Gig Economy

As The Gig Economy Grows Up, Clashes Emerge Over Its Nature

It’s probably getting to the point that everyone who doesn’t have gig work — offering rideshares via personal vehicles, for instance, or doing other freelance jobs found via digital marketplaces — probably knows someone who does.

And it’s also getting to the point that at least two views are developing about the nature of the gig economy that, for now at least, seem mostly contradictory.

Two Gig Views

One sees the gig economy in mostly positive terms.

It’s a place where workers have more freedom to make their own hours and even pursue their passions, where digital technology such as online marketplaces adds efficiency to the classic mechanism of supply and demand, and where the pay and experience from one or more gigs supports Horatio Alger-type dreams of getting ahead and moving up. That’s a view supported by the PYMNTS/Hyperwallet Gig Economy Index, which found that 35 percent of today’s workforce participates in the gig economy.

Another view paints the gig economy picture with dimmer tones.

Sure, the technology is doing an ever better job at putting together workers and employers. But most gig incomes are decreasing — thanks, in some part, to that supply-and-demand equation — with the highest pay concentrated among a few. This view, as described in a new study from the JPMorgan Chase Institute, takes less of an up-by-the-bootstraps view of gig work, and sees it more as a type of task used to shore up household finances. This offers less optimism about the gig economy representing this bright future of work, one in which workers have more power and freedom to sell their particular skills to bosses.

These two views don’t yet rise the level of the Jets vs. the Sharks, some existential rivalry or philosophical street fight, and the two reports do have some areas of overlap about the nature of the gig economy. Those views are different enough, however, that it pays to see where the PYMNTS research, based on 10,004 survey responses and other data, pushes back against or contradicts the types of ideas offered in the Chase report, whose findings are based on the analysis of more than 35 million payments.

Gig Scope

The PYMNTS gig economy story tends to take a wider view of the gig economy, showing that gig work has “moved well beyond driving for Uber and the odd job listed on TaskRabbit.” Thanks to digital marketplaces and online payment and tax-reporting tech, “gig work is the most prevalent in art, design, entertainment, sports and media, with 14 percent of gig workers working in the field compared to 1.8 percent of regular employees.”

The Chase report has a narrower scope, and much of its headline-ready material comes from jobs associated with transportation — that is, for the most part, ridesharing. In fact, one of the most interesting parts of that report is that, in 2017, the average monthly pay for the stereotypical gig worker — one who provides transportation — declined 53 percent from the previous year, to $783.

Why the income drop?

Supply and demand likely played a part, with more drivers putting “downward pressure on hourly wages,” the Chase report said. Drivers might also be working fewer hours, though the numbers and data analysis in the study did not go so far as to offer a determination on that.

“The fact that earnings declined more than costs, however, suggests that effective wages also fell, the report said. “Regardless of whether the drop in earnings was caused by a fall in wages or hours or both, it indicates that driving has become less and less likely to replace a full-time job over the past five years, as more drivers have joined the market.”

Gig Motivation

That lower likelihood of gig work representing full-time employment might set off some alarm bells.

That because the PYMNTS Gig Economy Index recently found that nearly 40 percent of the American workforce now makes at least 40 percent of their income via gig work. What’s more, a growing majority of these workers (75.7 percent) say they would not leave freelance work behind for a full-time job, thanks to the perks of gig employment, including flexibility, health benefits, supplemental incomes and creative fulfillment.

While 19 percent of the people studied for the PYMNTS report said the most important factor driving them to take on gig work is to earn money for “day-to-day” bills, that was closely followed by the 17 percent who identified the factor as earning income for “discretionary” spending. Meanwhile, 14 percent of gig workers say that employment “allows [them] to support [their] passion or hobby,” with 13 percent in pursuit of saving for a “big life event.”

The Chase report describes a gig economy that is more about getting needed money quick — something akin to payday lending, through without the high borrowing costs. “The majority of families generating platform earnings only do so occasionally, and even while they are participating in the Online Platform Economy, median earnings in all but the leasing sector remain below $1,000 per month,” that report said.

The gig economy described in the PYMNTS report is one that offers a relatively high level of freedom for many workers. In fact, 55 percent of gig workers have a full-time job, a data point that helps to underscore the Horatio Alger aspect of such employment — earning extra money and displaying your chops and dependability to employers usually increases the value (and bank account), and boosts the reputation of such workers, leading to more economic opportunity.

That said, “less educated and older workers are more likely to work exclusively in the gig economy, and to do so without full-time jobs,” the PYMNTS report said. “This shows that gig workers cannot be painted with a broad brush, as their skills, occupations, levels of participation and motivation vary widely.”

Gig Uniqueness

Beyond that, PYMNTS research found that “the gig economy isn’t so much supplanting the regular job market as it is evolving with its own unique characteristics. One of these is seasonality, or work done at certain times of the year. While only 7 percent of non-gig employees work on a seasonal basis, 32 percent of gig workers do.”

The Chase report, by contrast, is relatively Dickensian compared to the PYMNTS view of the gig economy.

“While a supposed value proposition of the Online Platform Economy remains the fact that participants are free to enter and leave the market when they want, some platforms facilitate relationships which may involve expectations of continued service over time,” the report said. “Another characteristic that once distinguished the Online Platform Economy was that suppliers were paid for discrete tasks or products (piece work), whereas traditional employment usually involved paying for time (shift work). However, some of the non-transport work platforms now allow suppliers to provide shift work.”

Also according to Chase, participation and earnings growth in the gig economy has come almost entirely from transportation (ridesharing) jobs, a note that serves as a counter to views about the expansive freedom offered via the whole of the gig ecosystem.  And while it can be difficult to do an apples-to-apples comparison with the PYMNTS report, that study reported that gig workers don’t seem to have a such a dour outlook when it comes to such employment. “Many who work exclusively in the gig economy appear to be true believers, whether out of principle or necessity,” the PYMNTS report said. “Most do not want or need a regular job, and only 24 percent are looking for one.”

Gig Variety

Gig work encompasses a wide variety of jobs, with the gig economy increasingly tied together via digital platforms and payment services. That includes digital marketplaces, which are considered essential to people employed in the personal care and services sector, including nurses, physical therapists and chiropractors, according to other PYMNTS research. Gig workers around the globe are demanding more efficient payment disbursements, a demand that involves not only speed, but deposit into local accounts. Uber has reacted to such demands by rolling out Instant Pay — Lyft has a similar feature called Express Pay — as other payment service providers launch their own offerings.

But that pay is also declining in areas outside ridesharing, according to the Chase study.

Average monthly earnings for gig work related to “selling” declined 9.4 percent year-over-year in 2017 to $608, while other non-transport-related gigs declined 1.9 percent to $741. It wasn’t all bad news, though. Gig work related to leasing experienced a 69 percent year-over-year increase in monthly earnings in 2017 to $1,736.

Gig Reliance

Even amid those general declines in gig economy earnings, workers are finding other ways to make ends meet, and don’t seem as reliant on gig income as in previous years, according to the study. Again, the transportation sector provides sharp demonstration of that trend.

In that sector, “60 percent of families were highly dependent on platform earnings in the first quarter of 2013, but that fraction had fallen below 45 percent by the last quarter of 2017,” the report said. “This means that even among drivers, who tend to be more engaged than other participants, more than half generate significant income from some other source even in the months when they generate platform earnings. In the other three sectors, the analogous fraction is over 60 percent.”

The gig economy is still young and fluid, with much development to come as more investor money flows into this area and technology changes day-to-day operations. But the numbers from the study show changing trends for a sector that is unlikely to fade away anytime soon.

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