With the labor market cooling, what can the gig economy tell us about the current state of the job market? Does it provide a meaningful source of income support to those who experience job loss or reduced hours?
Here are the latest insights from Goldman Sachs Research.
According to Goldman Sachs Research, the most credible estimates suggest that 5%-15% of the US population participates in gig work, broadly defined as any income-generating work outside of standard, long-term, direct-hire employment.
Estimates of participation in platform-based gig work such as Uber are lower at roughly 2%-4% of the population.
The wide range of estimates is partly due to the fact that there is not one agreed-upon definition of what constitutes gig work, so various estimates of gig economy employment include different subsets of workers, such as independent contractors, temp agency or on-call workers, or freelancers.
Most surveys conducted over the years suggest that growth in total gig employment has been modest at best. Interestingly, platform-based gig work participation appears to be growing at a much faster pace.
Data from Sensor Tower on monthly active users of supply-side gig work apps suggests that year-over-year growth in the number of platform gig workers has averaged 5%-8% over the past few years.
Using the New York Fed’s Survey of Informal Work Participation (SIWP), Fed economists find that the average gig worker is more likely to be younger, female, to report working part-time, and to hold multiple jobs compared to workers in traditional jobs.
Data from Gridwise, an app that allows platform gig workers to compare potential earnings across services, shows that earnings per hour for platform-based gig work is not far below that of comparable standard jobs, though the comparison might be imperfect if gig workers are more likely to require their own vehicle.
Using the microdata from the SIWP, Goldman Sachs Research finds that roughly 15% of people who are counted as unemployed or not in the labor force actually do some gig work.
Gig work participation appears to be greatest among involuntary part-time workers, suggesting that some people turn to gig work to supplement earnings when they cannot work as many hours as they would like to in a standard job.
Source: Goldman Sachs Global Investment Research, Federal Reserve
If we account for gig work not captured by the household survey, it would raise the employment to population ratio to roughly 65% from the officially reported 60% and the labor force participation rate to 67% rather than 62%.
Source: Goldman Sachs Global Investment Research, Federal Reserve
Does the gig economy, especially platform-based work, offer a meaningful new source of income support with a low barrier to entry to those who face job loss or reduced hours?
Data from the SIWP show that 20% of all people who reported that they took a pay cut, lost their job, or had their hours reduced within the prior two years took up gig work as a result (see left panel in chart below).
Nearly 50% of gig workers in the SIWP reported that they do it to earn more money on top of pay from a current job or other regular source of income (see right panel in chart below), while only 15% of gig workers reported that they do gig work as their primary source of income.
Source: Goldman Sachs Global Investment Research, Federal Reserve
The SIWP data also suggest that gig workers earn less per hour than they would in a traditional job. Relative to earnings from their current or most recent traditional job:
As the broader labor market has cooled this year, platform-based gig work opportunities have held up so far.
Goldman Sachs Research found that hours worked on gig platforms increased more this year in cities where payroll growth has slowed, suggesting that some workers might have taken up gig work to cushion negative labor market outcomes.
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