The Pros and Cons of the Gig Economy
What Is the Gig Economy?
With the rise of freelance work and flexible jobs, the gig economy has redefined the concept of employment in today’s workforce. This model provides individuals with the option to work on short-term projectss or “gigs,” instead of committing to full-time roles. Whether it’s freelancing in creative industries, driving for rideshare services, or running an online business, gig workers are embracing a new way to earn a living.
The gig economy is often associated with the broader sharing economy, where digital platforms connect individuals to services like transportation, vacation rentals, or deliveries. This makes it easier than ever for people to earn income on their own terms. The gig economy can also involve tasks ranging from quick, one-time jobs to long-term projects that last months or even years. The defining feature is that workers are not tied to a single employer. Instead, they move from one opportunity to the next, always seeking their next gig.
As the gig economy continues to grow, it’s reshaping both the workforce and businesses alike. But what does this shift mean? This article explores gig economy pros and cons for both workers and businesses.
The Growth of the Gig Economy
The growing number of individuals participating in the gig economy, whether full-time or through side hustles, reflects a major shift in how people approach work. The gig economy is reshaping the labor market as more people prioritize flexibility and autonomy over traditional employment. In fact, there are currently over 70.4 million Americans engaged in freelance work. The gig economy has experienced remarkable growth, with a projected 16% growth over the next decade. In 2024, for example, the global gig economy market was valued at approximately $556.7 billion—and it’s estimated that it could reach a staggering $2.15 trillion by 2033. With the gig economy expanding at such a rapid pace, it’s clear that side gigs are no longer just a temporary trend—they’re becoming a permanent part of the workforce.
Why Are People Choosing Gig Work?
The reasons people turn to gig work are as diverse as the gigs themselves. For some, it’s a way to earn extra cash as a side hustle. For others, it’s a career path built around flexibility and autonomy. It’s also an option to earn income for those affected by economic downsizing and layoffs, or simply a desire to escape a traditional 9-to-5 job.
Post-pandemic shifts in work culture. While gig work has always been a part of the workforce, the pandemic opened the door even wider. As millions of workers were pushed out of offices to work from home, people discovered they could make money—and in some cases, more money—on their own terms.
Gig work is more accessible than ever. Digital platforms like Uber, Lyft, Instacart, and DoorDash make it easier than ever for people to sign up for gig work. Similarly, freelancing platforms like Upwork and Fiverr allow creatives to offer services remotely, reaching clients around the world with minimal startup costs.
Side hustles are the new norm. Economic uncertainty, layoffs, student debt, and a desire for financial independence have pushed many full-time employees to take on freelance projects or part-time gigs in their spare time. Whether it’s tutoring online, selling handmade goods on Etsy, or running social media for a local business—side hustles have become a way to bridge the gap between income and expenses.
Younger generations are driving the change. Millennials and Gen Z tend to value freedom and purpose over traditional work schedules. They’re more likely to seek flexible income streams and pursue passion projects, and the idea of working from anywhere is practically second nature to them. In fact, a Pew Research study found that nearly 40% of Gen Z workers engage in gig work.
Technology is making gig work easier and more efficient. AI tools like ChatGPT, Canva, Asana, and CoPilot are helping gig workers streamline their work, automate routine tasks, and take on more clients. This has opened up new kinds of freelance roles, from prompt engineering to digital coaching and virtual assistance.
What Are the Pros of the Gig Economy for Workers?
The gig economy offers numerous benefits for those looking to work in a flexible, independent, and varied environment. Some of the key advantages include:
Flexibility
One of the biggest draws for gig workers is the flexibility it provides. Whether it's working from home, setting their own hours, or choosing the days they want to work, gig economy workers have the freedom to create a schedule that fits their personal needs. This is particularly appealing to parents juggling childcare or individuals seeking to balance other commitments. According to Upwork Research Institute's 2023 Freelance Forward survey,“flexibility in my schedule" and "to work from the location of my choosing" top the list of reasons people choose gig work. The flexibility extends to where the workexp can be done—many workers appreciate the option to work remotely, saving time and money on commuting.
Greater Independence
For many gig workers, independence is a major perk. They’re trusted to manage their time and complete tasks in their own way, without a boss looking over their shoulder or dictating their hours. In fact, 77% of freelancers prioritize work-life balance when setting their schedules. This autonomy can boost confidence and job satisfaction, as workers feel empowered to take ownership of their work.
Variety of Work
Gig economy workers often find that their workdays are rarely the same. With access to a wide range of gigs, freelancers enjoy the variety that traditional 9-to-5 jobs often lack. The ability to work on diverse projects can lead to increased creativity, motivation, and job satisfaction compared to working repetitive tasks at a traditional job.
Pay
While pay can vary, many gig workers appreciate the ability to control their earnings by setting their own rates, choosing how much to work, and billing for additional tasks such as meetings, phone calls, or research time. A rising number of independent contractors are earning higher incomes, and those with in-demand skills often command higher rates. Plus, the integration of AI tools into workflow processes boosts efficiency, allowing gig workers to take on more projects. The flexibility of gig jobs also makes it easier to balance work with education, allowing workers to continue earning while advancing their careers, potentially increasing their earning potential in the gig economy.
What Are the Cons of the Gig Economy for Workers?
While gig economy jobs offer flexibility and independence, they also come with challenges. From lack of employee benefits to navigating taxes, securing health insurance, and dealing with income fluctuations, gig work can sometimes be more stressful than a traditional job.
Lack of Benefits
Unfortunately, for most gig economy jobs, employee benefits aren’t part of the package as they are with traditional employment. Gig workers typically do not receive health insurance, retirement plans, or paid leave. A 2023 study by The National Institute for Workers’ Rights revealed that 54% of gig workers lack access to employer-based benefits. As a result, they must independently secure health insurance and plan for retirement through options like IRAs or 401(k)s.
Quarterly Taxes and Expenses
Similarly, most companies don’t withhold taxes from payments to gig workers. As independent contractors, gig workers are responsible for managing their own taxes. The IRS mandates that self-employed individuals file an annual income tax return and pay estimated taxes quarterly. This includes the self-employment tax, which covers Social Security and Medicare, totaling 15.3% of net earnings. Most freelancers should also plan to save 25% to 40% of their earnings for taxes.
Additionally, gig workers are also responsible for covering work-related expenses such as laptops, cell phones, and even cars and insurance. While some of these expenses may be tax-deductible, they require careful record-keeping and financial planning. Many freelancers find it best to work with an accountant so they can go over all the things they use for their work and know what to write off for their taxes.
Lack of Workplace Community
Some freelancers and gig workers find that working independently can lead to feelings of isolation. Since these workers typically don’t go into an office, they may feel they’re missing out on the social aspects of a traditional workplace such as casual watercooler conversations and office events. While this flexibility can be a perk, it can also lead to feelings of disconnection from colleagues.
Stress
Gig economy workers must constantly seek new opportunities or be ready for changes in their current roles, which can create uncertainty and stress. Unlike traditional employment, gig work often lacks long-term stability, with income fluctuations and sudden job losses being common challenges. Another challenge is that many gig jobs pay per task, rather than per hour, meaning some workers may earn less than minimum wage depending on their efficiency. Additionally, working independently can make it harder to communicate questions or concerns, adding another layer of pressure for freelancers navigating projects on their own.
What Are the Pros of the Gig Economy for Businesses?
The gig economy offers several strategic advantages for businesses. From cutting costs to scaling quickly, here are some of the top reasons companies are tapping into contract talent:
Lower Cost
Hiring gig workers can significantly reduce overhead for businesses. In many cases, companies are able to save the costs typically associated with onboarding, training, equipment, and office space. And since most gig workers are considered independent contractors, employers aren’t required to provide benefits such as health insurance, paid time off, or retirement contributions. Although gig workers may charge a higher hourly rate due to their expertise and additional tax burden, it’s a cost-effective model that allows businesses to pay only for the specific services delivered, without the long-term financial commitments associated with traditional employment.
Ability to Scale Quickly
Freelancers give businesses the ability to scale quickly without the overhead of hiring full-time employees. This is especially important for startups and small companies. Since gig workers are often available to jump into projects, companies can respond quickly to new opportunities. Whether it’s launching a new product, expanding into a new market, or managing a busy season, hiring independent contractors allows teams to scale up fast, without the long-term commitment of hiring full-time staff. This approach helps businesses to grow efficiently while keeping operational costs low. For example, when Uber launched in 2009 as a startup in San Francisco, it was able to scale rapidly by using independent contractors as drivers. This gig-based model allowed the company to expand into new cities quickly without the overhead of hiring traditional employees.
Diverse Pool of Flexible Workers
The gig economy gives businesses access to a diverse pool of flexible talent. They often work outside of standard business hours, making it easier to get tasks done early in the morning, late at night, or even over the weekend. This kind of availability can be especially helpful for businesses with shifting demands. Gig workers also bring diverse backgrounds, experiences, and skill sets to the table. This flexible, on-demand approach allows for increased creativity, innovation, and efficiency—without the long-term commitment of full-time hiring.
What Are the Cons of the Gig Economy for Businesses?
Just like workers, businesses also experience the cons of gig economy labor, especially when it comes to reliability and legal obligations. Here are some of the potential drawbacks to using a contracted workforce:
Less Reliable Workers
While the flexibility and diversity of gig workers can be an asset, it can also pose challenges for businesses. Some gig economy workers may be less reliable than traditional employees, as they are not bound by the same expectations or work culture. This can lead to inconsistent work quality or missed deadlines. Businesses should be thorough when selecting gig workers and set clear expectations to minimize this risk.
Tight Regulations on Contractor Status
Businesses hiring gig workers must navigate complex federal and state regulations to ensure workers are properly classified. Potential employers must adhere to the federal Fair Labor Standards Act (FLSA) which uses a six-factor “economic reality” test to determine whether a worker is an employee or self-employed. This includes evaluating the level of control the employer has, whether the work is integral to the business, how much independence the worker has, and degree of permanence. Misclassification can lead to legal consequences, including back pay, benefits, and tax penalties.
State laws can add even more complexity. California’s controversial Assembly Bill 5 (AB5), for example, uses a strict “ABC test” that makes it extremely hard for many businesses to classify workers as independent contractors. At-will laws, which allow employers to terminate employees at any time for any legal reason, don't typically apply to independent contractors, who are bound by the terms of their contracts.
Tax filing is also different for contractors, requiring businesses to issue 1099 forms and keep detailed records. Given the regulatory challenges and risks, companies should consult legal advice or HR experts before hiring gig workers.
Kick-start Your Freelance Career with WGU
Whether you’re looking to grow your side hustle or launch a full-time freelance career, higher education can open the door to better-paying opportunities, strengthen your professional reputation, and help you stand out in a competitive gig economy. A degree from WGU gives the knowledge, credibility, and confidence you need to thrive in any field, whether that’s business, IT, healthcare, or education. With WGU’s affordable, competency-based model, you can earn your degree on your schedule while building your portfolio. Take the next step in your freelance journey and explore WGU’s online degree programs today.
