Technology has slowly transformed every aspect of human life. Are you starving but don’t have the time to cook? There are plenty of apps such as Uber Eats that deliver any type of food your taste buds desire. Do you need a quick and cheaper ride to somewhere but don’t own a car? With so many transportation apps now available, finding a car to take you to your desired destination is a piece of cake.

The advance of technology has also been altering the way people view and perform work. It’s been estimated that nearly 150 million workers in North America and Western Europe have quit their stable company lives to join the gig economy. According to a report by McKinsey, the largest and fastest-growing segments of the project-based economy are the knowledge-intensive industries and creative occupations. It seems like the full-time employment culture is under threat and the gig industry is the one to blame.

But what exactly is the gig economy and who are the main players? What triggered its rise, and are there any challenges involved with the trend? Let’s try and find out.

What is the Gig Economy?

If the term “gig” reminds you of jazz musicians, you would be right. Although the term has long been associated with musicians, the gig work is a new nature of work. It involves independent contractors across all industries, including:

• software development
• content writing
• graphic design

In a nutshell, the project-based economy is a free market system in which companies collaborate with freelancers, independent contractors, project-based workers and part time employees. These companies can be small businesses or larger organizations.

Companies are willing to test the waters of this type of independent work economy and hire temporary workers. They manage to save costs as employee training and employee benefits go down drastically. In this model, gig workers have a lot to gain as well. They get to choose their own work hours, maintain a work/life balance and improve their productivity.

For instance, let’s imagine that you need to hire top tech talent to craft the architecture of a blockchain system. Similarly, if you’re in the Bitcoin business, you might need help setting up Bitcoin payments on apps and websites. Instead of hiring someone full-time, you could hire temporary gig workers. Once they successfully complete the tasks they’re given, your collaboration comes to an end and you’re free to part ways.

Companies such as Uber, Lyft, Airbnb, TaskRabbit, and Udemy have all been following the same model, contributing to the gig industry.

Who Takes Part in the New Economy?

The new sharing economy involves three major components. They include:

1. The independent workers.

The independent workers are paid by companies to complete a gig. They’re increasingly mobile and can work from anywhere. Meaning, they can choose between temporary jobs all around the world. There are two groups of independent workers: the labor providers and the goods providers. The labor providers are the less-educated workers. They joined the freelance economy because they have trouble finding other job options. This type of workforce includes drivers, delivery men, and handymen. The goods providers are the more educated workers who often have another full-time job. They can be artists, craftsmen, and software developers.

2. The companies that act as a medium between the worker and the consumer.

These companies that connect the worker to the consumer directly are the second component. The majority of them are technology platform companies like Uber, Airbnb, and TaskRabit. These companies act as a medium between the worker and the consumer. They facilitate direct transactions from which they take a cut. Workers can easily find a quick and temporary job, from Uber drivers to SEO experts at a tech company. On these platforms, people can see online profiles and reviews of both workers and consumers.

3. The consumers.

The consumers are the people who need a specific service, for example, help with their software development project, or a ride to somewhere.

What is the State of the Independent Work Arrangements?

According to the CEO of Intuit, Brad Smith, the independent work economy in the United States is roughly 34% of the workforce. And it’s predicted to jump to 43% by 2020.

McKinsey Global Institute, MBO Partners, and the Freelancers’ Union each have conducted their surveys on the state of the gig industry. They have found that the number of the national workforce that is included in the freelance economy ranges from 25%-30%. More than one in ten workers rely on gigs as their primary source of income.

The Data Hub has tried to synthesize existing studies and concluded that full-time gig workers make up less than half of all gig workers. The others work on a supplemental basis, in addition to their part-time or full-time traditional work.

Moreover, roughly one percent of workers frequently use online platforms to find work opportunities.

Although it’s indisputable that independent workers are a significant part of today’s workforce, gig work requires new ways of measuring work. There’s a need for new ways of asking questions and measuring the number of workers. Only by doing so, we’ll get an exact estimate of the state of the freelance economy.

The Rise of the Gig Economy: What Triggered It?

Several factors greatly influenced the risk of the independent work economy. One of the main reasons was the financial crisis of 2008. Thousands of people faced unemployment or underemployment. A great number of them had to find temporary or short term work wherever they could. This temporary work had to be flexible. Some people held down a full-time or a part-time job and worked a side gig for additional income. Others made a living by working a few gigs at once.

The second player that triggered the popularity of the independent work arrangements was the development of new technologies. These new cutting-edge technologies enabled the creation of many online platforms. These platforms connected workers with specific types of work gigs. Technology platforms have been a significant force in the expansion of the independent work economy as they:

• erased the difficulty of finding temporary/part-time gigs
• supported transactions between providers and consumers
• offered flexible work schedules like remote work for gig workers
• enabled the creation of online profiles and reviews of both producers and consumers

Thanks to these platforms, individual workers could now:

• work for any company around the world
• sell their skills for a higher price
• perform a variety of tasks for strangers based on real-time demand

Add in the flexibility in time and location and it’s easy to deduct why the trend does not show signs of slowing.

What are some of the Major Gig Economy Benefits and Challenges?

In order to enjoy the benefits of the freelance economy, the challenges and disruptive effects associated with it must be addressed.

Independent workers enjoy multiple gig economy benefits, including:

• higher salary
• flexible work
• location independence

However, the freelance economy is freelance and contact-based. Unlike traditional full-time work, independent contractors don’t receive benefits like health insurance or paid time off. They are forced to obtain them on their own.

As a large part of a company’s costs comes in the form of benefits, employers are saving on these costs by hiring individual contractors instead of employing workers. Their recruitment, hiring, and interviewing costs are reduced. What’s more, there’s no risk of making big investments in employees that later turn out not to be a fit for the company. Employers have access to a wide pool of diverse talent with the right skills for a specific project, without worrying about benefits or long-term fit.

One way of resolving the issue of employee benefits is by introducing new work policies such as “portable benefits”. Meaning, companies that hire freelances must contribute to employees’ benefits based on the amount of work an employee completes for the company on a monthly basis.

Several companies have already stepped up to offer benefits to their contract employees. Uber and Lyft have begun offering perks and rewards to drivers. Uber subsidizes car maintenance and offers phone plan discounts, while Lyft offers discounts for fuel, roadside assistance, and telemedicine.

Discussions about portable benefits will surely continue. The future of portable benefits will greatly depend on the goodwill of employers and governmental policies.

Final Word

The gig economy brings far too many benefits than downsides. Gig employees have the opportunity to choose projects that best align with their interests and goals, and earn income from multiple sources.

Traditional workers, although not participants in the independent work economy, have also been experiencing its benefits. As the workplace continues to change, more and more traditional employees are demanding for more flexible work arrangement. Employers are pressured into offering more remote work options to their in-office employees.

Companies have also been enjoying the advantages of the freelance economy. They’re able to hire independent workers to meet seasonal demands, cut down on overhead costs of hiring employees, and remain competitive.

Hopefully, as the independent work economy continues to grow and advance, the workplace of tomorrow will have a bright future ahead. It’ll be a future abundant in flexibility, choice, and opportunity. In this bright future of gig economy, everyone wins.