What are the downsides to working in the gig economy?
Robert McGuire
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My Google alert feed every day is filled with op eds and blog posts teeing off on the evils of the gig economy. I don’t want to minimize the potential downsides, but many that are brought up the most frequently are either:
a.) also true of jobs in the same field.
For example, many people argue that the hours for a house cleaner working on an app are lousy and that there are no protections or benefits. Absolutely true. But you know what . . . being a house cleaner on the payroll of an agency is a lousy job, too. This isn’t an issue with the gig economy. It’s an issue with the economy overall being lousy for people at certain skill levels.
b.) something that you can control for with a little learning.
For example, independent contractors in the gig economy “lack employee benefits.” Health insurance is a moving target for the self-employed, so I’ll give you that.
But there are retirement plans that allow freelancers to reproduce the equivalent of an employer sponsored retirement plan. It’s called a SEP-IRA.
Why is the SEP-IRA an imperfect solution? Two reasons:
- Low awareness levels.
- To afford it, you have to price the expense into your rates.
- Cash flow
Similarly, you can have paid time off as a freelancer . . . if you charge your clients enough money that you can take a day off and still pay yourself. Many freelancers don’t think that through.
So in a sense many of the downsides of the gig economy come down to three issues:
- The need to educate all the ways that you are now the owner and operator of your freelance business.
- Getting your freelance rates high enough to compensate for all the employer expenses that are now shifted to you.
- Managing for feast and famine cycles.
The solutions to this are for independent contractors to have a certain minimum understanding of business strategy and business operations.
Freelance Rate Calculator: Know Your Expenses To Know Your Minimum
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6 年The real black hole is when you're on W2 with an agency, but get no benefits. So you have the worst of both worlds. Paying full whack for health insurance, and not being able to write it (or any other expenses, like the commute) off. Plus all time off is unpaid. You technically have an "employer," but you have none of the benefits of being an employee... yet you also can't enjoy the benefits of being an independent contractor, either.