Gig Economy

Summary Definition: An economic model centered around consumers hiring independent contractors and freelancers for short-term tasks or projects.

What is the Gig Economy?

The gig economy refers to the marketplace of consumers hiring freelancers and independent contractors for short-term jobs or projects, such as ridesharing, food or package delivery, and property rentals.

Borrowed from performing arts industry slang, “gig” refers to a single, paid appearance after which a performer’s employment ends. The artist is then free to pursue new opportunities with the same or different venues.

A gig economy model focuses on direct, temporary connections between consumers and workers. It balances fast and efficient request fulfillment with flexible working conditions.

Key Takeaways

Gig work can include a broad range of tasks across most industries but is distinguished by its ad-hoc, temporary, and on-demand nature.
Gig workers can include almost any freelancer or independent contractor, provided the employment ends as soon as the requested service or activity is completed.
While gig work provides a gig worker with substantial freedom and scheduling autonomy, its availability can be inconsistent, it lacks stable, employer-provided benefits, and the revenue it generates is still subject to income taxes.

What is a Gig Worker?

A gig worker is an individual who earns income through temporary or project-based jobs rather than traditional, long-term employment.

Unlike standard employees, who receive hourly wages or a salary, gig workers are paid for specific, individual tasks, often arranged through an app or website. In other words, as soon as the requested service or project finishes, the employment ends, and the gig worker must look for the next job.

This short-term, flexible employment offers gig workers far more freedom with their working schedules but lacks the stability of standard wages and employer-provided benefits, such as health insurance.

Another potential disadvantage is that the digital platforms used by gig workers to connect with customers may limit their rates or fares.

What is Gig Work?

Gig work is a flexible form of employment where individuals take on temporary, on-demand projects or services for consumers to generate income. This can include an extensive range of tasks or activities that span most of today’s standard industries (e.g., hospitality, retail, education, etc.).

Moreover, gig work isn’t limited to physical, in-person projects or labor. Remote gig work for virtual services, such as knowledge sharing or consulting, also exists. Some examples of gig work include:

Renting out personal property
Delivering packages or food
Designing or building a website
Driving someone to a destination (a.k.a. ridesharing)
Selling homemade goods or secondhand products
Tutoring someone via online classes

Gig Work Taxes

Despite its differences from traditional employment, gig work is still subject to income taxes. According to the Internal Revenue Service’s (IRS) Gig Economy Tax Center, this is still true even if the income is:

From part-time, temporary, or side work
Not reported on an information return (e.g., W-2, Form 1099, or other income statement)
Paid in any form, including cash, property, goods, or virtual currency

Since gig workers can operate as independent contractors, they don’t have a permanent employer and must handle their own taxes.

Pros and Cons of a Gig Economy

The flexible, ad-hoc nature of gig work benefits all parties involved. Consumers have access to on-demand services and goods, the facilitating organization receives a portion of the revenue with minimal overhead costs, and gig workers can choose when and how much they work.

However, the most significant downsides to a gig economy also stem from its flexible, ad-hoc nature. There’s substantial inconsistency in how much a gig worker can earn on a given day due to fluctuating work availability and the significant control digital platforms have over adjusting fare rates and setting profit-sharing margins.

In some cases, that level of control has caused gig workers to go on strike over claims of unfair treatment and disproportionate earnings.

Furthermore, if a digital platform doesn’t classify a gig worker as an employee, that worker may not be covered by federal or state employment laws (e.g., minimum wage, anti-discrimination, etc.). In those cases, the platform isn’t always required to provide employee benefits, such as paid sick days, health insurance, or retirement accounts.