The Gig Economy: Improving Job Quality for Gig Workers
The gig economy offers flexibility and a diverse range of job options, it also poses issues related to job security, fair wages, and career advancement.
gig economy
It seems as if there is no escaping the gig economy nowadays. But what exactly is the <anchor>gig economy</anchor>? It is a labor market characterized by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs. So many of the services Americans use every day are gig economy jobs. From ride-sharing drivers to food delivery workers, freelance writers, and more, we are seeing an explosion of jobs and opportunities in these areas. These jobs offer flexibility and independence but also come with challenges. The gig economy has reshaped the landscape of work, offering new opportunities and challenges for workers. Understanding its impact on them is essential for navigating this evolving job market.
What Is a Gig Economy?
What Is a Gig Economy?

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Table of Contents

Expand

Table of Contents

- [What Is a Gig Economy?](#toc-what-is-a-gig-economy)

- [Job Types](#toc-job-types)

- [Benefits for Employers and Employees](#toc-benefits-for-employers-and-employees)

- [Downside of a Gig Economy](#toc-downside-of-a-gig-economy)

- [FAQs](#toc-do-gig-workers-experience-higher-job-satisfaction-than-regular-employees)

- [The Bottom Line](#toc-the-bottom-line)


- [Business](https://www.investopedia.com/business-4689640)
- [Small Business](https://www.investopedia.com/small-business-4427743)

# What Is a Gig Economy?

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Updated July 22, 2024

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![Gig Economy](https://www.investopedia.com/thmb/Eh4YyUPSWlN1exN-4OUOalQbFwU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/gig-economy-final-e11918cb36e74a7db354bf0bf519c12e.jpg)

Katie Kerpel / Investopedia

Close

## What Is a Gig Economy?

A gig economy, also known as the sharing economy or access economy, relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees.

Gig workers have flexibility and independence but little or no job security. In a gig economy, employers save money when they do not have to provide benefits such as health coverage and paid vacation time.

### Key Takeaways

- A gig economy is based on flexible, temporary, or freelance jobs.
- The gig economy can benefit workers, businesses, and consumers through a flexible model.
- Gig workers do not earn paid holiday or sick leave, and experience fluctuating wages.

## Job Types

The gig economy is a labor market characterized by temporary, contract, and [freelance](https://www.investopedia.com/terms/f/freelancer.asp) jobs rather than permanent positions. People earn money from providing on-demand work, services, or goods.

A wide variety of positions fall into the category of a gig. The work can range from managing short-term rentals, tutoring, writing code, driving for [ride-share services](https://www.investopedia.com/articles/investing/110614/taxi-industry-pros-cons-uber-and-other-ehail-apps.asp), delivering food, or authoring freelance articles. Colleges and universities cut costs and match professors to their academic needs by hiring more adjunct and part-time professors.

The gig economy experienced significant increases in 2020. COVID-19 lockdowns forced people to work from home and rely more on purchasing goods and services online, and these trends continued when restrictions were lifted. In 2023, nearly 64 million Americans, 38% of the U.S. workforce, were freelancers or gig workers, according to an Upwork report. [Independent contract workers](https://www.investopedia.com/best-independent-contractor-insurance-4845558) contributed $1.27 trillion to the U.S. economy.

The term “gig economy” is borrowed from the music world, where performers book gigs, or single or short-term engagements at various venues.

## Benefits for Employers and Employees

For Employers

- Wider range of applicants due to remote work options

- Can hire and fire more easily based on seasonal work

- Do not need to provide costly benefits like health insurance or paid vacation time


For Employees

- Greater flexibility for individuals to set their own schedule

- Offers various side-hustle opportunities to those who work regular full-time jobs

- Remote positions allow gig workers to live anywhere that has an internet connection


Hiring a full-time employee costs companies nearly 1.25 to 1.4 times the salary. If an individual's salary is $35,000, the actual costs likely range from $43,750 to $49,000.

## Downside of a Gig Economy

The gig economy trend can make it harder for full-time employees to develop careers and establish a long-term reputation. The gig economy is often associated with eroding worker rights, loss of health insurance, and sick and vacation pay.

Employers are under little pressure to pay higher wages. Opening up positions to people living anywhere in the world, including places where the cost of living is much cheaper, allows employers to seek places with lower wages.

The flexibility of working gigs can disrupt the [work-life balance](https://www.investopedia.com/articles/professionals/061113/maintaining-worklife-balance-financial-professionals.asp), sleep patterns, and daily life. Long-term relationships between workers, employers, clients, and [vendors](https://www.investopedia.com/terms/v/vendor.asp) can erode. This can eliminate the benefits of building long-term trust, customary practice, and familiarity with clients and employers.

## Do Gig Workers Experience Higher Job Satisfaction Than Regular Employees?

According to the National Institute of Health, gig workers reported lower mental health and life satisfaction than those employed full-time and part-time in 2022. Gig workers also experienced higher levels of loneliness and financial insecurity.

## How Do Gig Workers Get Health Benefits?

As independent contractors, gig workers must pay for health insurance benefits and expenses. They are also responsible for self-employment taxes and business expenses.

## How Do Gig Workers Pay Taxes?

Individuals must report any income made in cash, property, goods, or [virtual currency](https://www.investopedia.com/terms/v/virtual-currency.asp), earned from the gig economy on a tax return. This includes part-time, temporary, or income not reported on another form like Form 1099-K, 1099-MISC, 1099-NEC, or W-2.

## The Bottom Line

Temporary, freelance, and part-time work, collectively known informally as the gig economy provides workers with more flexibility and allows companies to cut down on certain costs. While employers save money on health benefits or paid vacation time, gig workers must cover all business and personal expenses and report all earnings on their tax returns.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
[editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy)

1. Internal Revenue Service. " [Gig Economy Tax Center](https://www.irs.gov/businesses/gig-economy-tax-center)."

2. National Bureau of Economic Research. " [The Evolving Role of Gig Work During the COVID-19 Pandemic](https://www.nber.org/digest/20238/evolving-role-gig-work-during-covid-19-pandemic)."

3. Upwork. “ [Freelance Forward 2023](https://www.upwork.com/research/freelance-forward-2023-research-report).”

4. Small Business Administration. " [How Much Does an Employee Cost You](https://www.sba.gov/blog/how-much-does-employee-cost-you)?"

5. Association for Entrepreneurship. " [The Pros and Cons of Gig Work: Exploring the Economic Benefits of Productivity and Employment](https://afeusa.org/articles/the-pros-and-cons-of-gig-work-exploring-the-economic-benefits-of-productivity-and-employment/)."

6. National Institute of Health. " [National Survey of Mental Health and Life Satisfaction of Gig Workers: The Role of Loneliness and Financial Precarity](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9743407/)."

7. Internal Revenue Service. " [Gig Economy Tax Center](https://www.irs.gov/businesses/gig-economy-tax-center)."


Part of the Series

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1. [Self-Employment: Definition, Types, and Benefits](https://www.investopedia.com/terms/s/self-employed.asp)
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4. [Freelancer](https://www.investopedia.com/terms/f/freelancer.asp)

Self Employment in the Economy

1. [The Gig Economy](https://www.investopedia.com/terms/g/gig-economy.asp)
CURRENT ARTICLE

2. [Watch This Trend: Calif. Assembly Bill 5](https://www.investopedia.com/california-assembly-bill-5-ab5-4773201)
3. [Challenges for Self-Employed Finance Professionals](https://www.investopedia.com/articles/professionals/062613/unexpected-challenges-selfemployed-finance-professionals.asp)

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2. [Best Health Insurance Plans](https://www.investopedia.com/best-health-insurance-for-self-employed-5078989)
3. [Best Disability Insurance Plans](https://www.investopedia.com/best-disability-insurance-for-self-employed-5078961)
4. [Getting a Mortgage When Self-Employed](https://www.investopedia.com/articles/mortgages-real-estate/08/self-employed-mortgage.asp)
5. [Money Guide for Self-Employed Parents](https://www.investopedia.com/which-tax-deductions-apply-to-self-employed-parents-5084256)

Self-Employment Business Strategy

1. [Calculate Your Salary](https://www.investopedia.com/articles/personal-finance/071814/calculate-your-selfemployed-salary.asp)
2. [SEO for Small Businesses: Everything You Need to Know](https://www.investopedia.com/seo-for-small-businesses-8584627)

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