Will the New Freelancer Economy Promote Macroeconomic Growth?

What is the Gig Economy? 

The gig economy is a free market where workers offer themselves for temporary work and organizations hire them for short-term contracts. The term “gig”, originally used by musicians, refers to work that lasts for a specific period of time. The gig economy is part of a new cultural and business environment that includes the sharing economy, the gift economy, and the barter economy.

In the gig economy, the workplace and worker’s location are separated—a worker can take on a job for employers from anywhere in the world. Employers can select the best talent for a particular project from a global pool of talent.

Examples of gig workers are drivers in ride-sharing services, personal coaches, and home renovation workers. In the gig economy, mobile applications and other technologies are often used to connect clients and gig workers.

Gig Economy Global Statistics 

The stats below show how the gig economy has grown.

Size of the Gig Economy

According to Statista, the gig economy has nearly doubled in four years, from $204 billion to $401.4 billion in 2022. According to another study by British Thinks, in the UK, 9% of the workforce is engaged in gig work through platforms like Uber, and 3 in 20 adults find a job at least once a week through an online gig economy platform.

Effect of the COVID-19 Pandemic

Several factors are accelerating the growth of the gig economy, but many experts believe the COVID-19 pandemic was a major driver of growth. Many traditional employment solutions disappeared during the pandemic, and employees opted for freelance and gig work over full-time employment. 

According to an Upwork report, the number of gig workers grew by 24% in 2020, the year in which the pandemic started. The number of full-time freelancer contracts in the US increased by 2 million to a total of 59 million. 34% of freelancers said they started working independently during the pandemic.

Usage of Gig Economy Apps

According to a survey by Wonolo, 38% of people use mobile apps to find jobs, and 31% use app-based workforce platforms to accept jobs. 56% looked for a job by physically going to an employer’s location. The survey also showed that 74% of gig workers are leaving their current jobs and looking for new opportunities to raise their income.

Gig Economy Major Players 

The gig economy is dominated by large companies that employ a significant percentage of gig workers in the regions they operate. Here are some of the world’s biggest gig economy employers:

• Uber—a transportation company that provides an app where riders can request rides and drivers can bill and receive payments. Uber employs independent contractors as drivers. It operates in 72 countries and generates over $17 billion in revenue per year.
• Lyft—offers mobility-as-a-service, ride-hailing, car rental, electric scooter, bike-sharing systems, car rental, and food delivery in the US and Canada. Lyft charges a fee for each reservation and pays drivers, who use their own vehicles for deliveries.
• Fiverr—a digital services marketplace that provides buyers and sellers with a digital trading platform. A service offered by a seller is called a “gig”. Sellers can create a gig and choose a starting price, and buyers negotiate the final price.
• DoorDash—a delivery service delivered as a mobile application. DoorDash lets users deliver food from their favorite restaurant. They can also order groceries, pet food, convenience store items and more to their home or another address. When an order is made through the app, DoorDash works behind the scenes to assign the delivery to a gig worker and ensure the order arrives on time.
• Upwork—a marketplace for freelancers in fields like writing, graphic design, and web development. The website helps professionals find projects, and provides advanced rating and search options to help clients find qualified talent. 
• FlexJobs—a membership-based job search site where workers can find flexible job options in the form of remote, freelance and part-time jobs.

Macroeconomic Impact of the Gig Economy: 7 Key Factors 

There are several ways the gig economy impacts the larger economy and how organizations conduct business:

1. Performance and business strategy management—the gig economy dissolves conventional organizational structures and hierarchies that divide work among distinct units and sequences to ensure a smooth workflow. In reality, many traditionally structured organizations have performance issues, which they supplement with additional staff and skills, often spread unevenly when the organization expands or contracts. 
2. Dynamic employment—the gig economy helps reduce under- and overstaffing, minimizing idle work hours during the less busy parts of the work cycle. It allows managers to coordinate workers more easily, maximize productivity, and avoid paying for idle time.
3. Short-term contracts—freelancers and temporary workers can complete individual assignments online. Freelancing or gig work differs from outsourcing, which usually involves longer-term B2B contracts. It is usually business-to-person.
4. More choice—both the commissioning organization and the gig worker have more choice. Gig arrangements can be flexible and allow specialized workers to fill specific niches, ranging from expert consultations to manual labor.  
5. Broader scope—the gig economy offers opportunities and challenges for managers, who must use new processes to define assignments and match them with the right gig workers. 
6. Career stunting—this impact is a less desirable outcome of the gig economy, hindering the growth of gig workers’ skills and careers. In-house employees increasingly specialize in controlling outsourced work and collaborating with gig workers. While gig workers often have many opportunities, they have less job security than traditional employees. 
7. Unbalanced application—gig work is not equally suited to all value chain areas. For example, gig platforms are more useful for non-critical and standardized tasks than core jobs like product strategizing, development, and branding.

In summary, the gig economy will have both positive and negative effects, but will definitely change the economy forever. Entrepreneurs should consider the gig economy when building new business models or planning new ventures, to ensure they don’t stay behind. Investors considering new opportunities should evaluate how companies recruit their workforce and how this will impact their competitiveness in the years to come. 

Author bio:

Gilad David Maayan is a technology writer who has worked with over 150 technology companies including SAP, Samsung NEXT, NetApp and Imperva, producing technical and thought leadership content that elucidates technical solutions for developers and IT leadership.