The Gig Worker’s Dilemma: Flexibility vs. Stability

It sounds like an amazing deal to work only the hours you want to.  On a beautiful day, you can choose to not work and, instead, enjoy some leisure time.  Indeed, the labor-leisure tradeoff is one of the key concepts of microeconomics, or operation of a firm or worker within the economy.  Traditionally, workers had relatively little choice in regard to this trade-off: they could work full-time or part-time, usually with rigid schedules.  The past few decades have seen the rise of new technology that allows flexible scheduling on the fly: smartphone apps connecting at-will workers with individual employers.

The Gig Economy Explained

Thanks to smartphones, individuals with desirable skills can match with employers, often other individuals, desiring simple services.  These simple services, or gigs, create the gig economy of part-time workers.  Typically, gig workers complete quick tasks that do not require a lot of trust in deeply-honed skills.  They are primarily ride share drivers, food or grocery deliverers, simple task handymen, pet sitters, dog walkers, and freelance writers or content creators.  If the task goes awry, the employer is not out of a lot of money.

Typically, gig workers choose when to log in and work, picking up offered tasks.  They can work regularly or infrequently, though those who work infrequently may not develop ratings high enough to enjoy more lucrative tasks.  Some people make gig work their full-time employment, often by working for multiple gig employers like Uber, Lyft, Uber Eats, Fiverr, etc. on a rotating basis.  

Is the Gig Economy Worth It for Workers?

The vast majority of gig employees make less than $500 per month, laboring only part-time.  For those who want to work only part-time, the gig economy may be an excellent deal.  It offers tremendous flexibility, with most workers able to log in to work at will.  However, for those who want more stable or lucrative employment, the gig economy may not be a good fit.

Flexibility Versus Security

In exchange for schedule flexibility, gig workers must often accept lower wages.  Part of the rationale for this lower pay is greater risk on the part of the employer: the gig worker may choose not to work at any given time.  These workers may also jump from gig to gig, leaving employers without reliable labor.  Due to lack of reliable labor, the gig employer cannot risk offering decent wages and be left with incomplete tasks.

On the flip side, low pay may also be due to lack of regular work opportunities.  Gig workers can choose when to work, but the work is not guaranteed to be there.  Thus, the gig economy often features inconsistent pay.  Lyft drivers may not find fares, Fiverr creators may not find clients, and Uber Eats deliverers may discover that nobody wants fast food delivered.  The downside to pursuing a flexible work schedule can be lack of work when it is desired!

Hidden Costs of Flexibility

Independent Contractor Status

Most gig workers are classified as independent contractors, meaning they are not considered true employees of the gig employment apps.  The companies consider their apps to be connectors between clients and labor.  While this may seem relatively unimportant, there are some real financial implications of being an independent contractor that can harm workers who are unaware.  This can cause economic inefficiencies at the macro level due to large numbers of gig workers who make costly mistakes that negatively impact their productivity.

Tax Implications of Being an Independent Contractor

If you are a gig worker, you are usually considered self-employed for tax purposes.  This means that you, rather than your employer, must pay your income taxes.  When working for a business as a traditional employee who receives an hourly wage, the business deducts taxes from your paycheck and pays the taxing authority on your behalf.  As a gig worker, the burden of this process falls to you, which can be complicated and time-consuming.  Failing to pay taxes correctly or in a timely fashion can result in fines later on.

Lack of Benefits

Gig workers tend to receive cash only, being ineligible for worker benefits like health insurance and retirement plans.  This may mean relatively little for gig workers who are in their late teens or early twenties and still dependents of full-time employed parents, but can be quite costly for gig workers who maintain that status into adulthood.  Part-time gig workers who are no longer dependents will have to find their own health insurance.  They will also be earning nothing in an employer-sponsored retirement plan, placing them at risk of insufficient funds upon reaching retirement age.

Lack of Bargaining Power

For some gig work, the cash may be good at first.  However, unlike traditional employees, gig workers are less likely to be able to earn raises.  Employers have little vested in gig workers, depriving them of any bargaining power.  Because gig workers tend to be low-skilled independent contractors, there is a tremendous supply of substitute labor.  Therefore, gig workers with experience may discover that their tenure means nothing in terms of bargaining for additional pay.

Legal Protections

If an accident occurs on the job, gig workers lack the legal protections of traditional employees.  As independent contractors, they are not covered by companies’ insurance plans, meaning there is no workers’ compensation for injuries received on the job.  They may also be fully liable for any mistakes they cause, without the company having to assist.  In sum, gig workers may be essentially abandoned by their employer during a time of crisis.

Potential Policy Changes to Benefit Gig Workers

As more workers in Western nations become part of the gig economy, there will be increasing pressure to make health care and retirement benefits independent of employment.  This will likely increase public support for single pay healthcare, where basic health care is provided for all residents by taxpayers.  Many developed nations have such a system, including Britain, Canada, and Australia, while the United States notably does not.  

In the United States, about 60 percent of workers receive a health insurance plan through their employers.  However, the employer usually pays for only part of these plans, deducting the remainder of the cost from workers’ paychecks.  Typically, only full-time employees are eligible to purchase these plans.  As more workers become part-time gig workers, cobbling together full-time schedules, they will demand options for health insurance independent of their jobs.

Aside from healthcare, there will also be increased political pressure to adjust labor laws and regulations to protect gig workers. Many gig workers, if not all, want their employers to have to provide accident insurance and workers' compensation for on-the-job injuries. They also want the legal right to challenge arbitrary firings, such as the right to appeal. Currently, gig workers have virtually no right to challenge or appeal job terminations for any reason.