The gig economy is growing rapidly, changing the way workers and employees interact. We take a look at the benefits and risks of the gig economy, and the ways you can take advantage of the trend.
- What is the gig economy?
- Gig economy examples
- History of the gig economy
- How big is the gig economy?
- Top gig economy companies
- Gig economy advantages and disadvantages
- Gig economy stocks
What is the gig economy?
The gig economy is a segment of the service economy that’s based on flexible, temporary and freelance jobs. The gig economy has become interwoven with technology, so much so that most gig economy jobs connect clients and customers through online platforms.
The term ‘gig economy’ comes from the music industry, where artists book a single performance or short-term residency at a venue.
Gig economy examples
There are a wide variety of positions that fall within the gig economy. The most commonly cited examples of gig workers are ride-hailing drivers, food delivery drivers and freelancers – whether that’s writers, designers, coders and so on.
We’re also seeing the expansion of these positions into the ‘part-time’ workforce or ‘agency’ roles. For example, professors are increasingly working on contract so that universities can cut costs.
History of the gig economy
The history of the gig economy isn’t as modern as you might think. Non-traditional, short-term contracts existed long before the technology that we now associate with it.
However, the boom in the gig economy was a result of the internet and smartphones making it quicker and easier for workers to be connected to clients.
We just have to look at the prevalence of Uber – and its competitors such as Bolt, Lyft and Grab – to see how much easier gig working is with apps. After just a few clicks, an individual in need of a lift can be connected to a driver looking for work.
The largest shift in the gig economy occurred in 2020, when the Covid-19 pandemic forced huge portions of the workforce to be homebound. A lot of industries that couldn’t work from home were forced to furlough or terminate employees, which resulted in another segment of the workforce seeking employment – often on a part-time or flexible contract.
Before the pandemic, roughly 1% of all jobs posted on LinkedIn were remote, according to a statement from LinkedIn CEO Ryan Roslansky. But as of November 2022, that number is closer to 14%. Interestingly, nearly 50% of daily job applications on the platform are for that 14% of remote jobs, showing a clear demand for gig working.
How big is the gig economy?
It’s estimated the global gig economy is worth upwards of $347 billion as of 2021, and will grow to $455 billion by 2023.
The largest gig economy is found in America, where estimates already show that around 59 million – or a third of the working population – are in the gig economy. Studies show that 16% of all Americans have earned money through an online platform for ride-hailing, shopping, household tasks or food delivery.1
In the UK, the gig economy is much smaller, made up of around 6.07 million people or 14.7% of the working population. The gig economy in the UK is growing though, as data showed this number was 4.7 million people in 2019 (pre-pandemic) and just 2.4 million in 2016. And it’s estimated that by the end of 2022, 7.25 million UK workers will be in the gig economy.2
Top gig economy companies
The majority of gig economy companies, especially the big players, are US companies. That’s because the gig working model is far more popular in the US than elsewhere at the moment, although there are some large gig companies in the UK too.
Here are some of the largest and most well-known gig economy companies:
We’ve already mentioned Uber a few times, so it’ll come as no surprise that Uber – and other ride-hailing services – continue to make up the largest portion of the gig economy.
Uber and Lyft hold a duopoly in the ride-hailing market, making 61.2% and 32.7% of sales respectively, but Uber now boasts a diversified offering, with food delivery and freight services too.
By the end of 2023, Uber is expected to surpass $35 billion in ride-hailing sales, up from $14.15 billion in 2021. By comparison, Lyft brought in $7.56 billion last year and isn’t expected to reach $14 billion in sales until 2023.
DoorDash was the most-downloaded food and drink app in the US in 2021, with over 37 million downloads. Its popularity comes from its unique partnership with restaurants that haven’t offered delivery to consumers before.
DoorDash is also available outside of cities, so it reaches a greater consumer base than other food delivery apps. The company is branding itself as a delivery app, not just a restaurant intermediary, as it offers convenience and grocery delivery services to consumers too.
For 2022, it’s expected that DoorDash’s restaurant sales will exceed $32 billion, making up half of all restaurant delivery intermediary sales in the US. By comparison, Uber Eats restaurant sales are worth $26 billion.
Instacart is a US-based grocery delivery and pick-up company. It’s experienced rapid growth, especially during the Covid-19 pandemic, with sales increasing by 229% from 2019 to 2020.
For 2022, Instacart’s revenue is expected to hit the $30 billion level, which would give the company a 20.5% share of the US grocery ecommerce market. Instacart and other third-party delivery services are thought to generate more than one-fourth (28.8%) of digital grocery sales.3
TaskRabbit is an app that allows people to get help with household tasks, such as moving furniture, home repair tasks, and other general errands.
Customers post tasks that they want to get done and then select a tasker from the pool of freelancers near their location – whether that’s qualified professionals or capable DIY-ers. They can then check the pricing of these freelancers, creating competition and relatively cheap costs for consumers.
By 2020 the app became so popular that it had more than 140,000 taskers.In 2022, TaskRabbit made revenues of $81.5 million.
Deliveroo is a popular intermediary between food outlets and consumers in the UK. Customers place their order via the Deliveroo app, choosing from a wide range of venues, and the company’s drivers pick up food from the restaurants, delivering them to the waiting users.
Deliveroo grew massively over Covid-19, revealing a 130% increase in its gross transaction value in early 2021.
It continued on this trajectory for a while, generating £1.8 billion in revenue in 2021, a 50% year-on-year increase. But the cost-of-living crisis in the UK has caused a slow-down in orders that could reduce growth for the next few years, although the online food delivery market is still expected to grow at 10.8% per year until 2028.
Etsy is an ecommerce website company specialising in craft and vintage items, which are sold to consumers by independent sellers and businesses. The sellers pay to use the platform, and can pay to advertise their products too, but receive no security or support.
The platform saw a huge surge in demand throughout 2020 and 2021 as shopping from home was boosted during the pandemic. Etsy managed $13.4 billion in gross merchandise sales in 2021, a 30% annual increase.
But less money in consumers’ pockets has led to slowing sales in 2022. Etsy's active buyers fell to 88.1 million, down 2% year over year and marking its second sequential drop. This could make trouble for the gig workers who use the platform to sell their goods, although most only use it as a second source of income.
Gig economy advantages and disadvantages
Advantages of a gig economy
The result of a gig economy is cheaper and more efficient services for consumers. The main areas that benefit from gig economies are cities that have larger populations and more developed technological services.
Employers can choose from a much larger pool of talent, as they’re no longer constrained by proximity. Workers can be hired to work from home or commute on a part-time basis in a hybrid-working model thanks to advancements in technology.
Employers can hire part-time or temporary employees to take care of busier times or specific projects. This also means that staff aren’t billed as permanent expenses but fluctuate – which is often more appealing to shareholders.
For employees, the benefits are the freedom and flexibility to choose when and where they work. It also makes it easier to earn additional income. According to Pew Research, the vast majority of gig workers do their temporary jobs on the side, rather than as their primary source of income. And very few do more than 30 hours of gig work in a typical week.1
Disadvantages of a gig economy
The largest criticism of the gig economy is that it lacks benefits and job security for employees. There have been widespread issues of employers falsely claiming the workers are self-employed, which gives them little to no rights, including no right to trade union recognition.
Research by Oxford University showed companies in the gig economy, particularly Amazon’s delivery arm Amazon Flex, were failing to meet basic requirements for workers’ pay and rights.4
So, there’s an ongoing debate over the regulation of these gig companies and the legal status of gig workers. Over 7,000 people have started a petition for Uber and Lyft to raise their base rates to help offset the rising cost of gas, while other gig workers have gone on strike against companies including Instacart, DoorDash, and GoPuff over working conditions.
Gig economy stocks
You can go long or short on the shares of publicly traded companies within the gig economy, such as Uber, DoorDash, Deliveroo and Etsy. This enables you to take a position on whether the gig economy will continue to grow or stagnate.
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1 Pew Research, 2021
2 TUC, 2021
3 InsiderIntelligence, 2022
4 OOI, 2021