Demand for gig workers, freelancers, and independent contractors has taken off over the past two years in response to the COVID-19 pandemic.
In a recent survey, more than half (53%) of businesses reported that their experiences with pandemic-related remote working had increased their willingness to hire from the gig economy.
And that’s a good thing, because the number of people doing freelance work has also increased, to more than 59 million. Growth has been particularly pronounced among higher-skilled workers, with 51% of post-graduate workers doing at least some freelancing in 2021.
Many people start freelancing because they want a more flexible schedule or to be their boss. Others take on gig work temporarily while looking for a traditional job.
However, many people who decide to work in the gig economy do so because of the financial benefits. In this article, we’ll outline some economic advantages of being a gig worker.
No Income Ceiling
One of the most popular financial advantages of being a gig worker is getting to set your income ceiling.
Salaried employees make the same amount regardless of how hard or long they work, and hourly employees have someone else deciding how many hours they’ll get.
Gig workers, on the other hand, determine their income based on such factors as the skills they decide to sell, the rate they charge for their work, and how many jobs or projects they choose to take on.
According to Upwork, the popular freelancer platform, 75% of independent contractors in 2021 said they earn more now than when they worked for an employer.
Higher Hourly Rate
Along with having no income ceiling, gig workers often earn a higher hourly rate than when doing the same work in a traditional job.
For example – TaskRabbit is a site owned by Ikea on which you can find a large variety of one-off gigs, from running errands to lawn care to helping people move. Most jobs on the site pay between $20-$40 per hour, including those that involve assembling new furniture for Ikea customers. Not many department or furniture store workers that assemble furniture as part of their jobs make that kind of money.
Full-Time Job or Side Hustle
A substantial financial advantage of gig work is that it can be your full-time employment or just a side hustle that supplements a traditional job.
In the past, gig work was primarily a side hustle. However, the pandemic has caused a fundamental shift in the American labor force’s attitudes toward work. This has increased the number of people deciding to make gig work their full-time employment. For example, 35% of those who did at least some freelancing in 2021 say that gig work is now their permanent, non-temporary job.
Economic Opportunity
Another financial advantage of gig work is simply the economic opportunity. Although there are many more job openings in the U.S. now than people available to fill them, some industries still present a tough job market for workers, especially for young adults and new graduates.
Half of the Gen-Z workforce (adults between 18-22) report undertaking freelance work in the past year. A third of those say they started because they couldn’t find a job during the pandemic.
And, 58% of professionals who do not currently freelance report they are considering doing so in the future now that they have grown accustomed to working remotely during the pandemic.
Tax Write-Offs
Whether you think of yourself as a gig worker, freelancer, or independent contractor, you are a business (and hopefully, filing Schedules C and SE along with your annual tax return).
Businesses are allowed to write off reasonable costs of doing business. If you use your cell phone or computer to book jobs and communicate with clients, you may be able to write off part of your cell phone bill, internet service, computer maintenance, etc.
If you have an office in your home, you may be able to write off part of your rent or mortgage and office furniture and supplies. If you use your car to travel to client meetings or to and from job sites, you may be able to write off the mileage and possibly other vehicle-related expenses.
To ensure you are deducting all of the expenses to which you are legally entitled (and not anything that you aren’t), consult a qualified tax professional.
Final Thoughts
Whatever your motivation for entering the gig economy, there are a number of important financial advantages for those who earn part or all of their income as independent contractors.
