Is Gig Work Still Transforming the U.S. Job Market? Oh Yes.

Apr 17, 2024

For all of the side hustlers, freelancers, and self-starters out there, the gig economy is alive and well. With origins that date back to the rise of the jazz era of 1915 (hence the term “gig”), its more modern reference was solidified by former New Yorker editor Tina Brown in 2009. The term describes workers in the knowledge economy who increasingly pursue “a bunch of free-floating projects, consultancies, and part-time bits and pieces while they transacted in a digital marketplace.”

At that time, the traditional concept of employment was rapidly transforming as quickly as new startups and challenger brands leveraged technology and innovation to disrupt industries. The timing of the gig economy’s renaissance makes sense when you consider that Etsy started in 2005, Airbnb was born in 2007, Uber was founded in 2009 (it has since reached 5 million “earners”), and DoorDash sprinted onto the scene in 2013 and now has more than 2 million monthly active Dashers.

Since the beginning of the new millennium, the gig economy has been a centerpiece of economic and workforce analysis and commentary. According to Mastercard, the gig economy was expected to exceed $1 trillion in the U.S. and number 78 million workers by the end of 2023, demonstrating its ubiquity and importance in the job market and economy. And a recent paper by the University of Chicago looked at earnings through IRS tax filings to find that the number of gig workers who report income from gig sources rose sharply from 1 million to nearly 5 million in recent years.

As these wide-ranging estimates show, one of most complicated factors in analyzing this workforce segment is its lack of formal tracking and its undercounting, which also prevents the Federal Reserve from getting a complete picture of America’s workforce when setting monetary policy. The last time the Bureau of Labor Statistics officially tracked workers with nontraditional job arrangements was 2017 (it promises to restart its survey this year), so we are only scratching the surface in understanding its volume and true impact. What we do know is that its popularity is undeniable from a worker, employer, and consumer demand perspective.

Flexibility With Gap-Filling Potential

One of the key attractions of gig work is its flexibility. Individuals can choose when, where, and how much they work, providing them with a level of freedom that traditional employment often lacks. This flexibility appeals to a wide range of workers, including students, parents, and retirees, who may have other commitments, prefer a non-traditional work arrangement, or increasingly wish to use side-hustle money to save, invest, or support their lifestyle. As of last year, about half of Uber earners logged 10 hours a week online and about 70% averaged fewer than 20 hours, the company reported.

Many gig workers are using these temporary jobs to fill employment gaps and get through tough financial periods following layoffs or unemployment. Another upside: Some studies including one from MIT show that the gig workforce helps to reduce bankruptcies, unemployment insurance participation, and borrowing. But this flexibility often comes at the expense of stability. Gig workers typically lack benefits such as health insurance, retirement plans, and job security, leaving them vulnerable to income fluctuations and economic uncertainties.

The Instability That Comes With a Nontraditional Job

The proliferation of gig work has given rise to what some scholars have termed the “precariat”—a class of workers who experience precarious employment conditions characterized by low wages, unstable income, and limited social protections. Many gig workers (about 60% according to an Ultimate Gig Research Project and PayQuicker survey) juggle multiple gigs simultaneously to make ends meet, leading to concerns about overwork, burnout, and exploitation. Additionally, the lack of collective bargaining power among gig workers makes it challenging for them to advocate for fair wages, better working conditions, and labor rights.

Who’s Minding the Store?

The rapid growth of the gig economy has outpaced the development of regulations designed to protect workers and ensure fair labor practices. As a result, gig companies have faced mounting scrutiny and legal challenges regarding the classification of their workers as independent contractors rather than employees. This classification has significant implications for workers’ rights, including eligibility for minimum wage, overtime pay, unemployment benefits, and collective bargaining. Policymakers are grappling with how to strike a balance between fostering innovation and protecting workers. Two of the most notable legislative impacts have been seen in New York City, which announced a minimum wage of $17.96 for app food delivery workers, and in California, where Prop 22 allows drivers to be treated as independent contractors with some additional benefits such as a minimum earnings guarantee.

Diversification of Talent

Despite its challenges, the gig economy also presents opportunities for innovation and entrepreneurship. Gig platforms have democratized access to the labor market, allowing individuals with diverse skills and backgrounds to monetize their talents and pursue alternative career paths. Gig work can also serve as a stepping stone for individuals looking to gain experience, build their portfolios, or transition into full-time employment or entrepreneurship. According to the Ultimate Gig Research Project study, restaurant grocery and delivery services are the most popular (13%), followed by ridesharing/transportation, childcare or elder care services, and freelance graphic design, photography, and copyediting.

The Rub With Traditional Models

The emergence of gig platforms has disrupted traditional industries and business models across various sectors. Companies can now access a global pool of on-demand talent for a wide range of tasks. While this can lead to cost savings and increased efficiency for businesses, it also poses challenges for incumbent workers who may face job displacement or downward pressure on wages due to increased competition from gig workers willing to accept lower pay rates.

Someone Needs to Pay the Bill

As startups in the gig economy begin to grow up, there is a sense among several industry analysts that the prioritization of profitability and revenue growth will follow. This means the costs will need to be passed along somewhere, resulting in higher or surge pricing for consumers, lower wages for gig workers, and/or more competition for gig jobs.

On a positive note, some see 2024 as the golden age for the gig economy, with food delivery reaching stabilization post-pandemic, the travel industry booming, and company mandates requiring more employees to return to their offices with greater frequency.

What’s Next

The gig economy has undoubtedly reshaped the job market in profound ways, offering both opportunities and challenges for workers, businesses, and policymakers. As noted by John Fleming, author of Ultimate Gig: “The continued growth of gig workers is having profound impacts on not just the U.S. economy, but on a global scale.”

Written by: Employment Enterprises

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