Why The Gig Economy Is A Good Thing

Are you familiar with the gig economy yet? You should be, because it’s probably touching your life in some way.

“A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements,” according to “WhatIs.com.”

Also known as the ‘sharing economy,’ it refers to the emergent business model that includes businesses like Uber and Airbnb, where workers offer their services at will.

There’s a lot more involved than just rooms and rides. According to Huffington Post, gigs can be found in industries such as healthcare, writing, graphic design and other visual arts, home services and personal assistance, legal services, caregiving, coding and programming, consulting and manufacturing.

“The 53 million Americans who are freelancing already contribute more than $700 billion to our national economy and help U.S. businesses compete and find the skills that they need. The connected era we live in is liberating our workforce. The barriers to being a freelance professional – finding work, collaborating with clients and getting paid on time – are going away,” according to Fabio Rosati, CEO of Upwork, a freelance matching company.

A recent study by Intuit predicted that the on-demand economy will more than double by 2020 to 7.6 million workers, about 40 percent of the nation’s workforce.

You might wonder why you should care about this. Well, the first reason is that you most likely will be required to make a living at some point in your life. That’s harder to do since the Great Recession; recovery has been slow for the labor market.

The second reason, equally important, is that being your own boss offers a world of potential that’s not available to most nine-to-fivers. That includes not only the opportunity to pile up some serious cash but also the flexibility to pursue your real passions.

There are some downsides to being in the on-demand labor market. For one thing, there’s less stability and income can be inconsistent as jobs dry up, as industries go through cycles, or as increased competition decreases demand for certain jobs.

Workers incur more costs when they are not covered by an employer, including health insurance, gas for the car and other supplies for work. Also, there are a number of protections offered to employees that are not extended to independent contractors, such as paid time off, severance pay, disability leave, sick days and workers’ compensation.

In most service-based businesses, reputation matters. One of the biggest flaws in the gig economy system is that reputations are so easy to destroy in this digital age. Customer satisfaction is all too often entirely arbitrary, and one reviewer’s bad day posted on Yelp or Amazon could do serious damage to a freelancer.

Another possible hazard is mobile business apps going out of business as a result of litigation, or because the funding dried up.

With all those possible issues, and with all those questions, why is the gig economy good for us? Which ‘us’ are we talking about here? When you look at the big picture, it’s actually good for all of us: workers, employers and the economy as a whole.

More people working and making money benefits the entire nation. It means less unemployment, less poverty, less homelessness and less crime. It means a higher standard of living for everyone.

A sharing economy is good for businesses because it helps them to compete, which drives quality and variety up and prices down. It allows them to preserve more capital by not having to spend money on things like benefits, office space and training.

Best of all, a gig economy is good for workers because it allows more options for work, more freedom to choose what jobs to take and the flexibility to work or not work, when or where to work. The barriers to entry are lowered. For example, it just takes a good driving record and a reasonably new car to drive for Uber. Top freelance jobs for coders have an intensive entry process, but don’t require college degrees or specific experience – just the ability to do the work.

“Gigging” gives people the ability to earn money using assets they already own, like a house, a car or a skillset. Fierce competition for the best workers compels companies like Google to offer premium benefits to keep their top performers on board. Everybody wins.

So, how much can you make working on-demand? Income varies wildly, from a few bucks for a small handyman job listed on “Taskrabbit” to up to $1000 per hour for elite coders. Bloomberg profiled James Knight, who quit his job writing software for Google to make twice as much money as a freelancer, writing code while he vacations around Europe.

Some adjustments by the government could remove much of the uncertainty. Labor laws and regulatory systems need to be re-examined and reformed to meet the needs of this rapidly changing labor market, and portable benefits – not tied to an employer – would provide a basic safety net.

More data needs to be compiled before any solid conclusions can be drawn, but the picture is very bright for the future of this new business model. “A more collaborative, community-based form of capitalism could change not only our economy, but our polarized politics,” wrote Rana Foroohar, economics columnist for Time.

One thing is sure: In an unstable and depressed job market, it might be more important to diversify your income streams than your stock portfolio.