Gig Workers Cannibalize Rides/Rooms Payroll Spots — And More?

The gig economy is the future. But does the gig economy also presage the hobbling of the traditional, non-gig economy?

In a Wall Street Journal column last week, Mark Muro, a Brookings Institution senior fellow, wrote that the app-driven freelancer has been making steady inroads into gainful employment within the United States. The question remains as to whether the tradeoff is one where “traditional” payroll positions are eliminated as work is contracted out.

The data remains unclear in terms of a general trend, wrote Muro, who added that he and an economist, Ian Hathaway, found some evidence of “cannibalization” — or at least growth suppression — in payroll jobs, as painted by data from two industries, defined by Muro as rides and rooms.

A “first reading” of the numbers, said Muro, shows the marquee names of those sectors, Uber and Airbnb, actually helping to create jobs in general, as unmet demand is sated across 50 of the largest cities in the U.S. But within those two industries, Muro continued, the rise of the platform freelancer did have some negative impact on payroll job creation in at least 15 metropolitan areas in 2014 for ridesharing and another 10 cities that same year in rooms. As one example showed: In San Jose, nonemployer firm gig jobs were up 145 percent, while payroll jobs slipped 31 percent, tied to the fact that taxi companies eliminated 250 payroll jobs.

That trend can be extrapolated beyond the two industries noted by Muro, who stated that the “scale of the trend is enormous.” And last week’s inaugural PYMNTS Gig Economy Index, presented in collaboration with Hyperwallet, found that 40 percent of freelance workers get 40 percent of their income from contracted work. And as that number rises, said Muro, the powers that be on Capitol Hill and elsewhere will focus attention and efforts on guaranteeing some measures of income protection for freelancers, ranging from disability insurance to unemployment insurance.

Creating a lot of grey lines between who is a contract worker and who is an employee who works a variable hours schedule. Uber got a sense of that last week in the U.K. when it was ruled that drivers are employees and need to be treated as such. At the core of that decision is the fact that Uber sets drivers’ prices and forces drivers to use their equipment (e.g., software).

It will be a big topic of conversation since the gig economy is only getting larger and more relevant, thanks to technology that makes it easier than ever to map supply with demand.