(Image courtesy of The New York Times)
Surviving and Thriving in the Gig Economy
Founder and President, Armstrong Advisory Group
As our world continues to evolve, the gig economy continues to grow. The basis of the gig economy is the idea that workers are no longer beholden to one specific company or industry in order to obtain a livelihood. According to the Bureau of Labor Statistics (BLS), “a gig describes a single project or task for which a worker is hired, often through a digital marketplace, to work on demand”1. In other words, people who work in the gig economy labor independently. A McKinsey & Company survey from 2016 found that approximately 162 million people in the United States and Europe perform independent work in some capacity, which is a number that amounts to upwards of 30% of the entire working population2. How do all of these people go about surviving and thriving in the gig economy?
Taking a Big Leap
For many of us, the very notion of abandoning the conventional workplace and its associated comforts (a steady income stream, healthcare coverage, and matching contributions to retirement plans) is too risky to fully comprehend. However, many individuals with an entrepreneurial spirit and a specified set of skills have discovered ways to survive and thrive in the gig economy. This is because a great deal of companies actually like the idea of not having to provide healthcare coverage and match retirement plan contributions. Instead, the idea of a company hiring an enterprising individual to perform work on an independent, contractual basis is becoming a norm. This is the case across multiple industries, from the tech world to work in sectors involving fewer skill requirements. Although taking this leap can be a major risk, those who have a determined and focused work ethic are more likely to succeed.
A Desire for More Control
A report from the Harvard Business Review indicated that people are more willing to perform low-skill and low-wage jobs in the gig economy than in the traditional economy3. This is not due to any increases in pay, but it instead stems from the ability of independent workers to work whenever (and however much) they choose. The same is true for independent workers in sectors that require a more well-rounded skill set and offer much higher pay: for example, a computer programmer who once worked a traditional forty-hour workweek is now able to work on a freelance basis. Many workers who comprise the gig economy cite an improved work-life balance and increased control as some of the driving forces behind their desire to maintain vocational independence.
The Case of Uber
Uber offers us a prime example of this concept in a general sense. Approximately 160,000 people driver for Uber4, which offers its drivers the same position on the economic ladder as their counterparts in the traditional cab industry: comparatively lousy pay, no benefits whatsoever, and no ability to file a jobless claim3. However, drivers who work with Uber are able to directly control when they shuttle people around and how often they do it. This significant difference is a big reason why cab companies are failing at a quickened pace: it is true that more customers are choosing to ride with companies such as Uber and Lyft. At the same time, it is also true that cab drivers are joining the ranks of Uber drivers. They are not doing so in an attempt to simply increase their socioeconomic status, but to make improvements to their work-life balance.
Although there are many risks inherent in leaving the traditional workforce behind, people are increasingly doing so and seem to be surviving and, in many cases, thriving. However, the gig economy is not for lazy people: in order to become successful and make money, independent work requires a significant amount of personal discipline and entrepreneurial drive. Thankfully, a bridge that permits workers to cross from the conventional economy to the gig economy exists: the advent of the Affordable Care Act and the increasing prevalence of 401(k) plans (instead of traditional pension plans) both allow for greater workforce independence. Despite the helpful resources that are available to workers in the gig economy, it is important to develop a plan and understand that you will be exclusively responsible for your own success at the end of the day.
Barry Armstrong has over 30 years of experience in the financial industry. He founded the Armstrong Advisory Group in 2004 and has been sharing his financial knowledge with New Englanders on a daily basis during his Boston-based radio broadcast for nearly 20 years. Learn more about Barry and the Armstrong Advisory Group at www.armstrongadvisory.com. Securities offered through Securities America, Inc. Member FINRA/SIPC and Advisory Services offered through Securities America Advisors. Barry Armstrong, Representative. Representatives of Securities America do not offer tax advice. Always seek the assistance of a tax professional familiar with the laws in your state. Armstrong Advisory Group and Securities America are unaffiliated. February 2017