Taking Advantage of the Gig Economy at its Peak

Last year, the Bureau of Labor Statistics reported that 55 million people in the U.S. are “gig workers,” which is more than 35 percent of the U.S. workforce. That number is projected to jump to 43 percent by 2020. If you’ve never heard the term, “gig work” is basically just a buzzy way of describing an independent contract or part-time job, like driving for Uber or freelance copywriting.

Millennials, the generation credited with disrupting everything from housing to marriage, are gravitating toward gig work for the promise of greater work-life balance. Boomers and other generations on the brink of retirement are drawn to gig work because it brings in a little extra income without a major time commitment. And recent technologies like Skype, Slack, and DropBox have made the gig life a reality, giving you maximum freedom, an ideal work-life balance, and the chance to pursue your passions.

If you’re thinking of joining the gig economy, it’s never been easier. But freelance work also comes with challenges, like unsteady workloads and pay schedules, lack of benefits, and a ton of self-discipline.

Here’s what you need to know before you make the jump:

  • You’re your own boss, so discipline is key.
  • One of the great things about the gig economy is that you don’t have a boss breathing down your neck.
  • As a freelancer, you no longer have to cater to a company culture or work schedule that might cause physical or emotional stress. Instead, you get to choose the type of work you do and who you work with. Plus, you get to make your own decisions about when to wake up, when to work, when to exercise, when to run errands, and how much work you take on. You’re able to make choices that suit your personality and unique needs.

But this degree of freedom requires a corresponding amount of discipline, and that doesn’t come easily to everybody. With no boss to make sure you’re on task, it’s all on you. If you wake up late and miss a client call, no one else can help smooth things over. It’s your responsibility to apologize, call to reschedule or lose the client altogether. Not everybody is suited to be his or her own timekeeper. Some people need structure and the pressure of an authority figure to stay motivated. But if you’re a self-starter who chafes at being told what to do, the gig life could be a perfect fit.

The gig economy is great for creatives!

When you’re a young creative just starting out, and your resume is more or less a blank slate, gig work can help you get a foot in the door. The gig economy allows creatives to pay the bills while also giving them time to pursue their passions. Visual artists like my Uber driver can supplement freelance design work by driving for rideshare services. Aspiring novelists can freelance as copywriters to make their rent payments.

Plus, you can do these jobs from almost anywhere. You could be in the North Pole as long as you have internet access. You can find work wherever you feel inspired. Just make sure your artist’s late nights don’t keep you from turning projects around on time.

The Basic Premise

Apps dedicated to side gigs tend to follow the same pattern, and they aren’t always technologically sophisticated. First, there needs to be a customer need—a type of service that ideally, almost anyone could provide. Sometimes, that’s housesitting or pet sitting. Sometimes, it’s providing transportation. Other times, it’s a professional service, like writing, designing, or voice acting. In any case, the app functions as both a sophisticated classified-ad-style matchmaking service and as a facilitator of the services rendered. Take Uber as an example; Uber provides value because it matches you with a driver whenever you need a ride (and gives you riders if you’re a driver), and because it handles things like ride tracking, fare calculation, and other features.

On the surface, this isn’t a bad thing. You can look at it in one of two ways. In the first, this is simply a tool that increases the efficiency of something that would have happened anyway. Services like this have existed for a long time, and not always in app form. For example, if you’re managing a multifamily property as part of your investment property portfolio, you could enlist the help of property managers to take care of things like collecting rent, finding tenants, and managing evictions when necessary. In a sense, customers are paying a fee in exchange for making more money and making their own lives easier, and gig-focused apps aren’t the first things to do this.

These thoughts suggest that gig economy apps are mere extensions of things that develop naturally in the economy overall, and therefore shouldn’t bear criticism for impacting the economy negatively. But this isn’t the only dimension to consider.

The Profit Problem

There’s an inherent problem with how this system handles profits, and it’s one with apparent advantages. Tech startups that focus on gig-based transactions count on being able to scrape relatively small fees from either customers or service providers. On a large enough scale, even small fees can accumulate to massive amounts of revenue. Accordingly, the scale needs to be as large as possible for the company to continue growing and remain profitable. This is problematic because it encourages razor-thin profit margins for service providers over the long term, and as more service providers begin to lean on the app for part of their income, it becomes harder to leave.

Benefits and Job Security

Gig workers aren’t paid a salary; instead, they’re paid a fixed fee for each “gig” or task they complete, leading to a sense of job instability. Gig workers are frequently insecure about their future and have to deal with inconsistent income, which can make it difficult to raise a family or save enough for retirement.

Without benefits like health insurance, retirement options, or other perks, it can cause serious financial distress. High-tech IoT devices and other breakthroughs are gradually making healthcare less expensive, but health-related emergencies are still the leading cause of debt and bankruptcy in the United States. Without health insurance, gig workers are stuck fending for those costs on their own and could face financial ruin because of it.

Available Jobs

If a company has an option of hiring someone full-time or using an app to hire cheap temporary help, they’ll probably choose the latter. As an increasing number of jobs and services become available in the gig economy, the number of available full-time jobs could take a hit. And of course, with higher unemployment rates and less demand for workers, the economy would suffer.

Side Effects

If someone is leveraging side gigs full-time, they’ll face a number of other side effects in their life. Faced with inconsistent income and a job that could easily vanish, it would be nearly impossible to secure a mortgage or loan. Considering a relatively small percentage of people rely on gigs for their total income, we haven’t seen this kind of widespread impact, but it could happen as the numbers increase.

This doesn’t even consider the non-economic impact that the gig economy can have on workers. Inconsistent demand leads to inconsistent hours, and sometimes long, boring shifts as workers attempt to pick up tasks to accomplish. That leads to less job fulfillment, and more importantly, a less healthy work-life balance for workers.

The Bottom Line

Despite the weaknesses of the gig economy, there are remarkable benefits as well. People have more flexibility with the type of work they can take on, side gigs can lead to additional income for the average worker, and entirely new industries are being created. There are clearly positive economic benefits from apps that support the gig economy, but if they’re not carefully designed and managed, they could have a negative impact strong enough to negate them. We need to think carefully about the technology we create and how we use it on a regular basis, or it could ultimately do as much harm as good.

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