The Hidden Costs of Gig Economy

A Deep Dive into the Reality of App-Based Work

In the sprawling landscape of the gig economy, apps like Uber, Instacart, and Grubhub promise a flexible work schedule and the potential for earning extra income. Yet, a closer examination reveals a stark reality: many independent contractors are earning less than minimum wage when considering their work-related expenses1.

A Tale of Two Independent Contractors: Taxi Drivers vs. Gig Workers

Taxi drivers, who also operate as independent contractors, often end up earning more money than gig workers2. This discrepancy exists despite the fact that taxi drivers operate within a heavily regulated space. How is this possible? The answer lies in the accountability (or lack thereof) of the app companies.

Traditional taxi services operate within a regulated fare system. This ensures drivers receive a fair wage for their services, accounting for factors like time spent and distance traveled. On the other hand, gig economy apps often set their prices based on supply and demand, with little regard for the actual costs borne by the workers3.

The True Cost of a Gig: A Case Study of Instacart

Take, for instance, Instacart. A typical order might require a shopper to locate and purchase 20 items. Assuming the shopper knows exactly where everything is in the store, this process alone would take at least 20 minutes. Add to this the time spent commuting to and from the store, waiting in checkout lines, and delivering the items, and the time commitment becomes substantial.

Yet, the compensation provided by the app does not adequately reflect this time investment. Instead, it’s based on a flat fee per order and a per-item commission, often resulting in earnings that fall below the minimum wage when all factors are considered4.

The Hidden Expenses of Gig Work

Then there are the expenses – fuel, meals, wear and tear on personal vehicles, and other sundry costs. These are all expenses that the gig worker must bear. Yet, these costs are often overlooked when considering the earnings of gig workers5.

In essence, these popular gig economy apps have created a system where they bear no accountability for the way independent contractors are paid. They reap the benefits of cheap labor without shouldering the associated costs.

The Need for Change

The gig economy, with its promise of flexibility and extra income, is here to stay. However, there is a growing need for transparency and fairness in how gig workers are compensated. This includes accounting for the time and expenses that these workers invest in their jobs6.

For those considering gig work, it’s important to understand the true costs and benefits associated with these opportunities. And for those of us who use these services, it’s crucial to be aware of the realities faced by the workers who make our lives more convenient.


  1. Corporate Finance Institute
  2. The New York Times
  3. Investopedia
  4. Time Magazine
  5. Netspend
  6. IFAC

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