How to profit from the gig economy
The gig economy allows people to be masters of their own fate, which is to choose the work they do and for how much they perform the task for.
It’s all about flexibility, freedom, and choice.
There is no need for minimum or maximum hours, no obligatory peak-hour commute, no rigidity, and no workplace hierarchy.
The term ‘gig economy’ commonly describes peer-to-peer arrangements where for-profit companies create online platforms, or ‘marketplaces’, which pair workers with jobs.
Widely recognized examples include Freelancer, Fiverr, Uber, and Upwork.
The rise of the gig economy can partly be attributed to advances in technology paving the way for new innovative ways of doing business and providing income for many people seeking additional money.
A customer needs a task to be completed — their food delivered, garden landscaped, legal document reviewed or house cleaned.
Work is fragmented, insecure, unprotected, and sporadic. They are engaged on a task-by-task basis with no guarantee of continuous work in the future.
A gig economy worker with specialized, in-demand skills may agree to sell their expertise to a customer that needs a task to be completed for a fee.
Those with less specialized skills can secure a short-term job, a ‘gig’, by selling their labor for less than their competitors without a financial safety net beneath them, or for people who make a living by stringing odd jobs together.
For a commission, an online platform brings service providers and customers together.
Unfortunately, there is no limit as to how low fees can go. There’s no minimum amount a person can be paid to do a job, as long as they mutually agree within the context of a willing buyer and a willing seller.
As far as the platform provider and customers are concerned, the gig worker is not an employee earning a fixed salary or wage.
Supply and demand market forces prevail.
To many critics, the gig economy is dangerously unregulated and creates fertile ground for exploitation.
There’s no security of income, no insurance for the worker in case of an accident, no superannuation, no personal, and no annual or paid leave of any description.
Here’s the reality.
We buy cheaper products made in less developed countries because we do not want to pay a higher price. Who wants to buy the same product in a local store when it could be purchased from Aliexpress.com for a fraction of the cost?
Naturally, we want the lowest possible cost.
Likewise, why would a customer turn to an established cleaning business which pays its workers at or above the award wage, superannuation, insurance, and therefore charges much higher fees when they can find a gig worker to clean their house possibly for below minimum wage?
People have always done ‘odd jobs on the side’ — for friends and family or for extra cash. These online platforms have brought this kind of work into sharp focus.
In this document, we will use rideshare as the main case study to draw out the learning or principles upon which gig workers must take note of in order to maximize their incomes and minimize their time and expenses to generate their income.
Why is it important to know your financial numbers?
“Rideshare driver compensation — the income drivers get after deducting Rideshare fees and driver vehicle expenses from passenger fares — averages $11.77 an hour. This average Rideshare driver hourly compensation is substantially less than the $32.06 average hourly compensation of private-sector workers and less than the $14.99 average hourly compensation of workers in the lowest-paid major occupation (service occupation workers).” (Economic Policy Institute, 2018)
According to a study from the JPMorgan Chase Institute, rideshare drivers were earning an average of $783 a month in 2017 down from more than $1,500 in 2014. Drivers have seen their monthly paychecks cut in half in the last four years.
Between 2013 and 2017, the study distinguishes four sectors of the Online Platform Economy:
- The transportation sector, in which drivers transport people or goods, have decreased their average earnings per month by 53%.
- The non-transport work sector, in which workers offer a growing variety of services including dog walking, home repair, telemedicine, and many others, have increased their average earnings per month by 1.9%.
- The selling sector, in which independent sellers of goods find buyers through online marketplaces, have increased their average earnings per month by 9.4%.
- The leasing sector, in which lessors find lessees to rent homes, parking spaces, and many other types of assets, have increased their average earnings per month by 69%.
With these variations, it is so important for gig workers to be financially educated to maximize their income potential.