# Understanding the Gig Economy: Flexible Jobs Explained

![Gig Economy](https://www.investopedia.com/thmb/Eh4YyUPSWlN1exN-4OUOalQbFwU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/gig-economy-final-e11918cb36e74a7db354bf0bf519c12e.jpg)

*— Katie Kerpel / Investopedia*

## What Is a Gig Economy?

The gig economy, also known as the sharing or access economy, features temporary, freelance, and part-time positions often filled by independent contractors. While offering flexibility and independence to workers, it removes job security and benefits like health insurance and paid leave. Companies save costs by hiring freelancers without these benefits.  

### Key Takeaways

*   A gig economy is characterized by temporary, contract, and freelance jobs rather than permanent positions.
*   Gig workers enjoy flexibility but often lack job security and essential benefits such as health insurance.
*   Employers benefit by saving costs and hiring from a larger, globally accessible talent pool.
*   The gig economy surged during the COVID-19 pandemic, with 64 million Americans participating by 2023.
*   Potential downsides include disrupted work-life balance, financial insecurity for workers, and limited career development.

## Types of Gig Economy Jobs 

The gig economy is a labor market characterized by temporary, contract, and [freelance](https://www.investopedia.com/terms/f/freelancer.asp) jobs rather than permanent positions. People earn money from providing on-demand work, services, or goods.

Gig work includes managing rentals, tutoring, coding, driving for [ride-share services](https://www.investopedia.com/articles/investing/110614/taxi-industry-pros-cons-uber-and-other-ehail-apps.asp), delivering food, or writing articles. Colleges also hire adjunct and part-time professors to save costs and fulfill academic needs.

The gig economy experienced significant increases in 2020. COVID-19 lockdowns forced people to work from home and rely more on purchasing goods and services online, and these trends continued when restrictions were lifted. In 2023, nearly 64 million Americans, 38% of the U.S. workforce, were freelancers or gig workers, according to an Upwork report. Independent contract workers contributed $1.27 trillion to the U.S. economy.

> **Fast Fact**
>
> The term "gig economy" comes from the music industry, where artists book short-term gigs at different venues.

## Advantages of the Gig Economy for Employers and Workers

For Employers

*   Wider range of applicants due to remote work options
    
*   Can hire and fire more easily based on seasonal work
    
*   Do not need to provide costly benefits like health insurance or paid vacation time
    

For Employees

*   Greater flexibility for individuals to set their own schedule
    
*   Offers various side-hustle opportunities to those who work regular full-time jobs
    
*   Remote positions allow gig workers to live anywhere that has an internet connection
    

> **Important**
>
> Hiring full-time employees costs employers 1.25 to 1.4 times their salary, so a $35,000 salary can cost $43,750 to $49,000. 

## Challenges and Risks in the Gig Economy 

The rise of the gig economy can hinder full-time employees from building careers and long-term reputations. It also often erodes worker rights, like health insurance and paid leave.

Employers feel less pressure to raise wages, as they can hire people worldwide, including areas with lower living costs.

The flexibility of working gigs can disrupt the [work-life balance](https://www.investopedia.com/articles/professionals/061113/maintaining-worklife-balance-financial-professionals.asp), sleep patterns, and daily life. Long-term relationships between workers, employers, clients, and [vendors](https://www.investopedia.com/terms/v/vendor.asp) can erode. This can eliminate the benefits of building long-term trust, customary practice, and familiarity with clients and employers.

## Do Gig Workers Experience Higher Job Satisfaction Than Regular Employees?

According to the National Institute of Health, gig workers reported lower mental health and life satisfaction than those employed full-time and part-time in 2022. Gig workers also experienced higher levels of loneliness and financial insecurity.

## How Do Gig Workers Get Health Benefits?

As independent contractors, gig workers must pay for health insurance benefits and expenses. They are also responsible for self-employment taxes and business expenses.

## How Do Gig Workers Pay Taxes?

Individuals must report any income made in cash, property, goods, or [virtual currency](https://www.investopedia.com/terms/v/virtual-currency.asp), earned from the gig economy on a tax return. This includes part-time, temporary, or income not reported on another form like Form 1099-K, 1099-MISC, 1099-NEC, or W-2.

  

## Conclusion: Navigating the Gig Economy

The gig economy thrives on flexible, temporary, and freelance jobs, benefiting employers by reducing costs like health benefits and paid vacation. For gig workers, this setup offers scheduling freedom and diverse income opportunities, but it also requires them to manage their own benefits and financial responsibilities, such as [taxes](https://www.investopedia.com/filing-quarterly-taxes-as-a-gig-worker-what-you-need-to-know-11747986). As the gig economy expands, understanding its pros and cons empowers individuals and businesses to make informed decisions about participation.

> **Article Sources**
>
> 1.  Internal Revenue Service. "[Gig Economy Tax Center](https://www.irs.gov/businesses/gig-economy-tax-center)."
>     
> 2.  National Bureau of Economic Research. "[The Evolving Role of Gig Work During the COVID-19 Pandemic](https://www.nber.org/digest/20238/evolving-role-gig-work-during-covid-19-pandemic)."
>     
> 3.  Upwork. “[Freelance Forward 2023](https://www.upwork.com/research/freelance-forward-2023-research-report).”
>     
> 4.  Small Business Administration. "[How Much Does an Employee Cost You?](https://www.sba.gov/blog/how-much-does-employee-cost-you)"
>     
> 5.  Association for Entrepreneurship. "[The Pros and Cons of Gig Work: Exploring the Economic Benefits of Productivity and Employment](https://afeusa.org/articles/the-pros-and-cons-of-gig-work-exploring-the-economic-benefits-of-productivity-and-employment/)."
>     
> 6.  National Institute of Health. "[National Survey of Mental Health and Life Satisfaction of Gig Workers: The Role of Loneliness and Financial Precarity](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9743407/)."
>     
> 7.  Internal Revenue Service. "[Gig Economy Tax Center](https://www.irs.gov/businesses/gig-economy-tax-center)."