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The term “gig economy” refers to a workforce of independent contractors who earn income via short-term task-specific work as opposed to becoming traditional long-term employees of a business.
The gig economy has grown significantly across different industries, with more than 28% of skilled knowledge professionals operating as gig economy workers, according to freelance platform Upwork. This trend is forecast to accelerate in the coming years, with more skilled workers in the traditional economy considering a shift to independent work.
Learn the definition of the term “gig economy” in this article and how self-employed workers leverage gig economy platforms to find jobs. Entrepreneurs with specialized skills will also learn how gig work can provide an introduction to new clients—some of whom may become long-term customers.
Gig economy definition
The gig economy is a labor market made up of short-term, flexible, and project-based workers, where people take on individual jobs or contracts rather than holding a single position with one employer. Gig work includes jobs like driving for a rideshare app and freelance graphic design. Gig work includes both the blue-collar and white-collar workforce. The defining thread across all gig work is that the worker is engaged for a specific task or period of time, rather than hired for an ongoing role.
Gig work vs. traditional employment
The main difference between gig work and traditional employment comes down to the relationship between the worker and the employer. A traditional employee works set hours for one employer, receives a regular paycheck, and typically receives benefits such as health insurance and retirement contributions.
A gig worker, by contrast, is usually classified as an independent contractor. Gig workers set their own hours, often work with multiple clients at once, and take on responsibility for their own tax obligations (e.g., Social Security, income taxes) and insurance.
They usually don’t receive benefits like healthcare or paid holidays. They also have less job security than traditional employees. The legal distinction between gig workers and full-time employees can fluctuate, as worker classification determines which legal protections apply to individuals. For instance, a 2019 California law introduced new criteria for determining whether a worker is a contractor or an employee.
Digital platforms’ role in the gig economy
The rise of digital platforms has helped transform gig work from a niche arrangement into a mainstream pillar of the labor market. Apps like Uber and DoorDash and marketplaces like Fiverr and Thumbtack make it possible to quickly match workers with jobs. They handle payment automatically and allow users to scale a workforce up or down without the overhead and time needed to hire full-time employees.
Based on a survey of 3,000 skilled US knowledge workers, Upwork found that gig work generated $1.5 trillion in earnings in one year. Upwork itself is one of the online platforms that caters to gig workers by scaling job-matching and payment infrastructure at a low cost.
Julie Carty of LatchLight says on the Shopify Masters podcast that she turned to Upwork in the early stages of her business. There, she found a 3D designer to sketch her idea and a manufacturer to build a prototype of her night light for infant breastfeeding. Julie isn’t alone in finding highly skilled workers through a freelancing platform. Upwork’s research shows that 37% of skilled freelancers have post-graduate degrees.
Who are gig workers?
Participation in the gig economy spans a wide range of people, not a single type of worker. It includes:
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Full-time freelancers who treat independent work as their primary career
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Part-time and occasional workers picking up shifts or tasks around other commitments
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Full-time employees moonlighting on the side for supplemental income
Research from platforms like Upwork and Pew Research shows that people participate in the gig economy for different reasons. Some choose it for flexible work arrangements and managing work-life balance—especially Gen Z workers. Others turn to gig work while simultaneously holding down traditional jobs. Some rely on it while seeking traditional employment, finding it easier to land individual gigs.
Gig workers in regions without minimum pay standards may end up earning below minimum wage, according to the National Bureau of Economic Research. Those with specialized skills, such as software development or graphic design, may earn significantly more. The Upwork survey found that those in knowledge fields—like creative design, writing, and IT and development—earn a median annual income of $85,000.
Types of gig work
Gig workers fall into many categories, including:
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Ride-hailing and delivery drivers. These workers drive cars, trucks, and vans for platforms such as Uber, Lyft, DoorDash, and Instacart. They can shuttle passengers via ride-sharing, handle food delivery, or deliver parcels.
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Freelance knowledge workers. This includes writers, designers, developers, and consultants working project to project, often through platforms like Upwork or Fiverr.
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Task and errand workers. These workers handle household chores, home moves, or assembly work through platforms like TaskRabbit.
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Creative and content freelancers. This includes photographers, videographers, and other creative professionals working on a per-project basis.
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Consultants and fractional professionals. These are specialists brought in for defined projects or part-time engagements rather than full-time roles.
How the gig economy works: 3 characteristics
Gig work is often short-term, project-based, and task-oriented. It is typically structured around discrete work assignments—a single delivery, a one-off design project, or a specific consulting engagement—rather than an ongoing job. Once the work is finished, the arrangement ends. The worker and the business (or platform) form a new arrangement each time, whether that’s accepting the next ride request or pitching additional freelance projects.
Three features characterize the gig economy:
Independent contractors
Most gig workers are classified as independent contractors rather than employees. Employees work under the direction and control of an employer, who withholds payroll taxes and, in many cases, provides benefits like health insurance and contributions to workers’ retirement savings.
Independent contractors are treated as stand-alone small businesses. They typically invoice or get paid directly and handle their own self-employment taxes. They aren’t entitled to the protections that come with employee status, like minimum wage guarantees, overtime pay, or unemployment insurance in most jurisdictions.
This classification question has become legally contested ground, with lawsuits and state-level legislation (like California’s ABC test) shaping how strictly companies can rely on contractor status for their workforce.
Multiple income streams
Since gig work isn’t tied to a single employer, many workers earn income from more than one source at once.
MBO Partners’ State of Independence survey of 1,132 US-based gig workers found that 65% feel more financially secure working independently. That’s because it opens up multiple income streams rather than depending on one employer, and 52% report earning more than they did in a traditional job.
Although income diversification can smooth out the loss of any single client or platform, it can also mean income is less predictable than a fixed salary. For some gig workers, this can pose complications when setting a personal budget or covering operating expenses.
Payment structures vary across platforms and industries, but a few models are common:
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Per-task or per-trip payment. This model is standard on ride-hailing and delivery apps that typically pay per completed job, often with same-day or instant cash-out options for a small fee.
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Invoiced project fees. Freelancers on platforms like Upwork or Fiverr typically bill per project or milestone, with the platform taking a service fee before releasing payment.
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Periodic direct deposits. Some digital gig platforms lump earnings into a weekly payout rather than paying instantly.
Flexible schedules
Gig workers generally decide when, how much, and for whom they work, rather than clocking into set shifts. This is frequently cited favorably by those who actively choose gig work. The MBO Partners study, for example, found that 84% of gig workers are happier setting their own schedules than in a traditional employment role.
One drawback, however, is that unlike a full-time job with paid vacation, taking time off means taking a hit to earnings.
The gig economy and entrepreneurship
The gig economy is surging, but it has intersected with entrepreneurship for many years. A recent Intuit QuickBooks’ entrepreneurship study, a survey of 3,000 US adults, found that 47% of Americans earned income from a side hustle in the past year. A majority of gig workers said they planned to start a business in the year ahead.
Using tax data going back to 2012, researchers from Washington University’s Olin Business School found that gig workers are more likely to start a business than those who work as employees. The companies they start are larger in terms of revenue and headcount—but also riskier, with a 3% higher failure rate than traditional companies.
Recent gig economy growth has been increasingly product-based rather than purely service-based. Omnisend’s recent side hustle survey of more than 4,000 people across the US, the UK, Canada, and Australia found that 48% of all side hustlers sell products online. The majority use third-party marketplaces like Amazon to do so. Peer-to-peer sales platforms are also popular: 64% of ecommerce side hustlers report using platforms like Facebook Marketplace and Poshmark.
Shopify as a path into entrepreneurship
For a freelancer or gig worker ready to shift into entrepreneurship, Shopify is built to minimize friction in that transition. The platform’s presets and templates let you set up a storefront without needing to incorporate as a formal company first.
Shopify Payments accommodates sole proprietors, letting you accept payments under your own name or a DBA (doing business as) before you’ve formed an LLC (limited liability company) or corporation. You can also upgrade that setup later as your business grows.
The gig economy also creates a second, less obvious path into entrepreneurship: as a service provider to sellers. Freelance designers, developers, and marketers—the same skilled knowledge workers driving much of the gig economy’s growth—can build a business around creating and managing other people’s stores rather than running their own.
The Shopify Partner Program lets freelancers and agencies build client stores, develop apps or themes, and earn recurring revenue from referrals. This lets you turn a design or development skill set into a service business.
Many ecommerce founders hire gig workers and contractors to maintain lean operations and adapt to changing markets. Truvelle founder Gaby Bayona says on Shopify Masters that she keeps her bridal wear factory staff full-time, but employs her entire marketing team on a contract basis. This gives her the flexibility to pivot easily as trends change, giving her the option of hiring the best specific person for the role at that given time.
Sonsie Skin CEO Kaily Bradt took advantage of layoffs in the beauty industry to hire top consultants for her skincare business.
“There’s a ton of people freelancing right now that have all this experience that would take a call a couple of times a month and help you,” Kaily says on Shopify Masters. “It’s kind of like a fractional role where you can hire an expert, they’ll work with you, and they’ll advise you, even if they’re not the ones executing.”
Gig economy definition FAQ
What’s the highest-paying gig job?
There’s no single job that’s the highest-paying in the gig economy. However, high-earning white-collar workers with specialized skills can work on a per-gig basis, including software developers and management consultants.
How do gig workers pay taxes?
Gig workers, like anyone whose employer does not withhold taxes from their paycheck, must pay quarterly estimated federal income taxes to the IRS using Form 1040-ES. Many states also require estimated tax payments.
What are the pros and cons of the gig economy?
For workers, pros of the gig economy include making your own hours, achieving work-life balance, and—according to some respondents in the MBO Partners’ State of Independence survey—potentially earning more money than in a traditional employee role. Cons include the lack of benefits like health care and paid vacation, as well as the lack of job security that comes with long-term employment.
