income, particularly if you follow a few best practices:

• Find your niche. Utilize your existing skills and interests, but also follow your passions.
• Leverage technology platforms. Once you’ve identified your focus (the type of work you’re interested in and qualified for), sign up for technology platforms that connect workers with your skills to the companies who need them. These platforms make it easy to secure temporary work without the time-consuming task of seeking out clients on your own and marketing your services.
• Set your schedule. While one of the biggest benefits of the gig economy is flexibility, determining your availability ahead of time makes it easier to weed out gigs that work with your schedule and reduces the likelihood that you’ll need to make changes or bow out of a previously-accepted gig.
• Manage your finances. As an independent worker, developing a budget and organizing your finances is key. Determine how much you’ll need to set aside for taxes and develop a system for documenting your income and expenses. Tax time will be less stressful, and your tax preparer will thank you.
• Treat every gig as if it’s an audition. Give every job your all – even if you’re working a single shift for a company. Some on-demand staffing platforms have employer feedback loops, allowing companies to rate and review temporary workers, which can significantly impact your ability to secure future work. Even if there’s no formal review mechanism in place, your reputation is key to your success, and exceeding expectations can earn you referrals and recommendations.

The gig economy offers abundant opportunities for the workforce and employers alike. The rise of the independent workforce is here to stay, thanks to technology advancements that make it easier than ever for workers to find temporary jobs that afford them the freedom and flexibility they want.

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