The gig economy: most of us have heard of it, many of us work in it, but not everyone has a full understanding of exactly what it is and how it's evolving.

One thing that's certainly beyond doubt is that the gig economy is an increasingly important concept that has far-reaching implications for workers and employers in most sectors.

what is the gig economy?

The Bureau of Labor Statistics notes that, while there is no single or official definition of the gig economy, a 'gig' generally refers to "a single project or task for which a worker is hired, often through a digital marketplace, to work on demand".

Other definitions of the concept have highlighted how "temporary, flexible jobs are commonplace" in the gig economy and companies "tend to hire independent contractors and freelancers instead of full-time employees".

Closely associated with companies like Uber, TaskRabbit, Handy, Thumbtack, and Fiverr, the gig economy relies on marketplaces that are based on supplier ratings and payment systems usually routed through apps.

These platforms give people with various skills and abilities the chance to earn money by performing 'gigs' for clients. This could be anything from picking up and delivering groceries to professional consulting or business advisory services.

The people who participate in the gig economy come from a wide range of backgrounds. While some are part-timers looking to make some extra money outside their day job, others are full-time gig economy devotees who make their living solely from on-demand work.

how has the gig economy impacted labor and the labor market?

While the purported effects, merits and drawbacks of the gig economy are likely to vary depending on who you talk to, there's no question that this segment of the labor market has undergone significant growth in recent years.

The gross volume of the gig economy has been estimated at nearly US$297 billion (€245.2 billion) for 2020, up from US$248.3 billion in 2019, and this figure is expected to continue growing in the coming years.

There has been a lot of debate over what this growth means for employers and employees alike, particularly in terms of workers' rights and the protections available to consumers and clients using gig economy services.

One of the commonly cited benefits of this phenomenon is that workers who might be unable to find full-time work can make a living performing 'gigs' on their own time. As well as opening up new employment and earning opportunities, this approach to work offers valuable flexibility for people who can't commit to a '9 to 5' job - those with family caring commitments, for example.

Research by the Organization for Economic Cooperation and Development has highlighted the potential to generate additional income and work flexibility as the most common motivations for people to use gig economy platforms.

The study also noted: "Overall, most gig workers are satisfied with their job and working for gig economy platforms appears to reflect mainly voluntary choices rather than the lack of other options. However, a significant minority of platform workers - around 20% - use platforms because they are not able to find work as dependent employees."

McKinsey highlighted the complexity of this issue in a recent study that examined economic and employment opportunities in the US following the COVID-19 pandemic. One of the key findings was that 62% of contract, freelance and temporary workers said they would prefer to have a permanent job.

The multifaceted nature of the gig economy - with its various drawbacks and benefits - became particularly clear during the pandemic. It provided opportunities for workers to boost their income with short-term and one-off contracts, but it also brought attention to the importance of reliable employment during times of economic adversity.

While the gig economy can offer freedom, it can also have disadvantages for individuals when it comes to things like job security, benefits, paid sick leave and pensions. 

the future of the gig economy

On the issue of rights and protections for gig economy workers, recent developments have provided an indication of the possible direction of change in the coming years. In February 2021, the UK Supreme Court upheld a previous judgment that taxi booking app Uber should class its drivers as 'workers', rather than self-employed contractors. This classification gives Uber drivers rights including holiday pay, sick pay and a minimum wage.

There is uncertainty over how far the repercussions of this will reach, since this particular ruling only applies in the UK and Uber has argued the verdict only applies to the 25 drivers who brought the claim. However, there is no denying the significance of this development in a broader context. The Financial Times said the judgment will "reshape the gig economy" and the Society for Human Resource Management explored how the ruling could prompt major changes in this area of the economy and the labor market.

While there are still many questions to be answered about the gig economy, one thing seems certain: it will continue to grow. Mastercard has predicted that the total value generated by customers using gig economy services will reach $US455 billion by 2023.

In a survey by Monster, conducted in December 2020, 92% of respondents said it was a good time to look for gig work, while 57% said the gig economy provided a solution to maintain income in between jobs, particularly during times of economic uncertainty.

Since ongoing growth in the gig economy is a very strong possibility, companies and workers alike have a lot to gain from focusing on how this area is regulated and how individual rights and protections can be maintained. If concepts like equality and fairness can be prioritized and safeguarded in the growing gig economy, this new world of mass self-employment can offer notable benefits for workers and the companies that rely on them.

We have created a new report full of data-driven insights into how the flexible labor market is evolving and why this is so important for modern employers. You can download it below.