What Is The Gig Economy And Why Parents Need To Be Aware Of This
“What is the GIG Economy?” I asked my wife.
She had absolutely no clue.
I was shocked.
So I asked a non-entrepreneurial friend online, “what is the GIG Economy,” and they didn’t know either.
The GIG Economy is something all parents need to understand, thus that’s why we’re about to go over it.
You see, by 2020, estimates are 40 percent of all American workers will be a part of this new economy.
By 2025 some estimates are that 70% of the population will be a part of the GIG Economy.
So though this might not impact you personally, it will impact your children.
This wasn’t even a topic 20 years ago, Moms and Dads.
Heck, look at this chart and you can see this wasn’t even being Googled much until 2015, and it’s been spiking each year since.
Thus by best understanding what it is, you’ll be able to give your child a competitive edge to be best prepared to take advantage of this when they’re older.
Let’s jump in.
What Is The GIG Economy?
First, let’s go over what is the GIG Economy.
What defines a GIG worker varies, but many agree it is any supplemental, temporary, project-based or contract type work and/or odd jobs.
Other names for the GIG economy include:
- Sharing Economy
- On-Demand Economy
- Freelance Economy
GIG Work consists of:
- Offline, Service-Type Activities like Child Care, Lawn Care, House Cleaning
- Offline Sales Like Flea Markets
- Online Services Like Uber
- Online Sales Like Ebay or Fiverr
According to a recent Federal Reserve study, three in 10 adults work in the “gig economy” and supplement their income somehow with this type of work. These income sources (jobs) fluctuate between both online and offline work.
An UpWork study currently shows that there are over 57 million freelancers alone in the United States with freelancers contributing $1.4 Trillion annually in freelance earnings to the economy.
Earnings are up substantially also, with more earning $75K+ compared to previous years:
What’s interesting in the Federal Reserve study is that education didn’t weigh significantly in the difference between those seeking GIG work or those not seeking this type of work. In fact, the numbers were virtually the same whether you had a High School degree or a Bachelor’s Degree.
The primary reason for “GIG” Income is:
- Supplement income from regular work
- Hobby or just for fun
- Primary source of income
- Help out the family
- Learn new skills
GIG workers also tend to be those between the ages of 25–40 years of age and make up the largest percentage of these types of workers. This also makes up a larger percentage of millennial incomes versus those who are older.
Why The Rise of The GIG Economy?
First, let’s state the obvious and that is that the cost of college has dramatically increased and is continuing to do so each year.
Since the 1980’s college tuition has more than doubled and student loan debt continues to climb. Though we’ve seen an increase in wages, the cost of college has increased at a much faster pace.
Student loan debt is $1.5 trillion and the average student graduates with over $17,000 in student loans.
There’s also no sign of a slowdown in the costs of college and for those who do graduate, according to New York Fed, one-third are underemployed and 13% are in a low-paying job.
We’ve also seen a rise in living cost that continues to escalate at a faster pace than wages along with health care costs that are also growing at a faster pace.
So unless you’re the Rockefeller’s or have a nice Trust Fund set aside for your kids, they’re going to have to have side work (hustles) to support themselves.
Outside of pure necessity for a side ‘gig’ due to financial reasons, personal freedom is another big reason.
With the advancement of technology and marketplaces online, individuals surveyed have shared they like the freedom. Typically, being an independent contractor offers you much greater flexibility with your schedule to pursue other passions. For those who are ‘Gigpreneurs’ online you have the freedom to travel and support yourself from anywhere in the world with WiFi.
The frustration has been growing over the years with the hiring process of many corporations. The process, even with the rise in technology, has become more frustrating and the hiring time longer.
With instability already increasing within corporations, this has only added beauty to the opportunities the GIG Economy offers.
Big Business Loves The GIG Economy
Big business, corporations, absolutely love this new movement towards The GIG Economy.
The status quo of the past was to hire permanent workers, but that is no longer the case.
Today, Corporate America is outsourcing projects to freelancers at a much faster pace than ever before.
Though there are challenges a business can face when outsourcing (we’ll save that for another article) the advantages are many.
First, businesses are able to find specialized skills more easier than ever before. The talent pool is deep and companies can easily hire now for positions that aren’t needed year round. This is obviously a huge cost savings to a business and advantageous because they can hire for a specific need or season.
Another huge benefit to ‘Big Business’ is that benefit costs are escalating and there’s no sign of a slow down. The total cost of providing medical and pharmacy benefits will rise 5 percent for the sixth consecutive year in 2019. Health care costs are rising at double the pace of wages for both employers and employees. The average cost per employee is almost $15,000.
When companies hire a full-time worker, they’re responsible for benefits, yet when they hire a contractor they aren’t.
With freelancers, employers don’t have to worry about sick pay, vacation time, retirement benefits or other benefits, they’re strictly paying for a project and that’s all. The ability to scale during a busier season and then cut back without any legal worries looming adds to it’s attractiveness to big business.
Finally, fewer overhead expenses exist because many freelancers can work from anywhere on a project. This makes supply costs lower, human resource expenses lower and office space needs lower. This is a huge win for big business.
The Gig Economy, Education and Why Parents Need to Help Out
Can you see the predicament this has on our children for their future?
Let me summarize it for you to make it clear.
The cost of education, living and health care are rising faster than wages. There is also no clear end to when these costs will slow. Students are graduating with more debt than ever before and are faced with a dwindling job market whose pay doesn’t match the rising costs of living.
The advantages for “Big Business” to continue increasing the number of ‘Freelance’ jobs and decreasing the number of employees is also going to continue to scale.
This means our children have to be able to adapt to a world that our current education system isn’t preparing them for completely.
Roll up your sleeves moms and dads because this is where you come in.
You see, our children are going to have to learn how to compete in this new ‘GIG Economy’.
In a previous post we shared why every parent is a homeschooling parent, meaning when the school bell ends for the day, parents need to pick up teaching what isn’t always taught in school. We highlighted 14 different topics that are all important to succeed and live a happy life.
However, students have got to start developing a business mindset to survive in 2020 and beyond.
You see, whether your child is a full-time “freelancer” or a part-time side-hustler, there are some traits they’ll need to kick butt.
Let’s go over a few.
Traits to be Successful in the GIG Economy
The GIG Economy is already competitive and it’s only going to continue as more enter it voluntarily or involuntarily in the future.
Outside of the tasks your child will perform as a Freelancer, they’ll also need to be able to excel in other areas to not only survive but thrive.
One area they need to learn is personal branding. To compete with other individuals in the GIG Economy, you’ll need to have a strong personal brand both offline and online. This means creating a Social Media presence that is positive.
We’ve discussed previously how colleges are looking at your child’s Social Media accounts and weighing that into their decision-making process. Well, if your child is looking to stand out for a side hustle, the same is also true. A potential client will evaluate them online prior to hiring them and that’s why it’s crucial to show a positive presence.
In addition, here are 10 skills every student needs to succeed in the 21st-century, according to a World Economic Forum Report:
- Critical Thinking & Problem Solving
- Persistence & Grit
- Social and Cultural Awareness
Conclusion: What is the GIG Economy
Mom’s and Dad’s, we need to prepare our children for a tomorrow that didn’t exist a few years ago.
Whether your child has student debt upon graduating or not, the cost of living is escalating and side hustles are becoming a common thing.
75% of all future employment may be from the GIG Economy and Big Businesses aren’t resisting this trend because they benefit also.
It’s nothing to be afraid of if your child is prepared because those who excel in the GIG World are more happy with it’s freedom.
Embrace this change and teach your children basic entrepreneurial skills that can prepare them for tomorrow’s GIG Economy.
Should they end up in the workforce, these skills will only benefit them, by making them stand out further and excel.
What are your thoughts on the GIG Future? Have you participated in its current uptrend yourself?
Comment below, we’d love to hear from you.
This blog post originally appeared on Dinner Table MBA