If you’ve thought about downloading one of the many gig work apps onto your phone to earn some quick cash, you’re not alone. The gig economy is more popular than ever, with 1 in 3 Americans participating in some kind of side work, making an average of $891 per month from that endeavor. There are many upsides to the gig economy – flexible hours, instant earning access, and income diversity. But could focusing on gig work too much be making your financial situation worse in the long run?
Gig work is a double edged sword. While it offers you a near instantaneous way to make cash, it has an insidious dark side that can end up hurting your finances and throwing your lifestyle balance out of whack. In this post we’re going to discuss the pros and cons of gig work, and whether participating in the gig economy makes sense for you.
A Quick History of Gig Work
Gig work has been around in different iterations for longer than you might think. The term “gig” actually traces back to jazz musicians in the early 1900s, who would earn money playing music at different venues.
Later in the 1940’s, temp agencies started to pop up, helping folks find temporary job placements, which in turn fueled the rise of the gig economy. By 1995, 10% of all Americans were using some kind of gig work to make money. This is a full decade before modern apps like Uber and DoorDash hit the scene.
These days, there are more ways to make money via cell phone apps than ever before. 1 in 3 Americans participate in the gig work economy (and I bet more have at least tried it in some form). Between rideshare services like Uber and Lyft, food delivery services like DoorDash and Uber Eats, and skill based gig work platforms like Taskrabbit and Fiverr, there’s no shortage of opportunity when it comes to the gig economy.
The Benefits of Gig Work
Before we get to all the hidden costs and downsides, let’s review the benefits and see why gig work is so popular. Here’s why gig work might be a worthwhile pursuit for the right people in the right circ*mstances…
1. A Ton of Flexibility
One of the most appealing benefits of gig work is the flexibility that it offers to workers. Most gig work is performing on-demand tasks, so you get to decide when and if you want to work. Not feeling well? You don’t have to call in sick. Just don’t open your app! Even further, you’re able to choose specific jobs and reject ones you don’t want to perform.
For example, some platforms like Uber and DoorDash will offer different pay for different jobs, depending on demand. And many apps offer bonus pay for working during busier hours. If you choose to work during peak hours, you can make more money.
It’s truly freeing working on your own schedule. There’s no need to ask anyone for days off or for extra hours when you need a little more cash.
2. Helps supplement a full time job
Because of the extreme flexibility of gig work, you can treat it like a side hustle and use it to “fill in the cracks” of your weekly routine. You won’t need to worry about any scheduling conflicts or affecting your main career. Even if you only have a few available hours each week, you can still go out and earn some extra cash.
3. Can help you to reach short term goals
Overworking isn’t sustainable in the long run. But entering hyperspeed for a few weeks to reach a short term financial goal can be really helpful. If you’re saving up for a vacation, paying off debt, or trying to fully fund your emergency fund, earning extra money through gig work can help you to achieve these financial destinations more quickly.
4. Get paid quickly
With regular jobs, you typically have to wait a few days or even weeks for regular payroll to access the money you’ve earned. But many gig work platforms give you instant access to your income. For example, Uber drivers can transfer their earnings up to 6 times each day!
It’s kind of like taking cash jobs that pay you immediately after completing work. But instead of cash, you get paid via Venmo, PayPal, or direct deposit to your bank account. For those that need to make money in a pinch, this is really handy!
5. Can protect you from unemployment
Most gig work doesn’t pay as much as the typical full-time job. But it can still provide an important financial backstop in the case of job loss. You could lose your job on Tuesday morning and start Dashing with DoorDash Tuesday afternoon. Gig work often requires little to no training, so you can get started right away. No interviews and no tedious application processes needed!
6. Huge variety of work
Gig workers can work across multiple platforms at the same time, choosing jobs depending on how they feel in the moment. For example, you could drive for Lyft in the morning, then do some freelance writing on Fiverr in the afternoon. Cycling through these platforms helps keep things interesting, and may provide more variety than some traditional jobs.
7. Entirely independent
If you’re the kind of person who hates bureaucracy, you may find gig work to be very appealing. You won’t have a boss micromanaging you, no unnecessary meetings or paperwork, and no surprise schedule changes.
For some folks, this can be a big selling point! But remember that gig work is not the only way to say “peace out” to your manager. You can also consider becoming your own boss and starting a business, or becoming a freelancer in a field you are knowledgeable in.
The Downsides of Gig Work
OK, now let’s burst your bubble and talk about the hidden costs and downsides. Make sure to consider these potential pitfalls before taking the plunge into gig work.
1. Lack of consistent pay
Unfortunately, the flexibility of gig work comes at a cost. There is no way to tell how many jobs you will get while you’re working. This makes it pretty difficult to get a clear picture of how much money you can realistically expect to make.
Sometimes, you may clock in to an app like Uber or DoorDash and find that there are no gigs available. There might not be anyone looking for a ride right when you’re ready to start ferrying passengers. You might also find that the only gigs you can take aren’t really worth your time or effort. It’s nice being in control of your schedule, but if there’s no work available, you’re stuck with nothing to do.
2. Can’t negotiate pay
Another major downside of gig work is that you can’t really increase your rate for jobs. If you don’t want to perform work for a certain price, they’ll offer the gig to the next available worker.
Whereas freelancers and business owners can raise their own rates at any time, and folks working traditional jobs can ask for a raise, gig workers are often dealing with a nameless, faceless company.
Unfortunately, there is no one there to advocate for you to make sure you are fairly compensated for your work. Instead, you’re subject to the whims of the company, which can change the rates of pay whenever they see fit.
3. Doesn’t offer a career path
With most careers, you learn transferable skills that can help you advance in your profession. This leads to increased earning potential in the future. Many jobs also offer paths to promotion and regular raises. However, this is not the case with gig work.
With gig work platforms, there is no easy way to advance, and no way to get promoted. They typically pay the same rate for brand new workers as they do for people on the platform with over 10 years of experience.
If you drive for Lyft, they aren’t going to reward you for your excellent driving skills with a promotion. Unfortunately, many of these jobs can be dead ends, with no way to advance your career. In this way, you’re directly trading time for money, and you won’t get much out of these jobs beyond that.
4. No health insurance
For better or for worse, American health insurance is tied to employment. Good employer healthcare policies are a major selling point for traditional full time work. Roughly 54% of Americans get their health insurance from an employer, which often saves them tons of money on healthcare. However, gig workers will not have access to any healthcare benefits.
Having health insurance is extremely important. While it may seem like a money waster as you pay for it each and every month, healthcare costs are the number one reason for personal bankruptcy. While you may be able to pay for many healthcare costs out of pocket, having a high deductible plan can prevent you from getting saddled with tens of thousands of dollars in medical debt. If you’re unable to get health insurance from your employer, be sure to look into getting it from the Healthcare Marketplace. Many Americans qualify for meaningful subsidies that will dramatically reduce the cost of their healthcare coverage.
5. No benefits
Beyond not having access to healthcare benefits, gig workers also won’t have access to employer sponsored retirement plans. Without automatic deductions to a 401k, and with no employer match, the weight of your retirement planning will fall solely in your hands. If you decide to participate in the gig economy, it will be entirely up to you to ensure you are saving and investing for your golden years.
Even worse, you won’t be given any paid time off, sick days, or family leave. If you go down with the flu for a week, you’ll miss out on a week’s pay. And, you won’t have worker’s comp insurance, leaving you on the hook if you get injured on the job. Benefits like these are a huge part of a total compensation package, and provide traditional employees with additional support beyond their salary.
6. Pay is on the lower side
One of the biggest downsides of gig work is that it simply doesn’t pay that much. Because many of these jobs require no training or education, they just don’t offer competitive pay.
Take, for example, Uber. While pay depends on many factors, the average Uber driver makes around $39,202 each year before expenses. If you drive 40 hours each week, every week of the year, that equates to around $18.84 per hour. However, you’ll still need to pay for gas, and to maintain your vehicle.
7. Harder to disconnect
Participating in gig work through apps like Uber, Lyft and DoorDash can make it feel harder to stop working. Because you take your phone with you, you’re subject to notifications, emails, and even just seeing the darn app on your screen every time you unlock it. Work suddenly feels constant, and before you know it, your day off becomes a work day.
Because you have access to work constantly at your fingertips, it can be harder for gig workers to step away from work to take healthy breaks. Taking time away from work is beneficial for your mental and physical health. Overworking can impact your cognitive function, and lead to more stress and fatigue.
So, is gig work worth it?
After reading through all the pros and cons, you may be wondering, “Is gig work something I should get tangled up in?”
Well, there’s not really a one-size-fits-all answer. It can make sense for some people, but can be a complete waste of time for others. Here are some helpful scenarios.
Gig work can be a good fit for folks who need cash FAST. They can pick up gigs relatively quick, and make accelerated progress on their short term financial goals. If you’re working to pay credit card debt down quickly, or to meet a specific savings goal, performing gig work on the side can help you crush short term money goals.
If you’re suffering from job loss, gig work can also be a lifesaver. Quick jobs that pay instantly can keep your finances afloat while looking for something new. This means you don’t need to dip into your savings account, and can allow you to stretch your emergency fund further.
Lastly, participating in certain kinds of gig work can help you to increase your experience in freelance skills. Taking on more specialized work on websites like Fiverr and Taskrabbit can help you to build a portfolio and gain valuable work experience that you can use to get a better job, or to begin freelancing in the future.
However, we would not recommend making gig work your long term career plan. Because it offers no advancement opportunities and lower pay, you’re likely better off putting your energy elsewhere. Gig work should be a temporary thing. If you do decide to try gig work, go into it with an exit strategy in mind. Set a goal for when you plan to ditch the apps and focus on a more stable and sustainable work life balance.
Alternatives to gig work
If you’re looking to supplement or increase your income, gig work is not the only way to accomplish this. Here are a few alternatives to chekc out:
Start a side hustle
One of the best alternatives to gig work is to start a side hustle! While gig work is essentially trading your time for money, building a side hustle can help you create a source of sustainable income for the future.
When you start a side hustle, be it dog walking, freelance writing, or managing social media, you are your own boss. You’ll be able to set your own rates (or at the very least, negotiate them), and gain valuable work experience. In many cases, your side hustle could turn into a flourishing business, eventually replacing your 9-5 income. If you’re unhappy with your 9-5, side hustles can help you transition into a different field of work altogether!
Invest in self improvement
Often, investing in self improvement can be the best way to increase your earning potential for the future. If your finances are feeling tight, instead of turning to gig work, consider asking for a raise, or buckling down to develop skills that make you more marketable as an employee. Certificate programs, further education, reading books on your specialized field, and attending lectures are great ways to become a more valuable and knowledgeable employee at work.
Beef up your savings
In the case of job loss it can be a good idea to spend some time reflecting on what you’re looking for in a new job, and to focus on the application process. However, it’s hard to focus on the job hunt if you’re hurting for cash, which is why many folks turn to gig work in the first place.
If things are good at work right now, focus on building up an extra cash cushion that could keep you afloat should you get laid off. Having a fully funded emergency fund with close to 6 months of expenses can prevent you from having to pick up gig work, and allow you to put all of your time and energy into finding the perfect new job for you.
The Bottom Line:
While gig work can be a great way to earn money on the side, it is not a good idea to depend on it for many years as your main way of making money. Sure, there are a ton of short term benefits, and making quick and easy money can get you out of a financial bind. But just remember the hidden downsides that can harm you in the long run.
At the end of the day, we want everyone to work fulfilling, rewarding, and well compensated jobs. No matter how you earn, keep your eyes on the long term goal of building wealth and reaching financial freedom so you can live life on your terms.
Related Posts:
- How to Start a Business Without Any Money
- Earning More vs. Spending Less- Which is More Important?
- How to Negotiate a Pay Raise
- Budgeting with Variable Income
