Pros and cons of the gig economy

Are you a member of the gig economy? Even if you don't know exactly what that means, there is a good chance you are indeed part of it. The gig economy is a term used to describes a relatively recent trend toward independent contracting, freelancing and other "alternative work arrangements" - basically something that can't be considered a typical 9-to-5 job.

"More U.S. workers than ever are earning some income from freelance work."

Since the early 2000s, more people in the U.S. and other countries have shifted from earning a regular wage to working on a contract basis. But with more recent developments in technology, like the proliferation of high-speed internet and smartphones, it's never been easier to freelance in some way. Businesses like the ridesharing service Uber or the short-term rental broker AirBnB have made this kind of work more visible and accessible than ever, too. As a result, a huge proportion of Americans either work in the gig economy or are now regular clients of freelancers.

If you're considering becoming a worker in the gig economy somehow, it's important to understand the benefits and drawbacks often involved with this type of work. From here, you should be in a better position to make an informed decision on how you go about earning an income with these services.

Examples of gig economy jobs

As we touched on earlier, the gig economy comprises a very broad segment of the workforce in the U.S. A large portion, perhaps even the majority of this job market involves the kind of independent contracting work that has been around for quite a while - think freelance writers, temporary office assistants, business consultants and more. In these cases, workers often apply skills and expertise developed over time in a more "traditional" career setting, but set off on their own and work for contracts rather than a salary.

On the other side of the gig economy are platform-based jobs. These include services like Uber and AirBnB, where workers depend on a service to deliver work, and income, for them. The nonpermanent nature of these gigs puts them in the same category as professional freelancers, but they tend to have lower skill requirements and often lower income possibilities. At the same time, platform-based work is generally more readily available to people regardless of location, skills, age and other factors that might limit them in a traditional freelance setting.

According to an article from Forbes, which summarized handful of recent surveys on the gig economy, the highest-earning platform-based services in the gig economy included:

  • Uber.
  • AirBnB.
  • Lyft, another ride-hailing service similar to Uber.
  • TaskRabbit, a service that connects people with temporary workers for a variety of jobs like cleaning, moving and more.

This list is far from complete, as new apps and services using the gig economy model are popping up constantly. It's part of the reason why, according to a survey conducted by McKinsey, around 162 million people across North America and Europe have logged hours working for a platform-based contract service like these in the last year. That number is only expected to grow as more participants extol the benefits of this kind of freelance work.

FreelancerThe gig economy might let you work from anywhere, but the benefits vary based on your priorities.

Pros and cons of working in the gig economy

Some of the biggest advantages of this new gig economy (compared to more traditional forms of employment) have to do with a better sense of work-life balance. Most jobs in the gig economy allow for a great deal of freedom in terms of setting one's work schedule and location. In many cases, gig economy workers can work as many hours per week as they want, and can always take a break for a few days or weeks if they choose. This might make it easier to supplement income from a full-time job, or just maintain a better balance of work time and family time. More retirees are also finding attractive options in the gig economy if they want to pad their savings without committing to work with grueling schedules or untenable physical demands. Of course, plenty of gig economy workers simply find more joy in their work compared to a typical position in an office or retail store.

The gig economy is all about freedom, but it can come at a price. The biggest drawback of this kind of employment revolves around income - not only how much money there is to be made, but how volatile the pay can be from month to month. And although many of us have heard incredible stories of success from people who have used these platforms, many of these could be the exception rather than the rule.

For example, according to a survey of earnings data from gig economy workers conducted by Earnest, AirBnB users reported the highest monthly average earnings of any service they analyzed ($924 per month on average). Some survey respondents even reported monthly earnings in excess of $10,000 using AirBnB. However, the majority of AirBnB hosts made less than $500 per month, according to Earnest. And based on their findings, it is more likely for a host to make less than $100 per month on average (15 percent of respondents) than to make at least $2,000 per month (10 percent of respondents).

Of all the popular gig economy services they examined, including AirBnB, Uber, Lyft, TaskRabbit and others, Earnest calculated average earnings of just under $300 per month (based on survey responses from "tens of thousands" of Earnest customers). But lower earnings might not be a dealbreaker for everyone considering the higher level of freedom afforded by the gig economy. Some consider it a fair tradeoff, especially since these services provide supplemental income for activities they would already be doing for free anyway.

There is so much more to the conversation around gig economy work, including the relative lack of benefits like insurance coverage and greater tax planning responsibility, than simply striking a balance between pay and job satisfaction. As you continue to explore your options for supplemental income, take this information with a grain of salt and find the work that best fits your needs.

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