The gig economy is booming, and it is contributing to the US economy in a big way. According to Upwork’s annual study, freelancers contributed over $1.2 trillion to the US economy in 2019. Furthermore, in September 2020, 30% of the US workforce constituted out of freelancers. With the rise of the gig economy, investors are looking for ways to start investing in gig economy stocks.
Not being ready to start working in the gig economy doesn’t mean not enjoying the benefits of its takeoff. On the contrary, plenty of companies are taking advantage of the gig economy growth.
Aside from investing directly in gig economy stocks like UBER and LYFT, one can also put money into companies that might benefit from the growing number of people working remotely. For instance, the video platform Zoom Video has been a strong performer due to the increasing number of people working from home. In addition, mobile payments are becoming more prevalent in the gig economy. Two companies that are leading this space are Square and PayPal.
The gig economy has already affected how we think about work. It’s likely to continue to do so in the future.
Investing in gig economy stocks
Investing in the gig economy stocks can be an excellent way to diversify investors’ portfolios. The gig economy refers to the exchange of labor for money between individuals and companies through digital platforms. Some refer to it as the “pay-by-task” economy.
According to a study released by DaVinci Payments, the number of participants in the labor market grew by 23 million in 2019. The study also found that workers’ wages increased 33% in 2020 to reach $1.6 trillion. As a result, the gig economy has become a compelling solution for employers and workers. Furthermore, according to research, more than 90% of Fortune 500 companies outsource some work to gig economy participants.
Most investors are entirely familiar with the gig economy. Some already participate in it as customers or employees. The rise of technology is transforming how people work, and businesses operate globally. In terms of time, it has become easier for companies to scale quickly. For instance, it took radio 38 years to reach 50 million listeners while Facebook had six million users in one year.
Startups in the gig economy are prone to rapid growth, especially in comparison to other industries. However, this accelerated growth can come with increased volatility. Even the so-called unicorns, companies with a billion-dollar valuation, can struggle to gain footing in the open market.
However, this accelerated growth brings potential that could be great.
What is a gig economy?
The rise of the internet has enabled people to work more seamlessly and connect even faster. Furthermore, the outbreak of COVID-19 has caused a spike in the number of people wanting to work part-time or freelance. As a result, the traditional work-life balance became outdated. Instead of relying on a conventional job, people can now work from home or take on shorter-term work. We refer to this new way of working as the gig economy.
The gig economy is a broad term that encompasses various types of jobs. The scope of employment can include anything from a driver to a tech support specialist. What makes someone part of the gig economy? The fact they are not hired for a specific job or chosen field, but rather are simply working on a project basis.
One can also join the gig economy while still being employed in a traditional manner. The gig economy is flourishing in specific industries such as creative and knowledge-intensive fields. These sectors are driving the demand for consultants and freelancers.
Modern tech companies are helping expand the gig economy’s reach by connecting consumers with workers who can work from home. The gig economy is a series of three components: people hired to complete a specific project or task, consumers who need a particular service, and companies that create gig economy jobs based on immediate demand.
Jazz musicians were first to use the term gig economy back in 1915. After that, it became widely used by all genres of musicians. The term “gig” is often used to describe the process of working on a project or task, which is typically only one-off.
The growth of the gig economy
The rise of the gig economy can be traced back to a few factors that made it easy for workers and companies to enter this sector.
Following the financial crisis, many people became underemployed or unemployed, which caused the demand for temporary work to increase significantly. As a result, they started juggling multiple part-time or freelance jobs and wound up with a fixed contract job or a flexible mini-job on the side.
Due to the rise of the gig economy, workers can now find work anywhere globally, which eliminates the need for employees to be in a specific physical location. In addition, the rise of digital platforms has created new opportunities for workers and consumers. These platforms connect consumers with workers directly.
As the world grapples with the effects of the COVID-19 pandemic, the gig economy has become an integral part of helping keep vital services running. From providing essential services such as food and medicines to assisting people in getting back on their feet after losing their jobs, gig workers have become indispensable. It’s also not uncommon to hear about contracted employees who have transitioned to gig workers in different fields. One prime example is event organizers who have suddenly switched gears and started organizing online conferences or content writers who have suddenly started freelancing.
The gig economy has also helped keep restaurants open during lockdowns. Instead of relying on regular servers and bartenders, many establishments are now hiring delivery people. This service helps keep chefs employed and allows restaurants to pay their rent while away from work during a lockdown. It works seamlessly for both parties.
Online platforms
As the gig economy rises, more people search for work through online platforms. These apps and websites connect workers with employers.
Considering the gig industry’s rapid growth, it comes as no surprise that more and more investors are looking for ways to start investing in the gig economy stocks.
Benefits of the gig economy
When working in the gig economy, one can decide which jobs they want to take, where they work from, and how much time their work needs.
According to a study conducted by McKinsey, people who do self-employment report higher satisfaction in their work than those with traditional jobs. However, gig workers express the same dissatisfaction levels while having bills-paying jobs that are not personally fulfilling.
Benefits for companies in the gig economy
Companies can cut costs by hiring people for short-term work in a gig economy. Meaning, they don’t have to pay for employee benefits that come with traditional employment.
The rapid emergence and evolution of digital platforms and apps enabled businesses to streamline their processes and save time, especially when hiring. It is easier than ever to find the right person for the job with today’s digital platforms and apps. This way, companies can keep their core operations running while also calling in external expertise when needed.
This method allows businesses to be more flexible and respond to unforeseen circumstances. Additionally, it enables them to work with different experts on short-term projects.
Benefits for workers in the gig economy
There are a variety of pros to being a freelancer in the gig economy. So what are the most significant advantages for workers?
Many gig economy workers find that their status allows them plenty of flexibility. They can work as many hours as desired and where ever desired with a set end date and time to accomplish their tasks.
Some people may find that working from home on the weekends is ideal for them, as it allows them to get their work done in the morning. This flexibility is also great for those struggling with busy family schedules. In addition, many gig economy workers find that they love the opportunity to complete their work without being tied to an office. This independence can give them the confidence to complete their tasks the way they see fit.
Also, instead of doing the same tasks day after day, each project or gig may have a different element that makes the work interesting. Workers can find that they have a variety of tasks to complete each day. Doing multiple projects and gigs might allow them to develop more skills they can monetize.
Some gig workers also charge an hourly rate for their time. Working in the gig economy allows employees to work more hours and control their schedules. It also allows them to get paid for those extra hours.
Downfalls of the gig economy
Aside from many positive sides of the gig economy, there are also inevitable downfalls for businesses and workers.
Downfalls of the gig economy for businesses
One of the cons is the lack of reliable workers. Sometimes, gig economy workers are not willing to work as hard as they used to while having traditional employment, which leads them to look for remote jobs in the first place. Therefore, businesses should implement a bulletproof hiring process to ensure they are onboarding reliable employees.
Many countries have regulations regarding the status of contractors. However, these regulations can vary depending on the country-specific laws and the industry. Hence, there are paperwork steps that businesses need to follow when it comes to filing taxes. These steps include keeping track of their employees’ income information, which can get time-consuming.
What are the downfalls of the gig economy for workers?
Most gigs don’t include benefits. Even if one is freelancing on a full-time contract, they may not get the same benefits as a regular employee. Additionally, freelancers need to plan for their retirement, which means they should allocate the pension budget monthly.
Furthermore, most gig workers won’t have their taxes taken out of their paychecks. Instead, they need to set aside a portion of their earnings to pay the taxes. Additionally, since gig workers are self-employed, they have other work expenses, such as cell phones and laptops. Therefore, they need to calculate all costs to get a clearer picture of how much work they need to put in to earn the desired salary. For this reason, many freelancers find it beneficial to work with an accountant.
Some workers find the gig economy a bit challenging. Office work includes benefits such as socializing with colleagues and feeling like a part of the team. Oppositely, gig economy workers can find work from home or a remote site, which can be isolating and cause them to feel left out.
The gig economy can be very challenging for people working in it. It entails putting in constant effort to find the next job or being prepared for potential changes in the current one. Additionally, freelancers should take a close look at their prospective employers. Investigating the company’s business model and reviews from previous workers can help prevent being taken advantage of.
How to start investing in gig economy stocks?
Investors are becoming increasingly interested in the gig economy and are looking for ways to jump-start investing in the gig economy stocks.
There are plenty of reasons for the sharp increase in the demand for gig workers. For once, COVID-19 has forced millions to leave their jobs and stay home. Hence, many started looking for freelance work from home. In addition, some workers have personal reasons to stay in their household throughout the day, such as small children, and, therefore, prefer flexible work schedules and remote jobs so they can manage their time. Additionally, as businesses look to improve efficiency and reduce costs, they are increasingly adopting talent models that integrate employees with external contractors or freelancers. Another reason lies in the decline of birth rates many countries are experiencing. This decline is causing their labor pool levels to drop. leading to companies looking for other locations to hire.
The rise of digital technology has created a data revolution, allowing businesses and consumers to collect and use vast amounts of information. In developing nations, the rapid emergence and evolution of technology has enabled people to reach new heights of economic development. Through the use of the Internet and gig platforms, job seekers can connect to companies in other parts of the world in a matter of clicks.
The rapid pace of technological innovation is transforming the way companies operate. It is creating new opportunities for startups and reducing the companies’ lifecycles. In addition, tech innovation allows small businesses to compete in a global marketplace and gain advantages over established businesses.
The rise of online talent networks is creating new job opportunities for millions of people worldwide. However, it also poses questions about the future of the employment model.
How to access the gig economy and begin investing in the gig economy stocks?
Investors use various investment vehicles to access market portions when investing in gig economy stocks. These include SPAC stocks and IPOs, individual securities, and thematic funds.
One of the main advantages of owning single stocks is that they don’t have annual management fees, which eliminates the need for a fund manager to manage assets. Instead, investors pay the fee when buying and selling the stock. On the other hand, the main disadvantages of owning single stocks are lack of diversification, time-consuming, and exorbitant prices. In addition, the process can get time-consuming due to the effort investors need to put in for monitoring and research.
Investors can also opt for SPACs and IPOs. With the gig economy’s growth, analysts are expecting to see a rise in SPACs. However, investors should be careful about deciding on the right SPAC stocks and the proper buying time.
Furthermore, investors can use technology or thematic mutual funds. These funds are the ones investing in industries with a shared theme. Some of these funds may have a portion of their portfolio in gig economy securities.
Another way to invest in gig economy stocks is through ETFs. They are known for their low expense annual fees and transparency. Investors should look for gig economy ETFs with a wide assortment of stocks as the gig economy is expansive by definition. This economy is a varied ecosystem encompassing many different types of companies and industries, which is why a broad-based gig economy ETF can help investors better understand the ecosystem. However, it is essential to keep in mind that portfolio diversification does not protect from financial losses, nor does it guarantee profit if the market goes down.
The Global Industry Groupe (GIGE)
The Global Industry Groupe (GIGE) is the first ETF to focus on companies involved in the revolution towards a gig economy. The theme of GIGE is about how technology has changed the way people work and live. The fund is managed by Toroso Investments, experts in emerging markets. They keep up with the latest news and trends in the industry.
GIGE’s broad portfolio represents the ideal mix of securities to tap into the gig economy’s high growth potential. They mainly consider household names in the gig economy, but they also research companies that support this movement.
Gig economy stocks
The number of gig workers is growing, showing how vital freedom of work really is.
Here is our list of notable gig economy stocks on the market.
Uber Technologies Inc
Ride-sharing service provider Uber is a San Francisco-based company that offers transportation services globally in more than 900 metropolitan areas.
The company provides food delivery (Postmates, Uber Eats), ride-hailing, package delivery, ferry transportation, freight transportation, courier, and motorized scooter rental (via Lime).
Instead of owning a fleet of cars, Uber receives a 25% commission on each booking. Its fares are quoted in advance but vary depending on the local conditions and demand at the time of booking.
In the second quarter of 2021, there were 101 million monthly active users of the ride-sharing platform globally. The company has a 68% market share for ride-sharing and 26% for food delivery in the US. Since its emergence in the sharing economy, the term “uberization” has been applied to the phenomenon of companies offering services using computing platforms. Furthermore, a few startups started referring to themselves as “uber for something”.
Like other ride-sharing companies, Uber has been criticized for its treatment of drivers. The company is also accused of disregarding local regulations, traffic congestion, and obstruction of taxi business.
Uber has a New York Stocks Exchange listing with the symbol UBER. The company was founded in 2009 and currently employs more than 10 000 people.
Company website: http://www.uber.com
Airbnb
Airbnb is an American company that connects travelers with home-like accommodations and rentals. Its platform enables users to search and book accommodations across various countries. Unlike traditional hotels, Airbnb does not own any of the properties listed on its platform. Instead, it makes money by taking a commission from each booking.
The company has been criticized for allegedly driving up home rental prices and creating nuisances for nearby residents. It is also considered a threat to the hotel industry.
In November 2012, following the devastating effects of Hurricane Sandy, Airbnb partnered with NYC Mayor Michael Bloomberg to provide free housing to the storm victims. Airbnb created a microsite where victims could register for free accommodation. The company maintained the host guarantee while waiving the fees.
In January 2017, Airbnb offered to provide free housing to refugees and those not allowed to enter the US due to President Donald Trump’s Executive Order 13769. Later in June the same year, Open Homes launched, which is a program that connects hosts with uprooted people. It is a place for hosts to offer free or low-cost housing to people fleeing natural disasters and refugee crises.
Another philanthropic effort happened in 2021. After the Taliban took over power in Afghanistan, Airbnb offered free housing for 20 000 Afghans.
As for the company’s other ventures, Airbnb runs Rausch Street Films, a production company that specializes in making documentaries. Its first release, Gay Chorus Deep South, was featured in various festivals and was distributed by MTV Documentary Films.
Airbnb was founded in 2007 in San Francisco, where its headquarter still is. The company employs between 5000 and 10000 people. Alike some other gig economy stocks, including Fiver, Airbnb also has a listing on NASDAQ. The symbol is ABNB.
Company website: http://airbnb.com
DoorDash
DoorDash is an online food ordering and delivery platform. With a 56% market share, DoorDash is the largest food delivery platform in the US. In 2020, its platform was used by over 20 million consumers, 450,000 merchants, and one million deliverers.
In 2018, DoorDash launched a Project DASH program, which helps local food security organizations distribute donated food to those in need. By 2019, it had delivered more than a million pounds of food to 25 cities in North America. As of 2021, project DASH operates in over 900 cities and has helped deliver more than 15 million meals.
In 2020, DoorDash partnered with the National Urban League to support the organization’s Main Street Strong program, which aims to support restaurants during the Covid-19 outbreak.
DoorDash was founded in 2013 and currently employs between one and five thousand people. The company’s public listing is available on the New York Stock Exchange with DASH.
Tipping controversies
In July 2019, the company’s tipping policy was criticized by various media outlets. The Verge and other news outlets criticized the company’s guaranteed minimum per order tipping policy. The issue pointed out by news outlets was that the tip from the customer did not go directly to the driver. Instead, the tip went to DoorDash first. Then, the company would cover the guaranteed minimum and send the rest of the tip (that exceeded the minimum) to the driver. A DoorDash customer sued the company for allegedly misleading customers regarding its tipping policy. In 2020, the case was referred to as arbitration.
Under pressure, the company changed its policy. The lawsuit with District Columbia Attorney was settled at 2.5 million dollars. The funds would go to deliverers, charities, and the government.
Antitrust litigation
In April 2020, the case of Mariam Davitashvili, Adam Bensimon, and Mia Sapienza was brought against several companies, including Postmates, Uber Eats, and DoorDash. The companies were accused of monopolizing the marketplace by only listing restaurants when the owners agreed to have the same prices for dine-in customers and the ones receiving delivery. The case argued that this arrangement increases the cost of dine-in customers as it forced them to “pay a subsidy” to cover the delivery costs. Additionally, they claimed the prices charged by the delivery companies in question were enormous. A trial date for the case has not yet been set.
Company website: https://www.doordash.com/
Lyft
Lyft is a transportation technology company that develops, markets, and operates a mobile app for vehicle hire, car rental, motorized scooters, food delivery, and bicycle-sharing system. Instead of owning vehicles, Lyft commissions each booking. The fares are quoted in advance but can vary depending on the local market and the time of the booking.
Lyft is the second-largest ride-sharing company in the United States, after Uber.
The company’s headquarters are in San Francisco, California, and it employs between five and ten thousand people. Lift’s public listing is available on NASDAQ, and the symbol is LYFT.
Just like other ride-sharing companies, Lyft was, as well, a subject of controversy. The criticism pointed out to Lyft was about safety concerns, earnings of drivers, price-fixing allegations, bias against passengers in certain demographic groups, carbon emissions, and traffic congestion.
Company website: https://www.lyft.com/
Fiverr
Through Fiverr, business owners can connect with freelancers for various digital projects, such as website design, content writing, and voice-overs. In addition, it simplifies the process of communication.
On the website, freelancers are referred to as sellers, and companies are referred to as buyers. Instead of sending out bids, they can list their services for free and set their prices. The system automatically charges the account and puts the money on hold. When a buyer makes a purchase, the system will send 80% of the offered price to the freelancers.
It can take up to 14 days for freelancers to withdraw their earnings. You can also withdraw funds through various options such as PayPal, wire transfer, and debit card.
Fiver was founded in 2010 with a headquarter in New York City. The company employs up to 500 employees and is one of the gig economy stocks listed on the New York stock exchange with the symbol FVRR.
Company Website: www.fiverr.com
Toptal
Toptal is a website that connects highly-qualified freelancers with companies. It features a broad range of freelancers, including web developers, web designers, product managers, and financial specialists.
Before joining Toptal, candidates must pass the platform’s rigorous screening process. This process ensures only the top 3% make it on the platform. After passing the test, you’ll have access to job postings from leading companies like Motorola and Airbnb.
Toptal’s time tracking and invoicing service is called TopTracker. It enables freelancers to keep track of their time and receive payments through Payoneer, Paypal, or direct local bank transfer.
Toptal was founded in 2010 and currently employs up to 5000 people. The company is privately held.
Company Website: https://www.toptal.com/
Upwork
Upwork is a platform that connects freelancers and clients globally. The platform features a variety of categories, such as web design, software development, customer support, and accounting.
Freelancers pay a commission fee of 20%. However, the commission decreases over time as freelancers gain momentum on the platform. Users can withdraw money through PayPal, direct transfer, and wire transfer.
The company was founded in 2015 and is established in San Francisco, California. UpWork hires up to 1000 employees. It is listed on the New York stock exchange with the symbol UPWK and is one of the popular choices among gig economy stocks.
Company Website: https://www.upwork.com/
FlexJobs
This website is a great place to find flexible and remote job openings. There are various opportunities, such as full-time, part-time, and freelance jobs. In addition, there are broad categories of jobs in education and training, journalism, and writing.
This website is built to ensure that every job posting is legitimate. FlexJobs tries hard to exclude fake companies and scams. It also doesn’t allow ads.
There are four plans available for a subscription. The basic plan gives users unlimited access to the platform’s job listings, along with a variety of other perks. Users can pay for their subscription using PayPal or a prepaid card. In addition, there is a 30-day satisfaction guarantee, which means that if they are not satisfied, they can get a full refund.
The company was founded in 2007 and currently employs up to 50 people. The headquarter is in Boulder, Colorado. FlexJobs is a privately held company.
Company Website: http://www.flexjobs.com
LinkedIn is a great place to find jobs in various fields. It connects professionals and makes it easy for them to communicate. Users can create a professional profile that includes all the information necessary to get in touch with employers and potential clients.
Creating posts can also help users reach potential employers. For instance, creating a post that describes one’s expertise and work portfolio can help attract potential employers.
LinkedIn was founded in 2003, and it has more than 751 million members. It’s the world’s largest professional platform. LinkedIn is a diversified company that offers a variety of products and services. The company’s revenue comes from various parts of its business, such as Talent Solutions, Premium Subscriptions, Marketing Services, and Sales Solutions.
The company headquarters is in Sunnyvale, California, employing more than 10 000 people. Linkedin is listed on the New York Stock Exchange with the symbol LNKD.
Company Website: www.linkedin.com
Freelancer
On Freelancer.com, one can find freelancers from all around the world. Job-seekers can find clients through predefined phrases. To get started, freelancers and business owners alike can sign-up. The sign-up process is simple and is conducted by filling out the registration form.
Aside from projects, there are also contests for freelancers. These include visual or design work.
This platform takes a 10% cut of a freelancer’s total earnings.
Freelancer owns and operates Escrow.com, a leading online payment and transaction management company. The company was founded in 2009 and currently employs up to 500 employees. With a headquarter in Sydney, Australia, Freelancer is listed on the Australian Securities Exchange under the symbol FLN.
Company Website: http://www.freelancer.com
People Per Hour
People Per Hour is a platform that enables businesses to hire freelancers from anywhere in the world. There are millions of freelancers in different industries. The company pays employees on an hourly basis.
Creating a profile is free. Once a profile is approved, freelancers can browse for jobs in multiple categories. The moderators review each application.
Like many other freelancing sites, People Per Hour requires freelancers to pay a service fee—the fee decreases when the amount freelancer earns increases.
The company was founded in 2007. The headquarter is in London, England. People Per Hour employs up to 50 people and is a privately owned company.
Company Website: http://www.PeoplePerHour.com
TaskRabbit
TaskRabbit is a great way to make money from tasks such as grocery shopping and assembling furniture. However, unlike other websites that offer professional jobs, TaskRabbit is focused on helping people complete simple errands.
Each application goes through a review and background check. After that, the freelancer must pay a $25 registration fee. Then, for every hour worked, the freelancer sends an invoice. Afterward, the client would deposit the money into the gig worker’s bank account.
IKEA Group, the world’s largest furniture retailer, acquired TaskRabbit in 2017. As a pioneer of the sharing economy, TaskRabbit’s core idea is to have neighbors help each other. They have grown to over 75 cities and eight countries, but their core mission has remained the same.
TaskRabbit was founded in 2008. The headquarter is in San Francisco, California. The company employs up to 500 employees and is privately held.
Company Website: http://www.taskrabbit.com
99designs
99designs is a website that enables designers to work from home. It features a variety of design projects that are ideal for freelancers. Freelancers should create a profile and include their work experience. The team will then determine their design level and submit the application.
99designs makes it easy to find freelance jobs in various industries and design categories. 99designs will charge a $100 introduction fee and a platform fee of 5% to 15%. Freelancers get paid via Payoneer or PayPal within three business days.
The company was founded in 2008 and has a headquarters in Richmond, Australia. They hire up to 200 employees and are a privately held company.
Company Website: http://99designs.com/
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This article was last updated on December 16th, 2021.New
