The Gig Economy Has a Downside

The "gig economy," as it has become known as, chock-full of various side hustles like Uber Eats, DoorDash and Uber and Lyft have become quite popular among a great many people. Especially those in the younger generation.

Granted, some who are doing it are doing it just to earn additional income alongside traditional employment. Some are using the opportunity to help them pay down student loan debt or even pay their way through college. Others may be stay at home moms or dads who have some spare time while the kids are at school that they can make some extra money from.

The idea has been around forever and is nothing new. Although many of the ways we can engage in it are newer. But it really took hold during the pandemic when people in certain professions were literally forced out of work and had no other choice but to find alternative ways to earn an income.

But there is a segment of society, again mostly of the younger generation, who simply have the idea that the old way doesn't work, isn't worth the time, and have simply decided they are not going to work for anyone else in a regular 9 to 5 job and have chosen to do gig work exclusively.

It is their primary source of income.

This comes with a downside, though, that few people who encourage this lifestyle talk about, and frankly that many in the gig economy don't consider.

The future.

It brings me back to a discussion I had with my niece who, during high school, worked under the table for a Thai food restaurant. I was actually happy that she did it, don't get me wrong. I started working when I was 14, and too many kids in the younger generations simply don't have any desire to work at all until much later in life.

My younger cousin was like that. He didn't have a job at all until he got out of college.

W-2 wages are an important thing for a variety of reasons. One big reason being the contributions we all make to Social Security, and the longer we work "under the table" for "unreported wages," the smaller our benefits will be when we retire because our benefits are based largely on what we make in our lifetimes and ultimately pay in FICA taxes throughout our work history.

If we're not contributing, there are less benefits afforded to us.

There is also the idea largely fueling a good many people in the gig economy. That is, they simply want to make money. It's not necessarily about having an extra source of income, such as is best suited for this type of work. It is the income. 

In other words, so long as they make enough money in a day to get through their monthly expenses, they are satisfied and don't work more than they have to.

This is a problem.

Because the future will still happen no matter what, and if there are lower Social Security benefits down the line as well as no contributions ever made to a 401k plan or other retirement accounts, the end of the road is going to be quite a bit of a rougher one.

And I don't think many in the gig economy even think about this.

There is also the consideration that health benefits are non-existent in a gig economy as well. And so, if a major medical event happens, not only can the gigger not afford to deal with it, but it is also going to send them miles behind financially potentially.

I don't think there is anything wrong with side hustles or the gig economy itself. But I do think that those who wish to choose this as their primary source of income need to consider the downside and do things to counter them. I think they need to fully understand what the downsides even are so they can better navigate the course and forge ahead into a better, more productive future for themselves.

Unfortunately, the mindset for many people in the gig economy is that they are "in business for themselves," or otherwise self-employed, when the reality is that they are neither of those things. Businesses operate with the future in mind, and they operate wanting to grow and expand and become bigger and more financially stable. They operate with the understanding that tomorrow is even more important than today, and if they want to have a sustainable future, they need to be constantly focused on ensuring that future is cared for.

The gig economy is not only a good thing overall, I think with all the changing environment around regular work, automation and other things, it is even necessary. But it needs to be conducted in similar ways that any business or self-employed person operates to ensure that it works for those who are working within it.

And so that there is less impact on society as a whole somewhere in the distant future when there are generations of former gig workers who enter into retirement ill-prepared to deal with it, and become dependent on the rest of society to hold them up and take care of them.

I'm now on YouTube as "The Springboard," and like to talk about money, money saving tips, business, investment and other money-related matters. If you like what I have to say and how I say it, come on over to my YouTube page and check me out. I'd love to see you there.