It’s likely you know or have heard of at least one person within your social network who has a flexible working arrangement. It could be they have the luxury of working from home a few days a week, or perhaps they’re full-on freelancers. This schedule may be enviable to someone who works full-time in a brick and mortar building. Who wouldn’t want to have the flexibility to work from the comfort of their bed during the workweek?
This growing trend of freelance and short-term work is also referred to as the gig economy. Forbes recently pointed to a Bureau of Labor Statistics report that noted 35% of the U.S. workforce in 2018 was gig workers. By 2020, the number is expected to jump to 43%. So why is nearly half of the American workforce so keen on working in the gig economy? Is it a matter of personal preference, or are socio-economic circumstances pushing them in that direction? Whatever the case, there are both pros and cons of working in the gig economy:
Although some people become a part of the gig economy because of their circumstances, others do so by choice. There are positives that make them gravitate to the world of freelancing such as freedom and the wealth of opportunities. Read more about the pros below.
One of the most attractive things about the gig economy happens to be the level of flexibility you’re afforded. Whether you’re a freelance writer or Uber driver, you can work on your schedule, which is something many desire. Millennials are said to especially gravitate towards the gig economy because it allows them to create more explicit work-life balance.
When you work in the gig economy, you tend to have more autonomy. In a traditional job, you may not be able to pick and choose the types of tasks you do daily. However, the gig economy gives you that chance. Thanks to the sharing economy, it’s possible for gig workers to access a range of jobs online. For instance, with the emergence of Lyft, people who enjoy driving for a living can use the platform to find consistent work.
It’s important to remember that as a gig worker, you are your own boss. That means you’re also responsible for being professional and managing your personal brand. In doing so, you may even find that work begins coming to you instead of vice versa. To show just how useful a personal brand is, 70% of employers use social media to screen candidates during the recruitment process. This suggests that you could increase your chances of securing a new client or contract just by building an online presence. A core example of someone who has mastered their personal brand is Oprah Winfrey. She has built an estimated net worth of $2.5 billion by inspiring people and challenging them to live their best lives.
It’s no secret that short-term contracts and freelancing can result in inconsistent income. This means that it’s hard to predict what they’ll earn and some months they could make very little. As of 2018, the average pay for gig workers looked to be around $58,000. Surprisingly enough, this isn’t so far off from the national average salary of a full-time worker in the U.S., which Glassdoor tells us is $53,902. That aside, as a gig economy worker, there is no limit on your earning potential as you can combine different types of work and a set salary doesn’t limit you.
According to an article on Forbes by Abdullahi Muhammed, in 2018, gig workers in the U.S. earned an impressive total of $1.4 trillion. What’s more, 40% of them are now bringing in over $100,000 annually, which suggests they’re doing quite well for themselves.
While working in the gig economy has its pros as outlined above, there are some cons, too. A lot of them center on the lack of security you get due to the nature of work you’re engaging in. Here are a few cons of working in the gig economy.
Lack of Benefits
A glaring con of being a gig worker is the lack of benefits you get. Although a full-time traditional worker may have to go to the office every day without fail, there are other benefits to doing so. Examples are medical insurance and retirement funds, which both act as safety nets.
Another crucial benefit you wouldn’t be entitled to is workers’ compensation. This is a significant disadvantage for individuals who work in physically dangerous jobs, such as contractors. If you’re injured, you won’t get any medical benefits or wage replacement, which leaves you vulnerable to financial struggles. Workers’ compensation usually covers medical expenses, any lost wages, the cost of ongoing care, and funeral costs in the unfortunate event of death. If you have a pre-existing condition, you may be able to get worker’s compensation depending on what the condition is and the laws where you live. In Pennsylvania, you may be entitled to benefits if you have a pre-existing physical condition that’s further aggravated by the work you do.
Inconsistent work can result in financial instability as a gig economy worker, especially for those who rely solely on independent contracting for work. For this reason, some people may end up doing odd jobs and working around the clock to make ends meet. There is also the issue of competition and the oversupply of workers in some industries which can make finding lucrative work difficult. For instance, platforms like Fiverr which is full of freelancers looking for contract work can drive the cost of labor down. This is because you have employers looking for cheap labor and several freelancers ready to do it.
Moreover, a 2018 court ruling in California could further shift the playing field for gig economy workers within the region. The implications of the order are that if you’re offering a business service within the same sector or niche, you could be entitled to the same benefits as an in-house employee. In the event that this does materialize, it could result in you having more financial stability and security, depending on the nature of your contract.
The clear downside to some of the more recent legislation related to labor and self employment is the limit it sets for freelance writers accustomed to earning a certain income from working with high-paying clients. For example, AB 5 is already facing potential lawsuits. This ruling will be especially problematic for freelance writers in California, since the ever-rising cost of living makes freelance contracting much more lucrative and stable than a traditional staff job, especially for writers in marketing.
One of the benefits of being an employee is that your employer withholds part of social security and Medicare taxes from your wages while paying a matching amount of each themselves. However, as a gig economy worker, you’re required to pay the full amounts on your own. As of 2019, the self-employment tax is 15.3%.
The gig economy really is a dream come true for some and a nightmare for others. It is about your unique circumstances and which type of work best suits your needs and lifestyle. Just ensure the pros outweigh the cons before you dive into the gig economy head first.