In this year’s midterm elections, voters in Portland, Maine rejected a referendum that would raise the minimum wage to $18 an hour and extend it to certain members of the gig economy. However well-intentioned the referendum was, its proponents failed to consider that the nontraditional nature of gig work is what makes it appealing for many participants in the first place. For those who can’t work traditional hours or need additional flexibility, the gig economy provides an opportunity to enter the workforce when otherwise they may not be able.
The gig economy refers to a type of economic activity characterized by short-term contracts, usually completed by freelance workers. The type of work varies but can include driving, deliveries and even walking dogs. The U.S. is one of the leading countries for the gig economy, falling just behind Brazil with 46 percent participation. In 2021 at least 59 million gig workers comprised over a third of the U.S. workforce. These numbers represent a marked increase from the previous year, with workers who occasionally participated in the gig economy increasing the most — by 51 percent. This economy doesn’t appear to be slowing down any time soon, with the potential to pull from a freelance work base that’s estimated to reach over 90 million workers in the U.S. by 2028.
Gig work provides enormous benefits to the economy, small businesses and consumers. DoorDash, a delivery service, contributed an estimated $68.9 billion to the U.S. GDP and is used by over 500,000 merchants to reach existing and future customers. Uber, a ride-sharing service, also contributes an estimated annual economic impact of $591 million. Furthermore, Uber helps consumers by saving them time and money. According to an Uber economic impact report, “the average benefit per trip is a combination of $1.68 in cost savings, $5.42 in time savings, and $4.98 in amenity value.” Over a year, that adds up to $17.6 billion in benefits for Uber riders.
In addition to benefiting the economy, business partners and consumers, the gig economy provides an opportunity to workers who may not favor the traditional employment mold. A key, distinctive characteristic of this economy is that most employees are legally considered contractors and as such are not entitled to certain employee benefits such as insurance or wage guarantees. The referendum in Portland would have changed this for drivers and classified them as employees.
While freelancing existed before apps, a report by the Congressional Research Service found that the accessibility of apps may have reduced barriers, such as network contacts, that used to be required for freelancing. In effect, these conditions make it easier for workers to join the gig economy. The flexibility in scheduling can also help facilitate work, with just under 29 percent of gig economy workers reporting it as a top reason for their choice. Additionally, the gig economy can help facilitate the transition into retirement, with 65 percent of gig workers over 55 years old stating that it is an ideal solution to ease the change.
The flexibility and diversity of gig work offers many opportunities to both the young and old that are not available in traditional work formats. High percentages of gig workers are between 18 and 22 years old, suggesting that the gig economy is a flexible solution both for those just entering the workforce and those looking to leave it.
Gig work also provides an opportunity to increase earnings and supplement other forms of income. Of workers who drive for Uber, 87 percent earn income from other sources, but Uber has helped 66 percent of drivers earn more money than they previously did. The total increase in income from Uber drivers amounts to $1.4 billion annually after deducting fuel and other operating costs.
A separate economic impact report from DoorDash echoed many of these findings, with a third of Dashers reporting that without the flexibility gig work offers, they would not choose an alternative way to earn income. The flexibility not only allows them to be in the workforce but has enabled 28 percent of dashers to avoid high-interest payday loans and 30 percent to avoid relying on government support.
Access to goods and services on mobile devices has not only created a new niche for retail but provided opportunity. The flexibility that the gig economy provides helps reduce barriers and facilitate economic opportunity for workers at all stages in life. Proponents of reclassifying gig workers should consider that the gig economy has opened doors for individuals who might otherwise be shut out of the workforce.