The Gig Economy: Navigating the Dichotomy of Opportunity and Exploitation

As someone responsible for W-2 employees, I know all too well the pinch of meeting payroll, especially when the economy’s doing the cha-cha-cha with unpredictability. But there’s something to be said for the stability and cohesiveness that a fixed team offers—a luxury that the “free-as-a-bird but where’s my next meal coming from” gig worker often doesn’t have. Don’t get me wrong; the gig economy is an incredible ballet of supply and demand. Still, it can be a tough stage to dance on if you haven’t memorized all the moves. The gig economy is not for the faint of heart, my friends. It’s more of a contact sport.

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In her riveting new book “SIDE HUSTLE SAFETY NET: How Vulnerable Workers Survive Precarious Times,” UNC Professor Alexandrea Ravenelle underscores a critical but often overlooked fact: the nature of work has changed, but our policies have not. The gig economy is booming, with 57.3 million people freelancing in the U.S., a number projected to escalate to 86.5 million by 2027 according to Upwork. For 44% of gig workers, this is not a side hustle but their primary source of income (Edison Research). Yet, the laws and protections available to them are woefully outdated.

57.3 million people are #freelancing in the U.S., presenting immense opportunities and significant challenges. @RedBranch's CEO and Founder, @MarenHogan, delves into this critical issue in her latest blog post: Share on X

As we move deeper into the complexities of the 21st-century work landscape, the rise of the gig economy is both a symptom and a response to the volatility and demands of modern life. The statistics reveal a sobering picture. According to a Bankrate survey, 39% of American adults have a side hustle, and for 28% of them, it’s not a choice but a necessity to make ends meet. In a country where gig workers comprise about 36% of the workforce, according to McKinsey, it’s not surprising that gig work is becoming more mainstream. However, this comes with a plethora of challenges—irregular wages, lack of job security, and limited access to healthcare, to name a few.

Sure, freelancing might seem like the dream—no bosses, flexible hours, work in your pajamas—but that doesn’t take into account the 80% of gig employees whose primary source of income say that an unexpected expense of $1,000 would be difficult to pay. That’s one broken laptop or a car repair away from financial anxiety.

The gig economy offers an attractive narrative—freedom, flexibility, and the lure of being one’s own boss. However, the figures tell a different story: 42% of those with an income under $50,000 say they need their side hustle just to cover everyday expenses. The average monthly income for gig workers ranges from $1,080 to $11,130, leaving many in a precarious situation, particularly when 24% say their savings wouldn’t last even one month.

The proliferation of the gig economy has created economic opportunities but also ushered in a new era of vulnerability. As the CEO of a company employing W-2 workers, the challenges of making payroll and offering a stable work environment are not lost on me. Nevertheless, these struggles pale in comparison to the abject lack of security and safety net confronting the gig economy worker.

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The Historical Disconnect

Looking back to the New Deal era, the visionaries of yesteryears put forth a structure that, for its time, was a breakthrough. Social safety nets were designed to secure full-time, traditional employment. Fast forward to today, and you’ll find that the gig economy has fractured this monolithic view of employment. People juggle multiple gigs—poly-employment, as Ravenelle calls it—often finding themselves ineligible for unemployment benefits because of it. This is not only unfair, but it also leaves an indelible mark on the social fabric we all share.

During the recent pandemic, the disparities became all the more glaring. The CARES Act, though groundbreaking, left many gig workers in the lurch. While 55% of gig workers maintain full-time or regular jobs (PYMNTS), a sizable number depend on gig work for their livelihood, making them ineligible for adequate unemployment benefits. The author states:

“The rise of independent contractors means there’s an entire group of workers who have been excluded from the social safety net. When they did get access to unemployment assistance under CARES, they received roughly half the benefits as their W-2 peers. They should have received the same amount, and the unemployment system should be changed to address the needs of these workers in the future.

In the past 40 years, we’ve seen a dismantling of the social safety net. States have cut back on the number of weeks that workers qualify for, and in many cases, the amount that workers receive hasn’t kept up with inflation. Sometimes workers feel that it’s too much hassle for too little money and don’t bother to apply.

Finally, while we have returned to relatively low unemployment rates, it’s just a matter of time before we have another recession. Meanwhile, more and more jobs are becoming “gig-ified” and moved outside the social safety net. If the goal of unemployment assistance is to prevent an economic meltdown and get people back on their feet, then we need an unemployment system that doesn’t penalize part-time or freelance work.”

The Pain of Being a Gig Worker

Imagine working multiple gigs—perhaps as a rideshare driver by day and freelance coder by night—your income ebbs and flows, but there is no sick leave, no health insurance, and no safety net. When the pandemic hit, this insecurity was exacerbated. According to Ravenelle, the CARES Act fell short in many ways, one of which was failing to address the diverse employment models that characterize the modern work landscape.

So where do we go from here? Ravenelle suggests adopting minimal governmental investments in the form of updated relief funds. But this is a short-term solution to a deep-rooted, structural problem.

I would argue for a complete paradigm shift.

Navigating the Precarious Cliff: Why The Gig Economy Needs A New Safety Net

Why not make these workers W-2 employees? The benefits are multifold. First, for millions of workers, this would mean access to a social safety net, from health insurance to retirement contributions. Secondly, it would create a more equitable workforce where 1099 and W-2 workers are treated the same concerning unemployment benefits. The argument for this is not only ethical but also economically sound. Happy and secure employees are more productive, less likely to leave, and more likely to contribute positively to the economy.

“Simply put: for millions of workers, this would mean access to the social safety net. Independent contractors or 1099 workers don’t have access to health insurance, workers comp, paid time off, retirement contributions, or unemployment assistance unless there’s literally an act of Congress. The W2 status isn’t perfect. But it’s a lot more protections than these workers have now.”

A major economic upside of transitioning gig workers to W-2 employees would be organizational cohesiveness. With reduced turnover and higher employee satisfaction, companies can expect increased productivity and profitability in the long run. This is not to overlook the initial costs involved, but the long-term economic benefits to both the workers and the companies can’t be ignored.

The Moral and Strategic Imperative for Companies

As leaders in the industry, the onus is on us to recognize and adapt to these shifts for the betterment of our workforce and the industry as a whole. While there may be economic benefits for business owners to transition entirely to a gig workforce, this creates a vulnerable segment of society—one illness or financial hiccup away from disaster. Living in essential poverty is a tightrope no one should have to walk. When 26% of gig workers report being overworked, and 23% have no access to benefits or job security, we are failing as a society to provide equitable opportunities for a dignified life. As Ravenelle states:

“There’s a reason why the CEOs and corporate office people for these platforms are all W-2 workers—they know it’s a better deal.”

A Balanced Approach

Of course, the situation is not binary. With 75.7% of gig workers indicating they would not quit their gigs for a full-time job (PYMNTS) and 64% saying they are doing their preferred type of work (Gallup), it’s clear that a one-size-fits-all approach won’t work.

In her latest blog post, @MarenHogan, Founder and CEO of @RedBranch, explores the dichotomy of the gig economy—a world filled with opportunities yet riddled with exploitation. 🌎 Find out more: Share on X

The pathway forward must include options for both traditional employment and gig work, each with its own set of protections and benefits. For those who thrive in a gig economy, there needs to be a flexible yet secure framework that doesn’t penalize them for their choice of work model. For businesses, this could translate into dual employment models, with robust systems for transitioning workers between them as their needs and preferences evolve.

Actionable Strategies for a Balanced Approach

1. Dual Employment Models
   One potential solution is the implementation of dual employment models, enabling workers to transition seamlessly between full-time employment and gig work according to their life circumstances. This not only provides a safety net but also a sense of security and flexibility.

2. Benefits Portability
   Companies could collaborate with insurers and healthcare providers to offer portable benefits that workers can carry with them irrespective of their employment status. This is essential given that 23% of gig workers report a lack of benefits or health insurance as a primary challenge.

3. Upskilling Programs
   Since 51% of U.S. freelancers have a postgraduate degree, it would be mutually beneficial to offer upskilling programs. Not only does this add value to the individual but it also enhances the skill set available within your talent pool, thereby improving productivity.

4. Financial Wellness Programs
   Given that 21% of gig workers live paycheck to paycheck and fear running out of money, financial wellness programs could provide them with essential tools for financial planning and stability.

5. Ethical Profit-Sharing Models
   For companies, especially in the high-dollar SaaS or consulting arenas, creating a profit-sharing model that extends to gig workers can instill a sense of ownership and belonging, thus increasing productivity and reducing turnover.

6. Mental Health Resources
   With 26% of gig workers reporting being overworked, mental health resources should not be a luxury but a necessity. Providing access to such services can improve overall well-being and productivity.

In a rapidly evolving work landscape, we can’t afford to rely on a social safety net that was woven a century ago. It’s time for a serious overhaul, one that ensures that the net is wide enough and strong enough to catch us all. And for business leaders like myself who employ a stable, W-2 workforce, this is not merely a concern for ‘the other.’ The instability of a large segment of the workforce creates ripples that affect us all—socially, economically, and morally. After all, the strength of a society is measured by how well it treats its most vulnerable, isn’t it?

The future of work must be one that is inclusive, flexible, and humane. And for that to happen, the pendulum must swing back, recalibrating the equilibrium between freedom and security, opportunity and equity.