You might be surprised by the answer…

What is the gig economy? There is no universally accepted definition of the gig economy, but taken broadly, it refers to those that provide labor services, sell goods, or rent out assets to generate income outside of a traditional/formal employment arrangement. The gig economy is also commonly referred to as the sharing economy, freelance economy, or 1099 economy, and while they may each mean slightly different things, most people use the terms interchangeably. Some in this market sector perform independent tasks with the help of an online platform, but while the rise of online platforms and tech applications have increased the visibility of independent work and lowered the entry and operating costs for those seeking to freelance, gig workers are not new to the economy. Gig workers include the self-employed, independent contractors, consultants, temps, freelancers, and on-demand workers.

While you may automatically think of companies like Uber, Lyft, and TaskRabbit when you hear the term “gig economy,” the reality is, companies like that only make up a very small portion of the income generated in this market sector. In fact, more traditional jobs like construction, agriculture, and mining experience the highest rates of gig work.

Still not sure what we’re talking about when we talk about gig workers? Characteristics of this class of worker include:

  • Getting paid for tasks, projects, assignments, or discrete jobs rather than for time spent working or based on a predetermined salary
  • A high degree of autonomy, control, and flexibility in choosing work projects or clients, scheduling one’s own time, overall workload, and being able to set or influence pricing for work completed or assets being sold or rented
  • Short-term or limited duration jobs, projects, or assignments
  • Reliance on multiple sources of income / not being economically dependent on a single employer

Why is there so much interest in the gig economy? There are a few big reasons. First, the gig economy is generating a lot of income – $1.2 trillion in the U.S. last year alone – so it’s important for policymakers, economists, labor leaders, and others to understand this market. Second, workers in the gig economy don’t enjoy the same benefits that traditional full-time employees do, meaning that the vast majority don’t gain access to health insurance, retirement benefits, paid sick or vacation time, etc. through these types of jobs. The implication of this is significant because as more and more individuals gain employment through gig work, fewer and fewer will have the traditional social safety net protections we’ve come to expect for workers in this country. Third, it’s not clear that all workers that are categorized as gig workers are classified correctly. Many companies may be trying to skirt labor laws to keep costs down by withholding benefits that are only enjoyed by traditional employees. Misclassification also costs federal, state, and local government taxes that are lost when workers are put in the wrong tax group. Finally, the gig economy garners interest because so many Americans are using gig work to supplement their primary incomes. This says a lot about the state of the labor market, the impact that stagnant wages are having on workers, and also means that the gig economy is a vital financial lifeline for a large portion of the populace.

The gig economy is only expected to grow over time, and federal policymakers haven’t addressed the issue in any significant way. It will be important for our elected officials to think proactively about the implications of this growing sector and what it means for workers, the national economy, and the social safety net to which we’ve grown accustomed.

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