Referred to as the "gig economy," independent contractor employment has grown to such an extent that it now constitutes a significant component of the overall US economy.
According to Upwork’s annual report, 38% of the total US workforce performed freelance work in 2023—down only 1 percentage point from 2022. About 64 million Americans were part of the gig economy in 2023, freelancing either full- or part-time doing jobs like creative work, food delivery, ride-sharing, information technology, childcare, home repair services, and more.
Whether you’re a proponent of gig work and the flexibility it offers, or a critic of the lack of protections it affords workers, the gig economy is here to stay.
Several macro trends have contributed to this rapid growth of the gig economy.
Advances in technology have given rise to the gig economy in several ways and impacted the way we function and perceive work.
But, what types of technology have helped the gig economy grow?
Various technologies, including digital platforms, freelance marketplaces, instant payout technology, communication tools, cloud computing, automation, mobile technology, and high-speed internet, have significantly contributed to the growth of the gig economy. These advancements have streamlined the process of connecting freelancers with clients, facilitated efficient communication and collaboration, and enabled flexible, remote work.
2. Demographics
Millennials and Gen-Z workers are a huge force in the gig economy: In 2023, 52% of all Gen-Z professionals and 44% of all Millennial professionals performed freelance work, according to the Upwork study.
Many of them grew up with digital platforms—and perhaps more importantly, these generations are more likely than older workers to prioritize flexibility and work-life balance. Job security and health benefits would be nice, sure—but some workers in these age groups put more value on the opportunity to work when, where, and how they want.
Between the Great Recession of 2008 and the COVID slowdown, these gig workers have likely seen their family and friends lose jobs or experienced layoffs themselves. Some people who lost their positions picked up gig work between jobs using digital marketplaces, and many have continued in the gig economy as their main source of income or to supplement low salaries. After all, wages have stagnated in the US since the 1970s.
It’s clear the days of working for an employer for 40 years before retiring with a proverbial gold watch are long gone; project-based work has hit the forefront providing work on one’s own terms with a sense of entrepreneurship and control.
When the job pool goes digital, suddenly companies aren’t relegated to the talent in the same city or even the same country. Instead, they can tap into a global pool of workers, who in turn have many gig work platforms to work across and several tools to showcase their skills to companies around the world.
As the gig economy continues to grow, so do its effects on its workers, companies, and the economy—as well as the debate around the concept.
Some experts predict freelancers will comprise 50% of the workforce by 2030.
A 2021 Pew Research report showed a majority of current or recent gig workers said they were satisfied with many aspects of the work over the past 12 months, including pay and the number of jobs available. That variety of work options should increase as the gig economy grows.
The gig economy is “a workforce that Hispanic, Black, or Asian adults are particularly likely to participate in,” Pew wrote. This could be seen as a win for flexible work among marginalized groups—but the deeper trends show that may not be the case. For example, in Pew’s study, only about 30% of white gig workers said they earned money across multiple types of gig jobs, compared to 48% of non-white gig workers.
That suggests some minority gig workers may struggle to cobble together enough work and money. The disproportionate number of minority gig workers is also concerning, critics say, because of the lack of worker protections:
Unlike traditional workers, gig workers aren’t covered under legal protections like minimum wage the Economic Policy Institute found about 1 in 7 gig workers earned less than the federal minimum wage on an hourly basis and almost a third couldn’t afford to pay their utility bills in full in the month before the survey. Gig workers are also not typically eligible for benefits like health insurance, paid time off, and retirement accounts.
Meanwhile, though many gig workers report higher job satisfaction than do traditional workers, the day-to-day isn’t so rosy for some gig workers—especially minorities and those who perform deliveries and other tasks for the general public. The Pew study also found that non-white gig workers were more likely than white workers to say they have been treated rudely, been sexually harassed, or felt unsafe.
Misclassification of workers is something the US Department of Labor takes seriously, levying penalties on companies found to call workers independent contractors when they should be employees. The DOL details specific guidelines for each category—for example, a business can’t decide “when and how” a gig worker’s work must be performed.
However, some companies continue to misclassify workers, either unintentionally or to skirt the law and avoid paying for employee benefits like health coverage. It’s a situation made more challenging as legislation, particularly on the state level, continues to evolve.
With a shortage of skilled labor, the gig economy is undeniably reshaping the nature of work, offering flexibility and opportunities for people worldwide. However, with these changes come challenges, including job insecurity or lack of benefits. Looking ahead to the future, the gig economy is projected to experience significant growth by 2030 prompting both workers and businesses to prepare and be ready to accommodate this transformation.
Join us at Orum.io to embrace the changing nature of work and stay ahead of the curve. Explore how our platform can help your business adapt to the challenges of a shifting workforce.