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What Is a Gig Economy?

Chime Team • July 10, 2024

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Gig Economy

A gig economy refers to a labor market characterized by short-term contracts or freelance work as opposed to full-time employees and permanent jobs.

This concept has gained significant traction over the years thanks to apps like Airbnb, Uber, and DoorDash, which make it easier for people to find flexible work. Other examples of gig-economy or independent work include freelance writing or web design, tutoring, coaching, pet sitting, or handy services.

The gig economy highlights the shift from the traditional 9-to-5 jobs towards more independent forms of employment. However, with this change comes opportunities and challenges.

Participating in a gig economy can allow workers to choose when, where, and how much they want to work, which can appeal to those seeking a better work-life balance or supplementing their income. It also offers an opportunity to develop diverse skills, gain exposure to various industries, and learn entrepreneurship, as gig employees are essentially running a small business. However, it also means navigating the challenges of variable income, lack of employer-provided benefits, and the need for self-discipline in managing finances.

For employers, the gig economy offers the ability to adjust labor costs based on demand and reduce the expenses associated with full-time employees.

How has the gig economy has changed over time?

While the gig economy has existed as long as there has been seasonal or temporary work, it started to gain traction in 2007 and 2008 due to the global financial crisis.¹ Many people turned to freelancing or contracting out of necessity. Thanks to extensive job loss and the impact it had on people’s retirement funds, people had to turn to the gig economy to supplement or replace their regular income stream.

During and after COVID-19, there was a similar shift in work with nearly 2.1 million new workers entering the gig economy in 2020.² This is double the number of people starting in 2019. However, this time, the increase in gig work was mainly through online platforms, with the largest increases in food delivery and transportation.

Today, the gig market has exploded thanks to technological advancements connecting workers with gigs through digital platforms. This market reflects broader economic changes, including the rise of digital marketplaces and the increasing demand for flexible work arrangements.

Understanding the gig economy is essential for anyone considering gig work as a primary source of income or a side hustle. It requires a proactive approach to saving, tax planning, and retirement planning, given the absence of traditional employment benefits.

A gig economy significantly impacts the broader economy by creating jobs, increasing consumer spending, and fostering innovation. However, it also raises questions about job security, workers’ rights, and the future of work.

To summarize, a gig economy offers flexibility and entrepreneurial opportunities but also requires people to be more proactive in managing their finances and career paths. As the gig economy evolves, workers, companies, and policymakers need to navigate its challenges and opportunities thoughtfully.

Third-party brands and companies are mentioned for informational purposes only. Chime does not sponsor, endorse, or partner with any of these brands or companies, and they do not sponsor or endorse Chime.

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1 Information from the Regional Economic Development Institute's "Inside the rise of the gig economy," as of June 18, 2024: https://www.libarts.colostate.edu/redi/wp-content/uploads/sites/50/2017/02/REDI-Gig-Economy-1-NK.pdf

2 Information from the National Bureau of Economic Research, "The evolving role of gig work during the COVID-19 pandemic" as of June 26, 2024: https://www.nber.org/digest/20238/evolving-role-gig-work-during-covid-19-pandemic

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