Is the Gig Economy Mostly Hype? Looking at the Latest Numbers.
Two recent studies by JPMorgan Chase and the U.S. Bureau of Labor Statistics have inspired an array of headlines and articles claiming the gig economy may not be the future of the workforce after all.
Data from the two studies calls into question the growth and proliferation of the gig economy. But the figures also reveal why there is so much confusion and misunderstanding about the gig economy and its future.
One of JPMorgan Chase’s biggest findings was that pay for gig workers has dropped over the past two years, and those workers are earning a growing share of their income elsewhere. Additionally, the study found that most Americans who earn income through online platforms do so for only a few months each year.
These figures suggest the gig economy may be smaller than previously estimated, and it may even be shrinking. Gig workers may also be performing gig work mostly as a short-term source of income, perhaps while transitioning between traditional jobs.
To further deflate the gig economy’s purported size, the U.S. Bureau of Labor Statistics found in its own study that only 1.6 million workers, or 1.0 percent of employed individuals, perform electronically mediated work, such as short jobs or tasks they find through websites or mobile apps that connect them with customers.
Overall, both sets of statistics seem to contradict the prevalence and projected growth of the gig economy reported in other industry surveys, some of which we’ve highlighted previously.
But the discrepancies point to the fundamental challenge of quantifying and understanding what’s actually happening in the gig economy, particularly when statistics are dramatically shaped by fast-moving trends.
For example, the JPMorgan Institute found that transportation is increasingly dominating the gig economy, with 56 percent of all gig work now comprised of driving. This is up from just 6 percent in 2013.
In contrast, selling items through online websites such as eBay and Etsy, which comprised 72 percent of all gig work in 2013, has sunk to just 19 percent.
However, among drivers, online income now makes up just 26 percent of total annual earnings, down from nearly 52 percent in 2013. In fact, drivers for companies such as Uber and Lyft are typically working fewer hours now and taking home less pay per month, although the work they do has grown to dominate the gig economy.
How do we make sense of these seemingly contradictory trends?
For one, Uber says its number of drivers has leaped from 160,000 in 2014 to 900,000 currently. Thus, there’s much more competition among drivers. In addition, Uber’s chief economist, Jonathan Hall, says the company’s decision to increase fares helped drivers initially earn more money, but it also attracted more drivers and reduced the number of trips consumers made.
All of this, combined with a labor market with historically low unemployment, has added up to drivers on the Uber platform driving for fewer than 10 hours a week according to the company’s data.
This points to a fundamental problem with analyzing and understanding the gig economy, which is separating temporary, short-term gig work from the entirely different notion of independent and self-employed workers making their living through online platforms.
Current studies and projections rely on varying definitions of the gig economy and gig workers, and they often highlight overall figures that don’t sufficiently distinguish between types of workers and their level of engagement with the gig economy.
If we’re blending together Uber drivers, Airbnb hosts, and TaskRabbit workers, along with self-employed consultants and professional experts, we end up with potentially skewed statistics and misleading indicators. Given the sudden market shifts triggered by companies such as Uber, the numbers are also highly volatile and subject to misunderstanding and misinterpretation.
Thus, while studies project that we could see as much as 50% of U.S. workers freelancing or participating in the gig economy within 10 years, it doesn’t mean a large portion of them will be doing so as a primary or permanent source of income. It also doesn’t mean a large portion will be doing it through an online platform or that we’ll reach 50% at all. As the labor market and the gig economy evolves, we could see wild fluctuations in macro-level statistics, which leave us with little insight on what’s happening or projected on a more refined level.
A better approach would be to focus more on the distinctions between full-time and part-time workers, temporary and permanent work arrangements, and specific gig economy industries. Dedicated gig economy work should also be parsed from transient work designed to supplement a worker’s income or earn money between jobs, such as many Uber drivers do.
This would help us perform a serious reality check against attention-grabbing stats. For example, online platforms might eventually help as much as 50% of the American workforce earn income from freelancing and engaging in the gig economy, but if only 1 or 2 percent are doing so as their primary source of income, that’s a completely different picture for the economy at large than the notion that a large portion of the workforce will be working independently.
By gathering more precise data and analyzing it in a more refined way, we can potentially get to a true measure of the gig economy’s prevalence and its future impact. We can do it for specific gig economy markets and sectors as well.
At Graphite, we may be a bit biased due to our focus on connecting firms with top-tier independent consultants and working with dedicated gig economy workers. But every company engaged in the gig economy, as well as investors, workers, and the public at large, would benefit from greater clarity and accuracy in this area.
It will help us better predict, manage and respond to the impact of the gig economy on the wider economy at large, and develop potential public policy and guidance, especially as platforms and opportunities continue to emerge and evolve.
In the meantime, to learn more about the gig economy, recent trends and reports, you can read our past blog articles.
If you’re interested in leveraging the gig economy to your advantage, you can also visit www.graphite.com to learn more about hiring pre-vetted and highly qualified consultants in business strategy, finance, investment banking, marketing, product development, IT and more.