Gig Economy: A Full Guide + 5 Practical Tips on How to Thrive in It

The gig economy is a steadily growing and diverse labor market; in fact, it was expected to reach approximately $455.2 billion in gross volume in 2023.

The freelancing market has helped pave the way for flexible work setups and more diverse work opportunities. Over the years, it has significantly redefined efficiency and cost-effectiveness in various industries worldwide.

If you’re eager to learn more about the gig economy, how it works, and how you can build a career by joining the independent workforce, this article can be your guide! Keep reading to find all the answers you need.

Key Takeaways

• The gig economy is a term used to describe the freelancing work industry.
• Its market structure consists of contractors hired independently to fulfill project-based and part-time jobs.
• A typical job in the flexible labor market can generate at least $5,700 per year, although the rates may vary based on the job description.
• Compared to a regular employee, freelancers complete an average of 25.1 hours a week and are not entitled to employer-sponsored benefits.
• The IRS imposes income and self-employment taxes on independent contractors, with the latter comprising both Medicare and Social Security taxes.

What Is the Gig Economy?

The gig economy, also called crowdwork, flexible labor market, or freelance economy, is a market structure comprised of independent contractors, also known as gig workers or freelancers.

These people are hired or paid to complete short-term jobs and tasks. Typical types of independent contractor jobs include graphic design, content writing, photography, virtual assistance, and business consulting.

The freelancing market, which the term ‘gig economy’ refers to, is said to have started in 2009. However, the history of freelancing can be traced back to the Great Depression, when employment rates were down by 25%.

At that time, workers were willing to take odd jobs and shift from one short-term job to another. Over time, hiring gig workers became more prevalent, mainly as small businesses lacked manpower after the war. Furthermore, the drastic shift into the digital era made project-based occupations more accessible to freelancers and vice versa.

How Does the Gig Economy Work?

The way the gig economy works is relatively simple and flexible.

Some freelancers find part-time gigs and project-based jobs by sending an application to a hiring agency or prospective client. In some instances, independent contractors may also advertise their skills and services by creating their own websites or using their social media pages.

A key difference between regular employees and gig workers is that the latter are responsible for managing and overseeing their own taxes and benefits.

Their clients don’t withhold portions of their earnings for their taxes or insurance premium contributions. Besides that, contractors should create freelance invoices on their own to document their earnings for each project.

Freelance projects in a gig economy can last from a couple of weeks to several months, depending on the nature of work or the agreement between the contractor and the client.

4 Popular Gig Economy Examples

There is a steadily growing number of gig economy examples at present, and the ones below are four of the biggest and most prominent flexible labor markets:

#1. Content Writing

The scope of content writing as a gig economy job is massive.

New businesses and even established companies in various industries employ freelance writers to create short and long-form content to promote their businesses, attract more customers, and outmatch their competitors.

#2. Rideshare or Delivery Services

Uber, DoorDash, Lyft, and Curb are among the most popular US companies offering delivery and ridesharing services.

These companies hire drivers contractually, and the latter independently earn a living based on the number of rides they have booked and the distance they traveled for each delivery.

#3. Graphic Design

Like content writing, graphic design is instrumental in helping big and small companies expand their audience reach and advertise their products.

Whether companies need branding and logo design, motion graphics, infographics, or promotional ads, they often seek the tasteful expertise of digital designers.

#4. Construction

Construction services are some of the world's oldest known types of contractual work.

In this industry, construction companies hire carpenters, electricians, surveyors, laborers, and construction workers to repair or build infrastructure and residential properties. These workers get paid a daily or weekly wage.

7 Fascinating Things to Know About the Gig Economy

#1. How Much Can Gig Workers Earn?

On average, gig workers can make at least $5,700 per year. The amount can increase based on the number of freelance jobs you have and how in-demand your side hustles are.

For instance, if you have experience in digital design, social media management, and content writing, you can book more high-paying freelance jobs.

#2. What Are the Best Cities for Gig Economy in the US?

The top US cities where the gig economy is said to continue thriving are Seattle, Denver, and Chicago.

First, Seattle is home to Amazon’s headquarters, making it a center for several office and remote-based freelancing gigs.

Next is Denver, a popular hub for tech industry companies and coworking spaces. If Seattle is home to Amazon, Denver offers flexible gigs at Bird, Uber, UberEats, Postmates, Lime, and DoorDash.

Finally, Chicago’s economy is among the largest and most diverse in the U.S., and it is home to all types of conventional and unconventional freelance work.

#3. How Many Hours Can You Work?

According to Remote’s freelancer report on gig workers worldwide, US-based freelancers complete an average of 25.1 work hours per week.

Generally, the number of hours you can complete solely depends on the number of contractual projects and the type of independent contractor job you have.

#4. How Are Freelancers Taxed?

The IRS requires gig economy workers to pay income and self-employment taxes.

Income tax rates are based on each freelancer’s tax brackets. Meanwhile, the IRS levies a fixed 15.3% self-employment tax rate on gig workers. 12.4% of this goes to Social Security taxes, while the remaining 2.9% is used for Medicare taxes.

Additionally, some freelancers may need clarification about whether to use Form 1099-NEC or 1099-MISC to report all their freelancing income for the year.

Following the IRS’ recent update in 2020, freelancers must use 1099-NEC to report non-employee compensation and file their taxes.

#5. Which Companies Are Best for Gig Workers?

In today's gig economy, the best companies for gig workers are Fiverr, Uber, and TopTal. All of them highlight an expansive selection of gig opportunities while also offering something new to freelancers globally.

Fiverr is popular because it lets contractors advertise their expertise and services to companies that could potentially be their next clients.

There are no membership or sign-up fees, and freelancers have the freedom to set their rates and earn more than their typical hourly pay.

In comparison, TopTal is best known for its meticulous screening process. It also focuses on gig work that requires a more advanced skill set, such as project management, software development, and finance.

Finally, as previously mentioned, Uber enables freelancers to earn by offering ridesharing or delivery services.

#6. How Unpredictable Is the Freelance Market?

The freelance market can be unstable because it does not offer permanent jobs, and the economy depends on the changing trends and needs of customers and businesses.

A good example is how the recent COVID-19 pandemic strengthened the freelancing workforce and paved the way for opening more remote job sites and opportunities.

At present, it is safe to say that there is a digital nomad for virtually any type of contractual task or project that most companies can think of.

#7. How Will AI Affect the Gig Economy’s Future?

Speaking of unpredictability, new and veteran freelancers have been discussing how AI will influence and affect the current gig economy.

While artificial intelligence is gradually expanding its range of professional traits, its efficiency and dependability are still far from perfect.

At best, AI effectively saves business owners time and money by taking over repetitive tasks. Gig workers should also take advantage of the enhanced efficiency that AI can bring to reduce burnout and focus on the more complicated aspects of their tasks.

5 Practical Tips on How to Thrive in the Gig Economy

The gig economy is an excellent market to explore and thrive in, particularly if you want to expand and stabilize your monthly income. Here are some expert tips on how to secure more work opportunities as a freelancer:

#1. Do Your Research

Researching the gig economy means staying updated with relevant trends and global economic changes that may affect your freelance profession of choice.

Therefore, you should check other skills and industries related to your field of expertise. This way, you can boost your independent contractor rates by learning and developing new and in-dem and freelancing skills.

#2. Beware of Scams

Unfortunately, the gig economy is not spared from scammers who pretend to be clients hiring freelancers or independent contractors offering their services. Therefore, it is crucial to screen all freelance opportunities you encounter online.

Better yet, only look for jobs on trusted remote job sites and check out the reviews and ratings of other contractors for a prospective client.

If you need to present a portfolio as part of the screening process, limit the access and permissions to view your files to the recruiters.

If you fall victim to a freelancing scam, report the incident immediately to the authorities or utilize the designated online helpdesk of the job board where you encountered the fraudster.

#3. Budget in For Taxes

Make it a part of your budgeting habits to set aside a percentage of your gig work earnings to pay your taxes and other essential expenses.

Allotting a portion of your budget to pay taxes helps you prepare before the tax-paying deadlines. You can even check whether you qualify for specific tax exemptions based on your financial status and declared dependents.

#4. Secure & Update Your Pay Records

Securing and keeping your pay records up-to-date is helpful when you need proof of income to secure loans or purchase properties.

One of the best ways to secure and update your pay records as a worker in the gig economy is to use online tools such as an invoice generator. These help independent contractors secure payments from clients in a timely fashion.

It also allows freelancers to create formal documentation of their services in fulfilling a project while specifying a breakdown of their rates and additional charges, if any.

Other useful tools to help protect your pay records include cloud storage to manage and keep your files and a trusted VPN service to shield your sensitive data from unsecured websites and phishing attempts.

#5. Maintain Professionalism

It is crucial to foster and maintain professionalism in every freelance endeavor you start. Doing so helps you build a track record as a freelancer and earn the trust of your clients.

At the same time, try to be as responsive as possible to your clients and focus on building a positive work dynamic. The happier your clients are with your work and disposition, the higher your chances of earning client recommendations and landing better jobs.

Criticisms and Challenges of the Gig Economy

Work consistency and stability and the lack of freelancers’ benefits are among the gig economy’s biggest challenges.

While some contractors may be lucky to have scored high-paying clients, there is no guarantee that the next freelancing gig will be just as profitable or promising. Not to mention, the duration at which freelancers can land their next project varies.

Furthermore, independent contractors are not covered by employer-sponsored benefits such as health and life insurance coverage, paid time off, salary increases, or holiday bonuses.

That said, discipline and flexibility are crucial to attaining success and financial security as a digital nomad.

Secure Your Freelancing Career With Paystub.org!

Our pay stub generator is a convenient and cost-effective online tool for freelancers, who, unlike other employees, don’t get pay slips from their employers.

With ready-made templates and a built-in calculator, our generator allows you to create your own pay slips and offers a reliable system to help you manage all your hard-earned money.

The best part about our pay stub generator is you can effortlessly create as many pay stubs as you need for each client or project, thereby saving time, energy, and resources.

Final Thoughts

The gig economy is a rapidly expanding market. It offers opportunities to maximize earnings and even propel your career toward bigger milestones and long-term success.

Freelancing has faced numerous challenges and disadvantages, and it will continue to do so depending on the trajectory of the global labor market and economy.

That said, the key to securing your career as an independent contractor is to focus on upgrading your skills and staying updated with the best resources for top-paying part-time gigs.