You might have heard people talking about “the gig economy.” These days, it’s in the news fairly
Lawrence Katz is a professor of economics at Harvard University. His associate Alan Kreuger is a professor of economics and public affairs at Princeton. In 2016 they completed a study that revealed the reason for 94 percent of all economic growth in the US, between 2005 and 2015 was traced back to the gig economy.
In that time period, the number of independent contractors, gig
workers and freelancers rose some 50 percent.
What is it, though?
What Makes It Different
The gig economy varies from traditional work styles. No longer are we getting out of college,
working at the same place for 20 years, then thinking about retirement. No longer are we
working several, shorter jobs and then retiring.
Now a new labor market is on the rise — the “gig economy.” There are a lot of contracts in this
market. They’re usually short-term, but not always. Unlike other markets, you don’t have a
“permanent job” in the gig economy. You do have skills, though, and you put them to work for
the people who need those skills.
It’s well-suited to people who like freelance work. You might not find doctors or lawyers in the
gig economy, but you will find:
● Video Producers
● and more.
Rather than going to a certain place and working set hours every day, participants in the gig
economy have much more control over their work schedules. Have a test you need to study for?
Take care of that. Need to take your kid to the doctor? Family comes first.
What Makes it Better
Another benefit for people in the gig economy is that it enables better regulation of your
work-life balance. Feeling sick one day? Don’t worry about it. Don’t feel like working? You don’t
have to force yourself.
Of course, if you don’t work, you don’t get paid. And if you have a deadline, there won’t be
anyone breathing down your neck to make sure you get it done. From the employer’s
perspective, this is an advantage: They don’t have to commit to a fixed schedule of payments,
so they spend money only when there’s work to be done.
Gig economy workers frequently work from home. In many cases, this can be a great
advantage. Yet it can also be a disadvantage as well.
What Makes it Not “Better”
Workers in the gig economy are classified as independent contractors. So they’re not protected
against unfair dismissal. They are also not covered by the national minimum wage standard.
They don’t get paid holidays, paid time off or sick pay.
At the same time, pay rates in the gig economy are typically somewhat inflated to cover these
situations. If a worker can manage their own time and money, they can be extremely effective.
And there are several umbrella organizations, both local and national, that provide benefits such
as health insurance, term life, and retirement plans.
Be careful about your taxes, though. In a “regular job,” your tax liability is removed from your
paycheck before you even get it. Federal income tax, state income tax, Social Security and
Medicare is all taken out. Not so with the gig economy. However, if you set aside 20-25% of
every payment, and keep track of all those payments, you should be good. And if you’ve
overestimated, you can get a nice fat “refund” at the end of the year!
Granted, the gig economy is not for everyone. Still, it can
work well for those that have the skills and tools – and the ambition to make it work!
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