The Gig Economy… The Workforce that will Save the American Economy (and Worker)


Gig Economy: Definition, Statistics & Trends — 2020 Update - PART 1

Some say the gig economy is booming, some say it’s declining. Two months ago, most would not have thought too much about independent contractors, freelancers, limited engagement professionals, and their contributions to the global economy.  That’s quickly changing as COVID-19 forces businesses of all sizes to rethink how they operate and the cost of doing business when threatened by a massive business interruption.

Let’s explore the complex truth about the gig economy from statistics and research from Q1 — 2020, aggregated from multiple independent sources.

The passing of California’s Assembly Bill 5 that turns gig-based workers into full-fledged employees has raised many questions as to the ethics and state of the so-called “gig economy” in general.

California may or may not appreciate the depth to which their economy is dependent on freelancers at all levels of the economic landscape.  They only seem to see this phenomenon as a source of uncollected or inconsistently paid income taxes.  That may well be a narrow point-of-ivew that misses the real issue.

Over the next couple of days, I will share some of the most compelling research on the gig economy to show you the magnitude of this phenomenon, the shape it’s in, as well as current and future trends.

What Is the Gig Economy? 

The gig economy is a free market system where organizations and independent workers engage in short-term work arrangements. According to the BLS, in 2017 the US gig economy had 55 million participants. It's estimated that 36% of US workers take part in the gig economy and 33% of companies extensively use gig workers.

The word “gig” refers to the transient nature of the job itself.

Gig Economy Examples

The gig economy definition encompasses all sorts of contingent work arrangements, for example:
  • Freelancers 
  • Consultants
  • Independent contractors and professionals
  • Temps (temporary contract workers) 
The gig economy is not a new phenomenon—freelancers have been around for a while. So have consultants, temps, and so on. The reason why the gig economy has been under scrutiny for the past couple of years is that technology has lowered barriers to entry so much that “gigs” have become easily accessible to an unprecedented number of people.

What was perceived as a side hustle only a couple of years ago, turned into a trillion-dollar industry with millions of participants.

Because of the very technology that made all this possible, it became increasingly hard to clearly classify what counts as part of the gig economy and what doesn't.

What’s more, studies vary so much in terms of their design that many arrive at conflicting conclusions. Just like in the case of the Contingent Worker Supplement from the BLS and the study conducted by Alan Krueger of Princeton University and Larry Katz of Harvard University—with the latter saying that the gig economy is rapidly growing and the former that it's slowly shrinking.

So—Let’s get in sync on the definitions first.

Say gig economy and people will think of:
  • Uber/Lyft drivers
  • TaskRabbit workers
  • Airbnb landlords
  • Online marketplace sellers
  • Volunteers
  • Artists 
But the list should also include:
  • On-call workers
  • Multiple job holders
  • Contingent and part-time workers
  • Highly skilled contractors
  • Seasonal workers
  • Consultants
  • And many others  
Gig economy participants sometimes treat their gigs as their main source of income, and sometimes as a secondary one. Some of them are highly skilled and this mode of work is their choice, some are unskilled and have no alternatives.

The statistics we present below come from multiple independent studies and cover all aspects of the gig economy to show what it looks like from several points of view.

Since the sheer variety of gig economy participants is huge, each study falls back on different terminology to refer to them:

MBO Partners distinguishes several types of so-called independents.

A full-time independent denotes a person working over 15 hours a week who chose this particular mode of work and doesn’t plan on altering it in the foreseeable future.

Part-time independent refers to those who regularly work less than 15 hours a week and treat their gigs as a way to supplement their usually insufficient monthly income.

Occasional independents encompasses those who do independent work sporadically, but at least once a month.

None of these terms, however, indicates the type of work performed by the person. So, a full-time independent could refer to a freelance management consultant just as much as to an Uber driver, independent artist, or a home-grown carpenter who sells their work via Etsy.

McKinsey reports for example, uses different nomenclature and the term primary independent earner refers to someone who earns their primary living from independent work.

As a general remark, the terminology used in studies indicates where the bulk of a person’s income comes from rather than what kind of job the person does.

20 Essential Gig Economy Statistics

The stats aggregated below illustrate the overall size of the gig economy:
  • 57.3 million people freelance in the U.S. It’s estimated that by 2027 there will be 86.5 million freelancers. (Upwork)
  • 36% of U.S. workers participate in the gig economy through either their primary or secondary jobs. (Gallup) 
  • For 44% of gig workers, their work in the gig economy is their primary source of income. (Edison Research)
  • For 53% of gig workers aged 18-34, their work in the gig economy is their primary source of income. (Edison Research)
  • Gig employees are more likely to be young, with 38% of 18-34-year-olds being part of the gig economy. (Edison Research)
  • 1 in 6 workers in traditional jobs would like to become a primary independent earner. (McKinsey)
  • Overall, it’s estimated that the independent workforce is larger than previously recognized: some 20 to 30 percent of the working-age population in the United States and the EU-15 countries are engaged in some form of independent earning today. (McKinsey)
  • Gig economy workers are projected to account for more than $1.4 trillion of the total US income in 2018. (PYMNTS)
  • 55% of gig workers also maintain full-time or regular jobs. (PYMNTS)
  • 19% say the main reason they have a gig job is to make extra money or cover day-to-day expenses. (PYMNTS)
  • In 2017, the total share of the labor force working in nonstandard arrangements was 10.1%, down from 10.9% in 2005. (Economic Policy Institute)
  • The largest number of gig workers (14%) find gigs in arts, design, entertainment, sports, and media followed by sales and related (10%.) (PYMNTS)
  • An additional 3% to 10% of workers in mature economies and more than 30% in some developing countries reported using gig platforms as a secondary source of income. (BCG Henderson)
  • Deloitte’s latest millennial study found that 64% of full-time workers want to do “side hustles” to make extra money. (Deloitte)
  • In 2018, the number of occasional independents jumped 16.4% to 14.9 million from 12.9 million in 2017; their ranks have risen 42% from 10.5 million in 2016. (MBO Partners)
  • 1 out of 5 full-time independents has customers outside the U.S. (MBO Partners)
  • The number of contingent employees will increase worldwide. In the US alone, contingent workers will exceed 40% of the workforce by 2020. (INTUIT)
About 40% of the American workforce now makes at least 40% of their income via gig work. (PYMNTS)
  • Between 2013 and 2017, earnings fell by 53% in the transportation sector and grew by 69% in the leasing sector. (JPMorgan Chase)
  • Compared with workers overall, electronically mediated workers were more likely to be in the prime-working-age category (25 to 54) and less likely to be in the oldest age category (55 and over.) (BLS)
TOMORROW... More Statistics, Analysis and Takeaways on the growing impact of the Gig Economy.

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