The rise and challenges of the gig economy

Even though it’s the year 2020, companies still prefer working traditionally — in other words, having employees inside the company office. However, that all changed when the coronavirus (COVID-19) pandemic flipped everything around basically overnight. Most people either lost their job or were forced to work remotely from home. The few who weren’t fired but couldn’t work remotely faced furlough, with the expectation that it would take months to return to work. As for how to get through the tough months until then, one possible solution was the gig economy.

In fact, the gig market has been growing steadily even before the COVID-19 outbreak, and now business is booming more than ever. For instance, offers for mobile delivery gigs grew by 78% in March alone.

That figure just goes to show that despite many people being laid off temporarily, there was still work to be found. Let’s take a much deeper dive into the pros and cons of the gig economy, starting with a definition of what exactly is meant by this term.

What exactly falls under the ‘gig economy’?

For many people, the words “gig economy” sound foreign. So, let’s define it.

According to Investopedia, the term gig economy refers to a mode of business where freelancers and independent contractors are employed in place of full-time workers.

As such, workers rely on finding jobs, or, better yet, gigs. They’re primarily on online platforms made specifically for this purpose. Some of the most popular ones are Airbnb, Uber, Fiverr, and UpWork. In essence, these platforms act as mediators and help both employers and freelancers find temporary work.

The boom continues…

So far, the gig economy has enjoyed an upward trajectory, and it is still growing strong. In the US, the industry grew by 15% just in the past decade. Currently, there are around 1.6 million people working this way in the country.

A big reason for this uninterrupted growth is the fact that both parties benefit from this way of doing business. For freelancers, it offers a lot of freedom that they wouldn’t otherwise have. In other words, they are not tied to an office chair from 9-to-5, day after day. What’s more, this type of work provides a much better work-life balance and allows freelancers to decide when best to complete their tasks (most of the time).

Employers, on the other hand, appreciate this work mode as there are fewer expenses and overhead costs than hiring a full-time employee. Working with freelancers means you don’t have to pay for training, insurance policies, and other worker-related expenses. However, for employers, there is an inherent risk when working with independent contractors that comes in a form of an employee misclassification, which can be avoided if you classify workers properly.

With clear benefits on both sides, it’s no wonder that the freelance market keeps growing year after year, with no signs of ever slowing down. In fact, due to the COVID-19 outbreak, a significant share of Japanese workers went looking for work in the gig sector. According to recent gig economy statistics, Japan saw a 513% increase in gig workers in 2020 alone!

Women and the gig economy

Just like anywhere else in the world, women in the US struggle to get equal working rights as men. Nevertheless, gig work offers a lot of options for women who are struggling to make ends meet or want the freedom that comes with gig work.

Firstly, they get paid the same amount as men for completing the exact same tasks — which is not the case with traditional work. Also, in many parts of the world, the job of raising children and taking care of the household often falls onto women, leaving her with little time to pursue a career. Luckily, gig jobs allow these women to pursue their interests (writing, designing, teaching, programming, and more) and get an additional source of income.

If you look at the numbers, the average pay gap between genders in the US is around 12% (for traditional, full-time jobs), whereas in the gig industry there’s merely a 5% difference. The reason is that gig and freelance work are paid mostly by merit and overall skill.

Another important thing to note concerns sexual harassment. In the traditional workplace, 8 out of 10 cases of sexual harassment are reported by women, according to the Institute for Women’s Policy Research (IWPR). That means that only 20% of cases involve men. The IWPR report from 2017 also states that 12,428 women filed sex-based complaints that year, and 6,696 were marked specifically as sexual harassment.

Given that gig work involves working from home or alone, it is likely that those numbers are significantly less for these types of workers. Of course, it’s naive to think that there isn’t still sexual harassment. But, hopefully, there’s less opportunity for it with remote gig work.

The downsides of gig work

Everything in this world comes with its own set of pros and cons, and the gig economy is no exception. So far, the discussion has mostly focused on the positive points, but there are also drawbacks of gig work.

Firstly, gigging falls into a category of employment where labor laws do not apply; at least, not in the traditional sense of the meaning. For instance, one of the main issues is the lack of overtime pay or having the “privilege” of paid leave. Likewise, there’s no minimum wage, and most contractors don’t offer any kind of insurance to freelancers.

However, seeing how the gig economy is growing at an exponential rate, it’s only a matter of time before employers and gig workers sit down and come up with new terms of work beneficial for both parties.

The second disadvantage applies to the person hiring the worker. Many people claim that traditional employees are significantly more reliable when it comes to finishing a project. There’s always the possibility that a freelancer submits the project late (that happened to me yesterday, sigh) or bails out right in the middle of an important project. Things like this are less likely to happen if you have a full-time employee working in the office instead.

Quality is yet another reason why some employers prefer hiring an employee in-house versus outsourcing to the gig market. No matter how much effort you pay to find the perfect candidate, you can’t always be sure whether they will meet the criteria needed for a specific project or not. In this case, a referral from a trusted person in the industry about the freelancer’s value can be very helpful for the hiring company.

The bottom line on the gig economy

The gig economy will undoubtedly grow even more over the next few years. The flaws of the traditional working model, which COVID-19 brought to the surface, made business owners think twice about hiring full-time workers (and sidelining remote workers and freelancers).

The fact of the matter is, a lot of people got the chance to work remotely during the lockdown, and for some, there’s no turning back. And for women, specifically, gig work offers many opportunities, a better work-life balance, and equal pay, which cannot always be said for traditional work.