The Gig Economy Is Growing Up — And Getting Less Lucrative

It’s probably getting to the point that everyone who doesn’t have gig work — offering ride shares via personal vehicles, for instance, or doing other freelance jobs found via digital marketplaces — probably knows someone who does. After all, according to the PYMNTS/Hyperwallet Gig Economy Index, 35 percent of today’s workforce participates in what we now call the gig economy.

But while gig work is apparently becoming as much a part of U.S. economic culture and history as those first burger-flipping jobs for teenagers (back in the Boomer and Gen X golden days, when relatively few adults did such work), much of it doesn’t seem to be paying too well, at least according to a new, comprehensive study. If so, that could have longer term impacts on the payment and other services that are popping up to better serve the growing gig economy.

Gig Income Drop

The study, from the JPMorgan Chase Institute, offers this insight, among others: 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.”

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

That’s 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 in large part to the perks of gig employment, including flexibility, health benefits, supplemental incomes and creative fulfillment.

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, considered essential to people employed in the personal care and services sector, including nurses, physical therapists and chiropractors, according to other PYMNTS research. As well, gig workers around the globe are demanding more efficient payment disbursements, which involves not only speed but also 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 declining in areas outside ride sharing, 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.

Less Reliance on Gigs?

But 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.