Gig Economy – The Economic Backbone of the Future?

The gig economy represents a free market system in which organizations and independent workers engage in short-term work arrangements.

That is the general definition of this topic.

But how much do we know about the gig economy and why is it becoming so increasingly popular in the past few years?

We have conducted a study to examine all aspects of the gig economy to shed new light on this topic and give guidance to all professionals looking to explore freelancing.

This study examines two main areas of discussion in gig economy.

Part of the study focuses on the gig economy itself in terms of size and growth, both in selected few countries and globally.

The second part explores the gig economy workforce and investigates areas such as workforce size, remuneration, growth rate, financial liberty, anxiety and working conditions.

It is estimated that the Global Gig Economy will be worth 347 billion dollars in 2021.

On a global scale, design and tech freelance jobs are the most popular with 59% of gig workers doing them, but oversaturation of talent in these fields is bringing down the pay.

In the US, 44% of gig workers considered freelancing to be their primary source of income, with 60% of workers engaging in freelancing activities at least weekly.

Global Gig Economy is expected to grow from $204 billion in 2018 to $455 billion in 2023, a Compound Annual Growth Rate (CAGR) of 17.4%.

Number of freelance workers is steadily increasing in the Western World. For example, number of US freelancers is estimated to grow from 57 to 86 million by 2027 and the UK’s gig economy workforce more than doubled from 2016-2019 as it accounts for 4.7 million people.

The worldwide average hourly rate charged by freelancers is $21.

In the US, the number of high-earning freelancers (reported income of over $100,000) keeps growing year over year and it currently stands at 3.1 million people (20% of the workforce).

Majority of US full-time freelancers are not prepared for an unexpected financial trouble with 80% of them reporting an unexpected expense of $1,000 would be difficult to pay.

Overall, gig economy workers are more satisfied with what they are doing: 79% of full-time independents said they were happier working on their own than at a traditional job (in the US).

Gig workers are more anxious about their finances: 45% of full-time gig workers have a high Economic Anxiety Index score compared to 24% of traditional full-time employees.

Freelancers are generally concerned about their working conditions: 54% of gig workers have no access to employer-based benefits (in the US, data from 2017).

$347 Billion

According to our research and the data provided by Mastercard, it is expected that the global gig economy will be worth almost 350 billion US dollars this year.

Vast majority of the gig economy grow value comes from transportation-based services (such as Uber) and asset-sharing platforms (such as Airbnb).

If we examine the global gig economy state from 2018 (when the latest data is available), we can see a clear image of division of capital in the gig economy:

Transportation-based services and asset-sharing platform are valued at nearly 90% of the entire gig economy.

This is not surprising given the global, rapid expansion of services from these categories that could be provided on a freelance basis, fueled by the incredible success of companies that offer them, such as Uber and Airbnb.

When we look at the number of workers currently contributing to the gig economy, it is no surprise that the economy overall is worth so much. For example, 57.3 million people freelance in the US that number is the UK is at 4.7 million people.

The stark difference in numbers between these two countries can probably be explained by more than just the total population difference; according to Mastercard, 44% of Global Gig Gross Volume in generated by United States residents.

According to a report on global freelancer income published by Payoneer, we can see that workers in the field of Web & Graphic Design are most prominent with 30%, followed by workers in Programming at 19% and workers in IT at 10%.

Primary field of freelancing: 

We can see that Programming and Web & Graphic Design fields hold almost half of the freelancer workforce.

However, it is interesting to analyze the main hourly rate of these fields, in order to get a better understanding on the impact workforce has.

Main hourly rate by primary field: 

Here we can see that the rate distribution does not have such a high variance from the main as opposed to the data in the previous graph, where two fields dominated the workforce distribution.

Another key point to observe is that the most widespread jobs mentioned before are not as lucrative as once perceived.

Programming and Web Design are traditionally high-paying jobs, but we can see that the mean rate for these fields is $25 and $19 USD respectively; not nearly as high as in traditional jobs.

This occurrence can be the result of workforce saturation in these respective fields.

As we have seen from the first graph, these two fields make up almost half of the workforce market, which can naturally lead to an increase in supply and reduction of prices.

If we consider the figure mentioned earlier regarding the level of contribution United States has on the gig economy, it is no surprise to find out that its’ freelancers are most engaged and most dependent on the gig economy.

Study done by Edison Research shows that for 44% of gig workers, their work in the gig economy is the primary source of income.

When we look into the deeper division of population and their engagement in the gig economy, we can see that women tend to rely less on freelancing as their primary source of income, with 40% of female participants declaring in the study that gig work is their primary source of income.

It is also interesting to see that more than half (53%) of the younger population (ages 18-34) has work in the gig economy as their primary source of income.

This confirms that younger people tend to do freelance work more due to the recent explosion in the digital gig economy and the ability to work completely online.

How often to you engage in freelancing [freelancers] 

US freelancers are also very active participants in the economy.

A study done by Upwork shows freelance worker activity in the graph above.

We can see that 31% of gig workers engages in freelancing daily, while 29% of them engage at least weekly.

We can also see that percentage of workers who are active declines as the activity period gets longer, with 84% of the population doing freelance work at least once per month.

Given this level of activity, it is no surprise that the United States can contribute such large of a share to the global gig economy.

17.4%

Projected gross volume of the gig economy (Billions USD)

The gig economy is expected to grow to $455B by
year end 2023 in gross volume transactions.

Report done by Mastercard where the global gig economy has been examined shows a significant growth in terms of gross volume generated from customers.

We can see that the output of the global gig economy has been $204 billion USD in 2018 and is expected to be at $455 billion USD by 2023.

This translates into a Compound Annual Growth Rate of a staggering 17.4%.

In other words, in terms of economic output the global gig economy more than doubles every 5 years!

Some of the main driving growth factors on the future increasing supply of freelancers are increasing digitalization rates, cultural shift toward embracing flexible work and the rising cost of living along with a shrinking middle class.

On the demand side, growth in business and consumer needs for gig work is driven by the “boom” of on-demand services, significant levels of VC funding in companies that deliver freelance work capabilities and outsourcing of short-term tasks by businesses due to rising costs.

The total amount of gig workers in the world grows every day and is predicted to keep growing even higher in the future.

When we talk about the past growth, we look at studies done by the MBO Partners, Upwork and University of Hertfordshire.

For example, the study from the University of Hertfordshire found that the amount of gig works in the UK (defined as adults who had worked for an online platform at least once per week) has grown from 2.3 million to 4.7 million between 2016 and 2019.

This is a significant rise in only 3 short years.

Furthermore, current US gig workforce of 57 million is expected to grow to 86 million by 2027; this translates into a 50% in 7 years, which is an astronomical figure considering the already enormous US gig workforce.

Number of occasional independence in the United States
(in millions)

Finally, as we look at the growth of occasional gig workers in the US, we can see yet another confirmation of gig economy’s workforce growth.

The number of occasional independents in the US (those who do gig work less than 15 hours per week), has grown by 42% in a 3-year period and it was holding at 15 million workers in 2019.

Freelancers around the world earn $21 per hour on average, as per Payoneer.

Let’s examine these number in more detail, taking into account distribution among age groups.

Main hourly rate by primary field

We can see that the younger generations are paid less than the world average, with income steadily rising as the age groups progress.

Age groups of 18-24 and 25-34 are earning $16 and $19 per hour respectively, which is lower than the worldwide average.

We can also see that these age groups account for 69% of the total gig worker population.

This tells us that there is disproportionate division of capital in the gig economy since majority of the population is earning less than average, which is due to age and work experience.

Furthermore, in US (according to Upwork), the median freelancer rate is $20/hour, compared to an $18.80/hour median for the entire US workforce.

Furthermore, median income for freelancers in skilled services is $28/hour.

This shows that freelancers in the US are on average earning more than general population which can probably give some reasoning as to why there is such a strong US gig workforce and such a massive contribution of the US to the global gig economy.

Related reading: Late freelance payments

According to MBO Partners, the average income for a full-time US independent is $68,000 which is higher than the country’s average median household income of $59,000.

The number of High-Earning full-time independents in the country is at a staggering 3.1 million people.

Just to clarify, to be a high-earning individual you must be making over $100,000 annually, according to the study.

Number of high-earning freelancers in the US has been steadily growing for the past decade.

Between 2011 and 2019, that number climbed from 1.9 million to 3.1 million people, which is a 64% growth for the period.

It is no surprise that the number of high-earning gig workers is increasing year over year as the trend of working remotely and offering skilled services independently has become increasingly popular in the recent years.

As of now, according to the MBO Partners’ report, full-time high-earning freelancers are making up about 20% of its workforce.

In the United States, 80% of freelancers whose primary source of income is from the gig economy reports they would have difficulty in paying an unexpected $1000 expense.

This is according to the report published by Edison Research where survey participants employed in various field answered this question.

Would it be difficult to pay an unexpected expense of $1000?

percentage saying “yes”

Here we can see that majority of Americans have fears about unexpected expenses.

However, there is a noticeably clear distinction towards that perception between those who are primarily employed in the gig economy and those who are not.

Staggering 80% of full-time freelancers have fears about unexpected expenses, compared to 54% of people employed but not in the gig economy.

Furthermore, US freelancers dip into savings more often.

In the report published by Upwork, 63% of full-time freelancers withdraw funds from their savings at least once per month, compared to only 20% of full-time non-freelancers.

This shows that although freelancing can be more lucrative in terms of freedom and greater financial compensation, it can also add to the overall financial instability and stress.

Related reading: Late payments & mental health

Based on numerous research and publications, there is a general consensus that people who decide to freelance full-time are quite satisfied with the change as well as with their new careers and lifestyle.

According to the report by PYMNTS, 75.7% of freelancers would not quit their gig for a full-time job.

Furthermore, the same report mentions that 60% of gig-dependent workers lack alternative employment because they don’t want or need one.

Report published by MBO Partners can also provide us with some useful info regarding job satisfaction among freelancers.

According to their survey, eighty-two percent of full-time independents say they are happier working on their own, while 69 percent say it is better for their health.

Their confidence about job security is also at an all-time high.

Centage of full-time independent workers reports feeling more secure working independently

As we can see from the graph above, 53% of full-time freelancers reported feeling more secure working independently in 2019.

That is a 21% jump overall in the course of 9 years and it is the first time every that majority of full-time freelancers are more secure working independently as opposed to holding a traditional job.

Gig workers are usually more anxious about their finances compared to traditional employees.

Due to the nature of the work, that might not come as a surprise, but it is an important fact to know about the nature of freelancing.

Edison Research has developed an Economic Anxiety Index tool to measure the financial anxiety levels of their respondents.

In their report on the gig economy, they have published the survey results of this metric.

Anxiety Index Score 
Percentage scoring 50+ on “Anxiety Index”

As we can see above, 45% of respondents primarily employed in the gig economy scored in the high anxiety bracket (score over 50), compared to only 24% of respondents employed in traditional jobs.

It is interesting to see that 38% respondents whose income from the gig economy is secondary also have high anxiety.

This can be due to the fact that parts of the freelance workforce are in the gig economy to supplement their primary income.

Hence, having high anxiety levels about your financial situation can be quite expected.

Working conditions of gig workers worldwide have not caught up to the working conditions of traditional full-time employees yet.

This is not unexpected considering the contractual nature of gig work where financial and health benefits are usually not part of the agreement.

Study conducted by University of Hertfordshire examined working conditions of freelancers by conducting 13 descriptive interviews as part of their research information gathering.

Interviews revealed a range of physical and psycho-social health hazards. Some of these were linked to working long hours, including long and unpredictable waiting periods (for which they were not paid).

To confirm results of the interviews with some data, report published by Prudential offers an outlook of how different traditional workers and freelancers are in terms of financial/health insurance, at least in the US.

According to the report, over half (54%) of gig workers do not have access to employer-based benefits.

Furthermore, gig workers have less than half the access to employer-based coverage than that of full-time employees in terms of health insurance (40% vs. 82%), life insurance (20% vs. 59%), dental insurance (25% vs. 66%), and short-term disability (5% vs. 42%).

For our study, we have analyzed reports on the gig economy published by several major international organizations whose expertise on the topic can be confirmed by their business activities.

All the reports used have been published in the last 3 years for accuracy purposes.

The publications we used in our own research have been done by the following organizations: Upwork, University of Hertfordshire, Payoneer, Edison Research, PYMNTS.com, Mastercard, Prudential and MBO Partners.

Data collection process for all the reports used has been consistent which is the main reason for our selection of multiple reports to produce the results of our study.

The main data collection method for all reports has been conducting surveys, ranging from 1,000+ to 20,000+ participants.

The only finding partially not related to survey data is related to working conditions of freelancers (last finding) because University of Hertfordshire used descriptive interviews as an additional data collection method in their research.

I hope you found this analysis of the global gig economy interesting and useful.

And now I’d like to hear from you.

What’s your #1 takeaway  from this study? Or maybe you have a question.

Feel free to leave a comment below.