What is The Gig Economy?

Read on to learn everything you need to know about the gig economy — past, present and future — and how organizations can more effectively embrace workforce changes moving forward.

The History of the Gig Economy — Understanding How It Works

Before diving into the evolution of the gig economy, it’s essential to understand what this workforce entails. The gig economy is a labor market characterized by flexible, temporary or freelance jobs, as opposed to permanent, full-time work. With this model — where a substantial amount of individuals work part-time in a temporary position or as independent contractors — the result is cheaper, more efficient services. This approach ultimately benefits workers, businesses and consumers by making work more adaptable to the needs of the current market and more adequately satisfying the demand for flexible lifestyles.

The genesis of the gig economy — shifting from D2C to B2B

The gig economy is not a new concept — with its roots dating all the way back to 1915 when jazz musicians coined the term “gig” to refer to performances. The use of temporary work to supplement a traditional job continued to grow and by 1995, 10% of all Americans worked in alternative employment, according to LinkedIn. 

At this point, the growing popularity of the gig economy can be attributed to two key factors: the rise of digital platforms and the employment of underutilized assets. It’s important to note that this labor market began as a peer-to-peer phenomenon, where consumers directly accessed assets through a gig economy platform — for example, Uber or Airbnb. This can be considered a result of:

• The increasing consumer desire for more choices.
• Individuals wanting greater access to goods and services.
• Growing calls for more flexible work options. 

As businesses took note of these successes, they recognized a valuable opportunity to tap into a new industry. The shift towards a B2B focus began with business travel and the logistics industry and is now continuously moving toward a highly-promising sector — staffing. 

Who is part of the gig economy today?

Individuals that are part of the gig workforce ultimately come from a wide variety of backgrounds. Some workers are in pursuit of an extra source of income outside of their traditional employment, while others provide for themselves financially entirely through contract jobs and projects. 

The two main types of gig workers include:

1. Independent contractors

An independent contractor or contract worker appears similar to a traditional employee but is independent. They are hired for a temporary, fixed period — generally between three months and two years — or specified scope of work. Once an independent contractor is employed by an organization, they’re not allowed to accept gig work for other companies. This type of work is typically more well-suited for business and strategic roles, like finance, operations and HR, where it’s not atypical to work from the company’s location. Moreover, as the name suggests, a contract is signed by both parties before an independent contractor’s project or scope of work begins. 

2. Freelancers

A freelance worker, on the other hand, is considered self-employed with the ability to accept work from anyone — including taking on multiple gigs at once. Freelance work is particularly popular for workers in the technology industry, such as web and software developers, along with individuals in the creative industry, including writers, graphic designers and video editors. According to Upwork, this is a growing market with 59 million Americans taking on freelance work this year — which represents 36% of the total American workforce. Moreover, the report emphasizes that despite a turbulent year, this segment remained integral to the U.S. labor market, contributing $1.3 trillion to the U.S. economy in annual earnings.  

These gig economy workers exist across industries, completing small, on-demand projects for pay — typically leveraging gig economy apps or a digital platform to connect with businesses and consumers. Once a project is complete, the contingent worker can move to their next assignment. Keep in mind, despite the lack of long-term commitment needed from either the company or the worker, it’s not uncommon for companies to continually work with the same gig worker.

Challenges of the Traditional Gig Economy and Calls for Change

While the popularity of contingent work continues to develop, there are a few main challenges of the traditional gig economy to note: 

• Worker misclassification: One of the most critical challenges of the gig economy involves denying workers the basic labor rights afforded to those in traditional employment. This economic insecurity involves the lack of minimum wage, overtime payment, employment insurance coverages, paid time off, employer contributions to retirement savings and more. However, it’s important to note that the misclassification of labor from a gig economy company is subject to lawsuits and it’s possible to reclassify workers under certain conditions. 
• Lack of job security: Many workers experienced gig economy challenges in the form of reduced job security, viewing platform work as a “race to the bottom” — where companies are looking to fill positions at the lowest possible cost. However, the expansion of this labor market and increasingly competitive landscape, along with the growing organizational pursuit of high-quality labor, is quickly changing this situation. 
• Regulatory challenges: The gig economy has brought about the gradual disruption of many industries and with over 40 major legal challenges brought to courts by gig workers across 20 countries, industries across the globe are facing challenges following employment regulations and tax laws.

The exponential growth of the gig economy amid these key challenges has led to calls for change — from both employers and the contingent workforce. And, while it will be impossible to overcome these difficulties overnight, the collective business landscape is taking steps in the right direction. 

Factors Driving the Gig Economy Today — And The Benefits It Can Provide

In 2021, the number of independent workers in the United States increased significantly, regardless of the frequency of work. According to Statista, there were approximately 23.9 million occasional independent workers in the United States, an increase from 12.9 million in 2017. Moreover, the number of global gig workers is expected to rise to 78 million in 2023, up from 43 million in 2018, per a report from Mastercard. 

While the considerable expansion of this labor market is clear, the main factors driving this include:

• The growth of digital platforms and solutions: In the gig economy today, business and staffing solutions provided by digital platforms are integrating seamlessly into supply chains and business cycles. They are achieving this through a network of on-demand workers, connected by a comprehensive mobile application. As a result, organizations across industries are increasingly tapping into the contingent workforce to fulfill staffing needs and meet variable demand amid uncertainty. 
• A better understanding of productivity: The traditional eight-hour work day quickly became the standard, however, the nature of work today is changing. Over the years, experts have concluded that working eight hours straight can be less than beneficial and working in short bursts can actually make you more productive and efficient. With greater flexibility and control over their assignments, freelance workers can maximize their productivity and efficiency for the benefit of their client at the time. 
• Increasing competition: Businesses are seeing more and more competition today — and feeling the pressure as a result. Because of this, companies are trying to reach high-quality labor while simultaneously maximizing the use of their limited resources. Gig workers ultimately represent a cheaper, qualified and more accessible workforce — helping organizations mitigate the costs of recruiting, hiring, onboarding and retaining traditional employees. 
• Fluctuating demand and uncertainty across industries: A number of businesses have been turning to a temporary workforce to help them meet variable demand as needed and pick up the slack. ADP reports that at 40% of organizations, one in four workers on payroll is a gig worker. Taking advantage of both an elastic hourly workforce and powerful platform technology to meet short-term and long-term needs will improve flexibility and scalability.

The advantages for gig workers

Those working within the gig economy often gain the benefit of:

• The opportunity for self-employment and creating their own wealth: With the ability to accept or decline specific projects or tasks as they prefer, gig economy workers have a valuable opportunity to take control of their income and more closely align their life's passion with their work.
• Providing greater flexibility and an improved work-life balance: Temporary workers also have greater flexibility in terms of their work schedules, taking on projects when it’s most convenient for them — which is quickly proving to be a linchpin in fostering a proper work-life balance. According to Pew Research Center, 49% of freelance workers and independent contractors said the ability to set their own hours is the most important factor when working in the gig economy.
• An excess source of income: Jobs in the gig economy represent new avenues for individuals to bring in additional wages — even for those who may already be employed. The flexible nature of this labor market supports workers in need of income outside of their other commitments.

How organizations benefit from the gig economy

While the advantages of gig work are typically clear for contingent workers, many fail to realize how highly beneficial this approach can be for organizations as well. These include:

• Reducing labor overhead in terms of full-time wages, overtime requirements, corporate benefits etc. 
• Fast access to high-intent, quality workers with the same capabilities as full-time, traditional employees.
• The opportunity to reach and select from a larger pool of candidates amid the workforce war for talent.
• Minimizing the use of internal resources while inevitably improving profits in the long run. 

With both the challenges and benefits of the gig economy in mind, is it worth it? The short answer is, yes. Not only can this market support organizations more efficiently and effectively, but 79% of full-time independents said they were happier working on their own than at a traditional job, according to Brodmin. And, as businesses increasingly realize the value of a contingent workforce, they’re in need of reliable partners and solutions to help them navigate this landscape effectively. 

Embracing the “Gig 2.0” With Bluecrew

Freelance and contract work are not new concepts, yet the future of the gig economy looks brighter than ever — and workers agree. In fact, Upwork found that 86% of freelancers believe the best days for their industry are yet to come, signaling that many are confident the gig economy will continue to boom. 

The “new” or evolving gig economy is anticipated to continue on a similar path, where businesses recognize and value the opportunity to hire specialists for specific jobs and look for ways to maximize the use of their limited resources. A report from Intuit found that up to 80% of large corporations plan to increase their use of flexible workers in the coming years.

It’s important to note that despite the benefits for organizations and workers, there’s an expected evolution of what the non-traditional employer-employee relationship will look like — along with the applicable requirements from both parties as a result. However, the overall optimistic outlook is generally due to the expanding integration of the gig workforce with innovative digital technology and mobile applications. Businesses today are increasingly in need of on-demand workforce solutions, which is shaping the future of the gig economy.

For organizations in pursuit of a dependable partner that can help them leverage and navigate the “gig 2.0” more effectively, Bluecrew can help. Bluecrew’s Elastic Hourly Workforce, a comprehensive workforce-as-a-service solution, matches your business with temporary workers — flexing to meet your workplace’s short-term and long-term needs. By helping your organization address the challenges of variable demand with an agile high-quality workforce and powerful management technology, ​​your business can stay at peak performance across market conditions.

If you’re ready to take advantage of the growing gig economy, contact Bluecrew and start working with our Crew Members today.