What is the Gig Economy? Definition, Challenges, and Benefits

How people prioritize and balance work, family, and personal time have altered significantly in recent years, with professional booms such as the gig economy becoming increasingly popular avenues for full-time or part-time income streams. 

With advancements in technology, including social media, file-sharing platforms and digital work resources, the fundamental office-like work environment is becoming less and less necessary.

Especially now, as the world is fully enveloped in the COVID-19 global pandemic, working from home has become a means of survival for many businesses instead of an added perk. 

With this involuntary adaptation, many companies had no other option than to adopt a remote working structure.

However, through this compulsory action, many soon discovered how productive and effective this system could be.

Even before the pandemic, many employees realized the increased level of personal and financial freedom from becoming their own boss and structuring their work around their lives instead of the other way around.

This mass epiphany contributed to creating a new, diverse pool of short-term outsourced talent operating within a budding international industry known as the ‘gig economy.’ It has also sparked an increase in employers using various digital platforms that enable this outsourcing to enlist the services of temporary workers for a lower price in the form of short-term digital ‘gigs.’

Today, we will be delving deeper into the concept of the gig economy to develop a comprehensive understanding of:

What is the Gig Economy?

These days, the term ‘career’ is taking on a whole new meaning. It’s much more customizable now than ever before. One of the most prominent ways this notion is reflected is through workers creating a free market system consisting of temporary positions operated by independent contractors.

This modern administrative structure is known as the gig economy.

Over recent years, a shift has slowly been occurring inspired by generational differences, primarily surrounding the desire for a healthier work-life balance.

As younger demographics, including Millennials and Gen Z, continue to flood the global workforce, and older generations like Baby Boomers are moving towards retirement, increased emphasis has been placed on how much businesses prioritize this delicate balance.

For many, the best way to ensure that this synergy is achieved is by taking matters into their own hands.

Essentially, the gig economy operates on two primary bases:

  • Work performed over digital platforms but in a specific location
  • Work conducted via digital platforms that enable remote working

Being self-employed and operating within the gig economy is appealing to many people because it allows for heightened flexibility that they would not otherwise be granted or have in a stricter 9-5 position. In this way, they can operate as their own boss and create their own schedule that works best for their particular circumstances.

However, that said, the concept of the gig economy isn’t new. In fact, the share of gig workers among all workers in Canada rose from almost 1 million (5.5%) in 2005 to about 1.7 million workers (8.2%) in 2016. And the numbers have steadily been increasing from there.

The relationships that exist within the gig economy also take on many different forms. For example, it can be direct, like an independent contractor performing a particular service or ‘gig’ for a company. However, it can also be an indirect relation, like a self-employed worker performing a service for businesses that consumers then utilize.

That said, there is a grey area in terms of regulating these relationships. It can sometimes lead to unsavoury experiences for both the temporary employer and the short-term employee. We will delve into the challenges and benefits further in a later section.

However, to touch on it briefly, since the market is unregulated, it creates an environment for potential exploitation from employers and decreased accountability and dedication from the independent gig workers.

In the following segment, we will outline the various individuals that make up the gig economy in greater detail.

Who’s Part of the Gig Economy?

The beauty of the gig economy is in the sheer diversity of products and services it provides.

With the world becoming more digitally-reliant every day, access to these various opportunities from both a consumer and gig workers standpoint has never been more straightforward.

Labour & Product Providers
gig job examples

Technology has helped society progress in an abundance of ways. However, it has also created optimal conditions for consumer expectations to be at an all-time high.

These days, it’s not enough to simply have a product available. To maintain a competitive edge, you have to have the desired product and also be able to order, package and ship it cheap and fast.

Specifically, in the context of the gig economy, it has created the necessity for third-party platforms to ensure cheap manufacturing and dependable shipping services to produce mass quantities of products and get them out as quickly as possible.

Independent contractors rely on eCommerce retail websites and dropshipping to fill inventory and supply fast and efficient shipping to ensure that customers are satisfied.

For example, the American e-commerce website Etsy operates as a medium connecting consumers with a steady population of full-time and part-time freelance or gig workers who supply various handmade, vintage or craft items available for purchase. 

In turn, they depend on Etsy’s delivery couriers to transport and deliver their products to the consumer.

Another noteworthy example of this type of relationship would be Amazon

As the largest eCommerce website globally, Amazon provides a fulfillment service for vendors and retailers whose physical locations or lack of, don’t store or ship the products they sell.

Amazon also provides a platform for entrepreneurs to sell their products online. Entrepreneurs will purchase their items in bulk from countries with wholesale pricing, rebrand them as their own, and sell them for markup for purchase online.

This business model, known as dropshipping, is already a lucrative industry with the potential for even more growth as eCommerce continues to change the way consumers shop.

Service Providers

As the gig economy’s nomadic employment style continues to grow in popularity, so does the practice of individuals and businesses utilizing these gig workers for various particular tasks.

The Digital Nomad lifestyle is rooted in the Gig Economy and might sound enticing, but it’s harder to execute than you might think. Here’s  How to be a Digital Nomad: 10 Easy, Simple Steps.”

New advancements in file-sharing technologies and digital resources make it easier than ever for organizations to hire part-time experts in a particular field to help with jobs on a project-specific basis.

Many business owners appreciate this relationship because it allows them to hire individuals for gig work as needed instead of paying full-time salaries.

This concept extends to a wide range of different services, including graphic designers, web developers and content writers who are hired for provisional gig work on a particular project but whose services are no longer required once the job is complete.

The terms of these relationships are most commonly outlined in a brief contract that summarizes the particular service required, the project’s duration, and payment details where the freelancer will send an invoice once the project concludes.

A smaller-scale example of this would be hiring a tutor or a teacher for music lessons. Individuals hire these gig workers who are well-versed in a particular subject or skill on either a limited number of classes or on an ongoing basis with an agreed-upon cost by both parties.

Software as a Service (SaaS) Workers
Uber's value proposition is all stress-free, easy-to-use convenience at your fingertips. (Mike Dotta - Shutterstock)

The sheer number of digital services available at our disposal means that it has never been easier to become a member of the gig economy, either on a part or full-time basis.

With the luxury of making your own hours and increased flexibility, various industries, including ride-hailing services like Uber and Lyft and vacation rentals such as Airbnb, have seen a massive influx of drivers and hosts.

For example, Uber drivers can pick and choose their working hours to fit around the various external factors of their lives, such as school, full-time jobs, and families. 

These companies have literally built their entire brands on the backs of gig economy workers. 

As such, they realize their inherent value. To ensure that their businesses continue to be successful, many opt to dedicate additional resources to ensure that their gig workers remain loyal and happy.

Additionally, the COVID-19 pandemic has forced many workers, particularly in the restaurant and foodservice industries to face the dilemma of navigating the various restrictions and protocols enacted by the government.

Businesses must walk a tight rope in order to keep afloat during the pandemic. Here are 5 Ways Businesses are Adapting to COVID-19.”

Sometimes, these rulings required establishments to shut down completely.

In cases like these, services such as Skip the Dishes, Door Dash and Uber Eats became necessary lifelines to keep these businesses afloat. 

When restaurants were permitted to open on a limited capacity basis, these food delivery services remained a crucial source of revenue.

Additionally, it also created an increased demand for people to pick up and deliver the food. This opportunity saw an uptick in delivery jobs where individuals could either earn or supplement their income. 

Changing the Workforce? Challenges & Benefits

gig jobs

Like with any other jobs, there are pros and cons for those who choose to operate within the confines of the gig economy.

Below, we will highlight some of the most significant challenges and benefits facing gig economy contractors.

Challenges

Lack of Brand Loyalty

From a business management standpoint, hiring external independent contractors can be a coin toss regarding how dedicated the person will be to the job at hand.

In other words, since they do not work for you full-time, there isn’t as much accountability on the contractor’s end to perform tasks to the best of their ability because there is no initial foundation of brand loyalty.

Brand Trust is important for any business. With gig workers having more autonomy over their jobs, it could make the establishment of brand trust more difficult. Learn more in The Value of Sustainable Brand Trust and How to Do it.”

However, this doesn’t necessarily mean that they are going to do a good job.

Ultimately, a gig worker’s loyalty lies with their work, not your business. That said, when it comes to operating as a freelancer, reputation is everything. In its own right, this fact will likely motivate them to apply themselves and generate quality results, albeit for more self-serving reasons.

Binding Contracts

The whole basis of the gig economy structure operates on agreements.

Once you establish a contract, that binding document will control everything surrounding the employer/temporary employee relationship. This can include your right to terminate the relationship.  

So, for example, say you are unsatisfied with the work being put out or the individual contract worker’s attitude.

Depending on the terms outlined in the contract, there may be limitations barring your ability to terminate that person’s temporary employment. 

Any infringements on specific clauses or the contract as a whole could expose you and your business to legal liability for breach of contract.

That said, in the context of a gig worker, it is absolutely vital to read a contract from beginning to end to know exactly what it is you’re signing up for. Some business owners may only offer to pay minimum wage or create loopholes for themselves to their advantage, leading to exploitation and unfair treatment.

All this to say that, if you choose to enter a business relationship, ensure that the contract works to the benefit of both the employer and the freelance worker. 

Minimal Support & Benefits

If you’re considering entering the gig economy, it’s essential to know the risks and costs. Namely, you’re likely sacrificing the comforts associated with a salary-based, full-time job.

Most people employed through gig work earn a significantly lower income – typically below $10,000 per year and fewer than 15 hours per week – which is why many opt to use these gigs instead to supplement their earnings rather than live off them.

Additionally, government employment laws provide a certain set of rights that are not accessible to self-employed individuals, another reason creating an air-tight contract is so important. 

In this way, benefits packages containing coverage for advantages such as health insurance, depending on where you live in the world, are not distributed by the government.

Instead, they’re features that the government requires employers to bestow to their employees.

Additionally, until the onset of the COVID-19 pandemic and still, in some regions, gig workers are not entitled to unemployment insurance if they enter a dry spell where demands are low for their specific product or expertise.

Unfortunately, it is the individual freelance worker’s sole responsibility to provide their own benefits packages, including health insurance, unemployment and disability.

Furthermore, gig economy workers are held accountable for several legal and financial responsibilities that traditional employees don’t typically need to consider.

For example, processes that may automatically be taken care of through an employer, such as income tax and paying a portion of social security, fall on the freelancer to handle themselves, which could implicate them legally if not done correctly or at all.

Benefits

More Flexibility

We’ve touched on this several times throughout the article, but flexibility is perhaps the most enticing and advantageous element of the gig industry for both employers and freelance workers.

Being able to generate personal working hours is an incredibly appealing factor, particularly for individuals only looking to work part-time while still caring for their families. 

Additionally, for people looking to supplement their income with additional work, the gig economy allows them to base their gig work around other aspects of their lives and choose when and how often to make themselves available for outside opportunities.

Additionally, from a professional standpoint, gig economy workers offer businesses the flexibility of staffing their business to occupy a specific need. 

This efficiency can lead to increased productivity and efficiency through hiring individuals with the particular expertise needed to complete a specific task.

Decreased Employment & Administrative Expenses

Since gig workers typically have a specific area of expertise, employers can eliminate the costs and time dedicated to training a new employee.

Since they will only be there temporarily, these workers don’t necessarily require company-specific training from a business’s HR or other organizational resources. 

As such, they can focus these resources on potentially expanding the business or dedicating more attention to particular areas that need improvement.

As we outlined previously, while it may come as a disadvantage to the employee, hiring freelance workers also minimizes the price of additional benefits given to salary-based workers, including the cost of health insurance, employer-funded pension plans and unemployment insurance.

Greater Autonomy

Many freelance workers often find that they are given independence and space to complete their work as they are considered experts in their specific field. 

Additionally, working outside of the specific office may also provide an increased level of individual functionality.

Most people find it easier to be productive and stay focused without someone looking over their shoulder or consistently checking in to see that things are proceeding on the right track. 

That said, it is not uncommon for employers to ask for progress reports, depending on the individual project’s longevity.

This autonomy further expands to individuals carrying out and completing jobs how they see fit and on their own time. 

Additionally, it grants workers the ability to pick and choose which gigs they would like to do in the first place.

Anyone who has been put in the position of being assigned a task or job they don’t want to do knows the luxury of being able to say no.

Finally, piggybacking on the point of choosing which jobs they’d like to do and those they can refuse, another significant appeal of contractors working in the gig economy is the sheer variety of opportunities at their disposal.

In this sense, each project or gig is likely filled with different elements that make the work more interesting and compelling. So, it brings an added element of intrigue and versatility to every day.

Key Takeaways on The Gig Economy – The Future of Work?

With the incredible amount of digital resources available for the personal and professional worlds, it has never been easier to remain connected. This innovation only further facilitates the accessibility and attractiveness of gig-type positions becoming more normalized.

Particularly as the workforce is ageing out Baby Boomers and consisting of greater populations of Gen X, Millennials, and some Gen Z, the priorities and social norms surrounding the concept of a ‘career’ and a work-life balance are at the forefront of many workers’ minds.

However, the gig work concept remains far from perfect. Legal implications, financial stability, and access to resources remain at the centre of this industry’s core issues.

That said, the benefit of utilizing specialized labour bodes significant promise for increased productivity and success both for the workers themselves and the businesses enlisting their services.

The gig economy presents a unique and modern opportunity that questions the classic employer/employee relationship’s validity and efficacy and presents an intriguing new option that holds collaboration and mutual benefit at the helm.

While there are still some kinks to work out, the gig economy’s future is incredibly promising with seemingly blue skies ahead.

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Written By Emily Rumball

A Content Writer at Advesa, Emily is a self-proclaimed tea addict (her favourite being a nice, strong English Breakfast), animal lover, and eager traveller. When she isn't jet-setting off to the next far off destination, she enjoys spending quality time at home in Vancouver.