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Why No One Can Seem to Agree On What the Gig Economy Actually Is

Roughly half of American workers would make their money in the “gig” economy if they had their way, a new survey suggests. And already, about 60 million Americans do. Or, maybe it’s only a few hundred thousand people who are gig workers now. It all depends on how you count.

The gig economy, personified by the current army of Uber drivers, attracts a lot of debate among economists and labor rights activists alike. The argument begins with: “Is the gig economy really a thing?”

Impassioned warnings about the Uberfication of all work float through courts, statehouses and editorial pages, warning that on-demand workers have no social safety net and risk abuse by their digital contracting overlords. At the same time, The Wall Street Journal not long ago used government data to proclaim that “Proof of a Gig Economy Revolution Is Hard to Find.” Another WSJ headline screamed, “The Entire Online Gig Economy Might Be Mostly Uber.”

As with many such controversies, the root of the problem is the definition of the term. Are full-time Uber drivers the only gig workers? What about part-time Airbnb “landlords?” Or weekend Etsy warriors? Or for that matter, moonlighting web developers or lawyers?

In a groundbreaking study released recently, McKinsey & Company tried to clear up this mess with an extensive international survey designed at clarifying some terms. For starters, McKinsey took a broad view, which means that many gig workers it included have another job that’s their main source of income. In fact, four out of 10 gig workers trying to add to a full-time income get 10% or less of their income from their side hustles, the report found. At least, now.

“Just as working models changed in the wake of the Industrial Revolution, the nature of work may be evolving again as the digital revolution takes hold,” the report said.

Different Types of Gig Workers

In its breakdown, McKinsey found several distinct types of gig workers. Those doing piece work who wish they had full-time employment are a group you’d expect during a sluggish economic recovery.

Yamileth Medina, 29, of South Florida, fits that profile.

“I’m a career switcher — marketing and copywriting into tech/web development— and it’s been hard to find a steady position or freelance work,” Medina said to me. She drove for Uber for a while. Now she delivers for GrubHub while job-hunting.

A larger group, however, are just the reverse. They have full-time jobs but aspire to join the independent lifestyle allowed by gig work. McKinsey found that 1-in-6 people in traditional jobs would like to become a primary independent earner.

“If everyone had the opportunity to pursue their preferred working style, roughly 40%-50% of the working-age population in the United States…would be independent,” the report found. “If they were able to pursue the working style they prefer, the independent workforce could potentially grow to 76 million to 129 million Americans.”

McKinsey fit the 20%-30% of Americans currently doing some kind of gig work into four distinct categories.

  • Free agents, who actively choose independent work and derive their primary income from it;
  • Casual earners, who use independent work for supplemental income and do so by choice;
  • Reluctants, who make their primary living from independent work but would prefer traditional jobs; and
  • The financially strapped, who do supplemental independent work out of necessity.

Medina sits firmly in that last group.

“It’s 90% necessity in my case,” she said.

On the other side of the spectrum, Robert Williams is an IT consultant in New York who relishes the chance to sell his unique skills via occasional moonlighting.

“For me, this model turned my life around,” the 43 year old told me. “I am an IT consultant, working for a full-time consulting firm. However, I have a somewhat unique set of skills that allows me to work independently without conflicts of interest… (I worked) 12-17 hours a day between my full-time job and up to six side gigs. I was able to pay down significant debt while living on Wall Street for two years.”

Their two stories show one main concern that’s been raised about the gig economy — its potential to create a two-tiered employment system. People who need gig work are in no position to bargain, and won’t have access to company benefits like health care. Meanwhile, they’ll have to accept on-demand work during the worst hours. The worst of both worlds. On the other hand, workers with highly sellable skill sets can leverage daytime benefits while they hold out for high moonlighting wages— the best of both worlds.

Read: 7 Ways High Earners Sabotage Their Finances

Some of the thorny issues arising out of the gig economy are getting the attention of legislators and regulators. A persistent complaint among freelancers is trouble getting paid — a crucial issue for out-of-necessity gig workers living month-to-month. A recent study showed 71% of freelancers said they’d had trouble getting paid, and the average outstanding payment was $6,000. To address this, New York City just passed the “Freelancing Isn’t Free” law (as yet unsigned by the mayor) setting strict rules about dealing with freelancers.

Disagreements Over the Gig Economy

The public discussion over the gig worker phenomenon has been frayed by disagreement, but one recent study suggests fixating on Uber is part of the problem. A study by Alan Krueger of Princeton University and Lawrence Katz of Harvard University found that while those kinds of gig workers represent only about 0.5% of the workforce, the number of employees in “alternative arrangements” is skyrocketing — from 10% of workers in 2005 to 16% in 2015.

“(Uber has) distracted us from this larger change that’s had more fundamental and pervasive effects,” said David Weil, administrator of the Labor Department’s Wage and Hour Division to the Wall Street Journal in a story about that study. (Uber did not immediately respond to request for comment for this article.)

To help frame public discussion, McKinsey set out to learn more about this broader set of gig workers. It found there are 54-68 million independent earners in the United States. Many are not what or whom you’d expect.

  • By choice, mostly – 72% are independent because they want to be; the other 28% are forced into gig work.
  • Casual earners are the largest group – 40% of gig workers are moonlighting because they like the extra cash; 14% are moonlighting because they have to, and another 14% are gig workers because they can’t get a full-time job.
  • Not all millennials – Young adults represent less than one-quarter of the independent workforce.
  • Many are older – Seniors are Airbnb’s fastest-growing host demographic, and a quarter of Uber’s drivers are over age 50.
  • Many are caregivers – Those who stay at home with children, the elderly, or the infirm are in a good position to pick up occasional piece work.
  • Etsy and Uber, part-time – Some 70% of Etsy sellers and 60% of Uber drivers in the United States have some other form of primary income.
  • It’s not all Uber and Etsy – While Uber grabs the headlines, independent work “is also preferred by many professionals such as doctors, therapists, lawyers, accountants, interior designers, and writers,” McKinsey said.
  • They are urbanites – Eighty-one percent of the growth in gig jobs over the past four years took place in the nation’s 25 largest metro areas.

Read: How to Stick to a Budget When You Don't Have a Steady Paycheck

If You Are Considering Gig Work

Not surprisingly, independent workers who consciously choose that path express higher satisfaction than those forced into it. But while “firing” your boss to work from a coffee shop every day can seem romantic, there are plenty of potential pitfalls. They only begin with trouble getting paid. Independent workers can be less productive because they have to absorb back-office tasks like invoicing and IT support, McKinsey warns. And they can miss out on professional development that’s available through larger organizations.

FlexJobs.com maintains job listings for those seeking non-traditional work arrangements. Spokeswoman Kathy Gardner offers these practical tips for anyone considering the gig worker life, either by choice or out of necessity.

  • Don’t work without a contract. The nature of gig work is such that it’s easy to agree to a work project and begin working. But if you don’t have at least a basic contract signed between you and the client, there’s a ton of room for issues to pop up. Basic contracts should outline who each party in the agreement is, what the work project is, the agreed-upon price for the project (and any related stipulations like method and timing of payments), and the deadline.
  • Find a few solid sources for gigs. Finding freelance work can be stressful because you want to make sure you find high-quality, reliable clients, and not people or companies that don’t intend on playing by the rules. If you’re searching for freelance work online, check out several job search sites to find out whether they pre-screen the companies and job listings before they’re posted to weed out scams and bad actors. Figure out what services and perks each site offers its job seekers (versus its employers). Not all “gig” job sites are created equal.
  • Create a system for tracking your income and payments. If you have multiple clients, this is especially important. As a freelancer, you should invoice each of your clients and set a due date for payment. If the due date comes and goes, and you didn’t get paid, invoice them again — this time, with a late notice. Still no payment? Call your client to find out what’s going on. Most of the time, clients don’t have nefarious reasons for failing to pay you on time, they just need a lot of reminding.

Remember, it’s very important for full-time gig workers to carefully manage their cash flow and save for emergencies, just in case a paycheck is delayed. Low funds can lead to missed loan payments, which can damage your credit score, incur late fees and heighten financial stress.

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