Consumer Pullback Threatens Paycheck-to-Paycheck Gig Economy Lifelines

Tips and informal, ad hoc work are the mainstays of the gig economy.

PYMNTS’ latest report on paycheck-to-paycheck consumers, done in collaboration with LendingClub, found that, overall, consumers are boosting their household cash flow by taking in  a collective $52 billion in cash payments each month related to active side incomes. Nearly half of all employed consumers now have supplemental income sources.

Drill down a bit, and our research found that 23% of consumers overall had side jobs, and 30% of these consumers with issues paying their bills have embraced additional employment. The extra income runs into the billions of dollars, as seen in the chart below, where tips and gratuities run nearly $12 billion. Informal tasks might conceivably fall within the confines of gig economy work, too — one-off jobs that might be found through online platforms and sites that match supply and demand, though not on a dedicated, hourly setup.

If paycheck-to-paycheck consumers are bringing in billions of dollars from these side gigs, and a significant percentage of these households are depended on these active forms of income to help offset the monthly struggle of making ends meet, any turbulence in the gig economy will have negative ripple effects.

Recalibrating What’s Essential — and What’s Not

Separate data from PYMNTS and LendingClub show that consumers are recalibrating their spending, and reconsidering discretionary vs. essential expenses. In a few notable examples, we’ve found that among grocery shoppers who say they have noticed price changes, 59% have cut down on nonessential grocery items, while 35% are buying cheaper alternatives. And, as seen here, consumers think that restaurant prices are as much as three times higher than inflation.

These are areas where it would be “low hanging” fruit to cut back on delivery, which in turn cuts back on demand for orders across platforms such as DoorDash, which lessens the need for drivers … you get the picture. What winds up happening is that tip volumes, and the delivery work, itself, face headwinds. Companies such as Instacart are broadening their business models to expand their addressable markets (in this case, to boost its business clientele).

We note that, depending on where you look, freelance demand in other areas is volatile, too. Fiverr’s recent results showed only slight growth in clients hiring the talents of gig workers, though spending across that client population is up.

CEO Micha Kaufman made note in remarks on the analyst conference call that the macro challenges resulted in “headwinds to overall freelance demand.” All, told, in the most recent period, Fiverr has said that active buyers (who buy gig services from “sellers”) were 4.3 million. That was up 1% year over year, according to company materials. There are, of course, pockets of notable growth in the gig economy.

In one example, Uber has said in its most recent results that active mobility drivers also reached an all-time high in Q4, up 35% year on year — 5.4 million people are earning across the platform on a global basis and growth had been continuing into 2023.  CEO Dara Khosrowshahi said that 70% of drivers are coming onto the platform to earn money to help combat inflation. PYMNTS’ gig economy app provider rankings released just last week show that Uber has remained the most popular app in that pantheon.