Looking at the numbers, it appears that the economy is recovering nicely from the Great Recession. Unemployment is at 5 percent and the GDP is up, but that doesn’t necessarily mean all is peachy-keen in America’s job market. In fact, PayScale’s Real Wage Index indicates that, despite the decreased unemployment rate, wages have actually fallen 6.5 percent since 2006 (when inflation is factored in). This reality has forced many professionals (employed and unemployed) to turn to flexible side gigs to make some extra cash. However, as it turns out, this “gig economy” could be more detrimental than beneficial to workers. Here’s why.
(Photo Credit: Jason Tester/Flickr)
Flexible Side Gigs vs. Flexible Work Arrangements
First, I think it’s important to distinguish between a flexible side gig and a flexible schedule. A flexible side gig is driving Uber or Lyft in your spare time, or taking on side gigs from Taskrabbit, hence the use of the word “gig.” Flexible work schedules, on the other hand, are modified work arrangements granted to an employee. For the sake of this article, we will be discussing the former: flexible gigs/jobs.
The Rise of the Gig Economy
Since the recession, the economy has been recovering at what seems to be a snail’s pace. During the past few years, many professionals who were laid off had to learn the hard way that finding a source of income – let alone a job – was no easy feat in a down economy. Many were forced to resort to taking on odd jobs, part-time work, or contract work to make ends meet, and it wasn’t uncommon to hear of former executives and other highly esteemed professionals working in much lower ranking occupations simply to earn a paycheck.
This odd-job way of life became the new norm for struggling professionals, and the “gig economy” was born. Companies benefited from this new type of employment because it was vastly cheaper to hire part-time/temporary employees and independent contractors than full-time employees who also got benefits. For workers, the “gig economy” was a blessing because they were able to earn enough income to survive, while having a new sense of freedom and autonomy they didn’t have before. It seemed like a win-win for everyone involved … until it wasn’t.
The Price of Freedom and Flexibility
“In the U.S., for good or bad, many benefits and social assistance programs are largely, though not exclusively, handled by employers,” writes Jeffrey Pfeffer at Fortune. “The U.S. is unique among advanced industrialized countries in not offering universal health care coverage. Instead, coverage decisions are at employers’ discretion. According to the Kaiser Family Foundation, even though employer-provided health insurance coverage has declined, about 58% of the nonelderly population still received employer-sponsored health insurance coverage in 2013.”
Retirement plans are similarly tied to employers, Pfeffer says. Although workers can roll over their 401k when they leave an employer – after being laid off, say, or choosing to go freelance – they lose out on employer-match contributions. Leaving the 9-to-5 world has real costs, in other words – something your ride-sharing driver probably already knows.
It’s hard to find numbers on exactly how many freelancers, contract workers, and other denizens of the gig economy have opted for the lifestyle voluntarily, and how many have been forced into it as a result of economic circumstance. But, if you’re considering shifting to side gigs, for example, to escape a dead-end 9-to-5 job that you absolutely despise, just take into consideration that a side gig shouldn’t be confused with (or be a replacement for) a career. The gig economy may afford you a freedom-filled, income-earning life now, but be aware of the ephemeral nature of such work, especially as it pertains to your long-term career success.
Tell Us What You Think
Do you think the gig economy is a good thing or bad thing? Tell us your thoughts on the matter by joining the conversation on Twitter, or leave a comment below.