The Gig Economy – Impact of AI and Regulations
- Amil Prema
- May 14
- 8 min read
If you’ve ever booked a ride with Uber, ordered food delivery, or hired a freelancer for a service, you’ve already participated in the gig economy. It’s a fast-growing system built around short-term, on-demand jobs that’s reshaping the nature of work. Gig workers typically include freelancers, independent contractors, and individuals who are self-employed.
Two major factors are shaping its future: technology and regulation. While technology has opened up many opportunities for gig workers, new regulations are also beginning to address the issues around worker rights, protections, and benefits. This article will explore the impact of these two factors and how they are contributing to a rapidly expanding part of the economy.
Growth of the gig economy
There was a significant surge in the gig economy during the pandemic, driven by rising demand for short-term, flexible work. Many businesses turned to gig workers as a cost-saving measure, while workers increasingly sought greater work-life balance through independent work.
Together, these shifts accelerated the growth of freelance and platform-based work across multiple sectors. As a result, the value of the industry grew from $204 billion in 2018, to $455.2 billion by 2023 —a clear sign of its rapid and sustained growth.
Let’s explore some of the key reasons for the growth in the gig economy.
Flexibility
Gig work offers flexibility—a key driver of its growth during the pandemic. In a recent survey by the Pew Research Center, 49% of gig workers identified the ability to choose their own hours as the primary reason they pursued independent work.
This adaptability allowed many to juggle personal responsibilities while still earning an income—contributing to the sharp rise in gig economy participation.
Additional income
Freelance work became popular during the pandemic as many workers decided to setup side hustles to provide themselves with different revenue streams. The Pew Research Centre survey found that 56% of gig workers took on extra jobs to have additional avenues of income.
This increasing focus on building multiple income sources, gave individuals more financial autonomy and played a key role in growing the gig economy.
Global market demand for gig workers
During the pandemic, many companies began hiring freelancers to reduce costs and avoid hiring full-time staff. According to Upwork, ~36% of US businesses increased their use of freelancers in 2020 due to the pandemic. At the same time, consumer demand surged in areas like food and parcel delivery, creating new opportunities for gig workers.
Impact of AI
A major driver behind the current growth of the gig economy is the rapid advancement of AI. Many platforms have integrated AI into their operations, making independent work more efficient, accessible, and appealing. Here are the main ways AI is making a positive impact on the gig economy.
Smarter job matching
AI is revolutionizing freelancing by making job-matching platforms more efficient. AI systems can analyze a worker’s skills, preferences, and experience to pair them with suitable jobs faster and more accurately. Today, 40% of gig platforms use AI to optimize job matching and personalize user experiences.
Platforms like Upwork and Fiverr use AI to recommend relevant gigs based on a freelancer’s profile and work experience. This helps freelancers spend less time searching and more time earning, helping them find more suitable, higher-quality work.
Increased specialization
AI is driving greater specialization in the gig economy by automating many routine and simple tasks. As AI tools take over simpler jobs, freelancers are increasingly focusing on niche, high-value work that requires creativity, strategy, or specific expertise.
Analysis from Upwork shows that while AI has led to a drop in demand for generalist roles, there has been a notable increase in demand for specialized jobs such as video editing and web development. This shift opens more opportunities for freelance specialists, who offer unique services that AI will have difficulty replicating.
Improved virtual collaboration
AI is improving global collaboration by making processes more effective. Freelancers can now work more efficiently with tools such as real-time translation, note-taking, and task tracking. They can work with clients who speak different languages and coordinate with teams working across different time zones.
For example, a marketing strategist in Australia can create a campaign with a graphic designer in China, using AI tools that can transcribe meetings and translate feedback in real time. This type of virtual collaboration helps increase demand for specialized work and gives gig workers greater access to the international market.
Enhanced personal branding
In the freelance market, standing out is essential. AI is making marketing and personal branding more accessible, empowering more people to become self-employed and join the gig economy.
With tools like Canva and ChatGPT, freelancers can generate a wide variety of content without employing a full marketing team. This makes it easier to build a personal brand and attract clients, which enhances the appeal of gig work as a viable career path.
Impact of regulations
New regulations have played a significant role in making working conditions fairer for independent workers. Given below is a recap of the regulatory landscape, pre- and post-Covid, as well as its impact on the gig economy.
Pre-pandemic
Before the pandemic, the gig economy was loosely regulated. Employers exploited loopholes by classifying workers as independent contractors. This meant they could avoid providing obligations such as superannuation, sick leave, and minimum wage.
In Australia, the UK, and the US, the legal status of gig workers was unclear. There was debate around whether their autonomy and flexibility justified their lack of traditional benefits. Governments were slow to act, and a lack of regulation left many workers vulnerable to job insecurity and income fluctuations.
Post-pandemic
Post-pandemic, the rapid growth of the gig economy prompted many governments to reconsider their stance on worker benefits and protections. As more people turned to gig work for income, it became clear that existing laws needed to change.
In response, governments began introducing new laws to close the gap between traditional employees and gig workers. These reforms included minimum wage guarantees, paid sick leave, and clearer rules on worker classification. This shift marked a growing recognition of gig workers' contributions and a move toward more inclusive worker benefits.
Why was regulation needed?
As the gig economy expanded, it became increasingly clear that regulation was necessary. Fair treatment and protection for gig workers became talking points for governments worldwide. Here are some of the key reasons regulation was needed:
Unclear employment status
The ambiguous nature of workers’ employment status was a significant issue in the gig economy. Gig workers were typically classified as independent contractors rather than employees. However, gig workers on platforms lacked the same benefits as independent contractors, as platforms control job allocations, ratings, and pay. This led to growing disputes over worker rights and prompted stronger regulatory protections.
Limited options for workers
Students, migrants, and individuals with limited job opportunities often found themselves in tough positions in the labour market. Facing limited demand for work, many took on gig jobs simply to secure a paycheck. While gig work offered flexibility, the lack of regulation exposed these workers to potential exploitation by employers.
For example, in developed countries, migrants often faced situations where language barriers affected their decision-making. This made it difficult for them to understand contracts, especially if English was not their first language. As a result, they were left vulnerable to unfavorable working conditions whilst undertaking gig work.
Exploitative contracts
Gig workers often faced uncertainty when it came to securing consistent projects. Many operated under zero-hour contracts, where there was no guarantee of minimum hours. While these arrangements are common, they are frequently exploited by employers—resulting in unpredictable income, limited job security, and little ability for workers to plan ahead. For example, some employers required exclusivity, preventing gig workers from taking on additional jobs—even when no work was guaranteed.
Low take-home pay
Many gig workers, particularly in roles such as delivery service, faced high overhead costs—such as fuel, vehicle maintenance, and platform fees. While they appeared to earn the equivalent of minimum wage on paper, their actual take-home pay was often significantly lower after expenses were deducted. This prompted the need for regulation—ensuring that gig workers not only earned a fair base but were also protected against hidden losses that affected their income.
Regulatory changes to the gig economy
In light of the challenges faced by workers in the gig economy, several countries introduced major reforms to improve protection for gig workers. In 2024, Australia, the United Kingdom, and the United States implemented changes to clarify employment status, enforce fairer pay, and address issues around worker classification. Here are examples of some of the regulatory changes made in Australia:
New worker classification
A new category—employee-like workers—was introduced to give gig workers more rights, including stronger negotiating power, fairer pay, and greater control over how they work.
Minimum standards introduced
The Fair Work Commission was granted the power to set minimum standards for employee-like gig workers, including penalty rates, superannuation, insurance, and protection from unfair platform deactivation.
Improved job security and dispute rights
Under the new rules, gig workers were given rights to challenge unfair deactivation from platforms, contest exploitative contracts, and dispute unfair dismissals through the Fair Work Commission, giving them more stability and legal protections.
Global regulatory changes
Source: www.abc.net.au | www.gov.uk/government | Competition.Today
Best practices to adopt
For employers
To ensure the safety and wellbeing of workers, it is important that companies adopt best practices. Here are some ways that employers can better support gig workers and ensure fair, productive, working relationships, particularly in markets without regulations. A well-informed freelancer is more likely to complete work successfully and build long-term, trusting relationships.
Mutual understanding
The start of the relationship is where trust is built. Clear guidelines should detail the general expectations of the project between the freelancer and the employer. This should include agreeing in advance on timelines, payment terms, and project specifics. Once the freelancer agrees to these, both parties share a mutual understanding of the scope and requirements needed to complete the task effectively.
Contractual agreements
Having a well-designed contract is essential for gig work. It ensures that all agreements are clearly documented, providing a reliable reference point if any confusion arises. A contract confirms the terms of the deal and helps protect both parties. Importantly, it should be reviewed and updated throughout the relationship to reflect any changes in scope or responsibilities.
Confidentiality
It’s common for freelancers to have special arrangements that include unique benefits such as flexible working hours or remote work options. In such cases, employers may prefer to keep these agreements confidential, particularly if they are already employing workers who have agreed to a traditional model. As a result, non-disclosure agreements (NDAs) are often used to protect sensitive terms and clarify what can and cannot be shared.
Clear communication
Two-way communication allows projects to flow more smoothly. This is especially important as freelancers can raise any concerns or objections they may have about the process. It also helps build trust and ensures that both parties stay aligned throughout any projects they undertake together.
For gig workers
Gig work offers many advantages in comparison to traditional 9–5 jobs, such as shorter hours, greater autonomy, and reduced stress. Prior to accepting projects, freelancers should be well aware of the nature of the work, including the scope and duration of a project. Payment terms, including any penalties, should be discussed in advance. Make sure you are being offered fair market rates and, depending on the duration and scope of work, request for an advance payment. Also, ensure all relevant details are provided in a formal agreement, signed by both parties to avoid any misunderstandings at a later stage. Gig workers should also know their tax obligations, depending on the country they reside in.
While flexibility is one of the greatest advantages of gig work, it should be balanced with transparency and professionalism. Freelancers should never hesitate to ask questions, clarify expectations, raise concerns before work begins, and complete their work with professionalism.
Looking forward
As the gig economy continues to grow, technology and regulation will play an increasingly vital role in shaping its future. Technology has revolutionized the way people work and has created many new opportunities for both skilled professionals and motivated freelancers. At the same time, regulations are constantly being put in place to bring more balance to a system that has often lacked clarity. Therefore, as more skilled workers choose to work independently, both governments and companies must adopt more equitable policies and regulations that protect gig workers’ rights, promote fair compensation, and ensure long-term sustainability within the gig economy.
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About the author
Amil Prema is a former financial services professional with over four years of experience working in corporate foreign exchange. He is currently a freelance writer, covering subjects such as financial markets, entrepreneurship and health & wellness. He holds a Bachelor of Commerce from Macquarie University in Sydney, Australia.
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