This is the real cost of the gig economy

The number of “gig economy” workers is at a record high, but the same cannot be said for wages. A recent study from JPMorgan Chase shows that, while more and more people are joining the online transportation workforce and driving for apps like Uber and Lyft, the average wage has been falling.

This is the real cost of the gig economy

The study analysed participation and earnings of gig economy workers by examining a sample of 38 million payments made to 2.3 million Chase checking accounts from 128 different online platforms between 2012 and 2018. Researchers identified four sectors of the gig economy: transportation, leasing, selling, and non-transportation work (which includes dog-walking and home repair.)

The results are shocking.

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In October 2012, the average monthly wage for workers in the transportation sector was $1,535 (£1,169). By March 2018, however, that number had declined to $762 (£580) per month, almost a 50% drop. Compare that to workers in the leasing sector, whose average wages have increased from $662 (£504) in 2012 to $2,113 (£1609) in March 2018.

These figures correlate with increasing participation. The study reports that nearly 5% of American workers are involved in the gig economy, up from less than 2% in 2013. The transportation sector alone makes up for half of these workers, with 2.4% of all American workers driving for an online transportation company. As a comparison, in October of 2012, that number was less than 0.1%.

So, more people are driving for transportation and delivery apps, but they’re making less money. There are a couple of potential reasons for this change. Drivers could simply be working fewer hours and therefore pulling in less money per month. Another possibility is that apps are paying their drivers less than they were in 2012, or that trip prices have fallen so much that driving isn’t as profitable anymore.

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Uber has come forward and supported the theory that drivers just aren’t working as much as they used to. On 24 September, Uber’s senior economist Libby Mishkin addressed the JPMorgan study directly in a blog post and criticized the study’s data. “As the number of people who drive with Uber has grown, the share of drivers who drive only occasionally also increased,” she explained. “In fact, today more than 50% of drivers drive less than 10 hours a week.” The problem here, in her mind, is that the study did not analyse hourly earnings and instead focused on monthly wages, which would naturally be lower if the average driver was working less.

JPMorgan’s data could also be slightly skewed by the fact they only studied payments being made to Chase checking accounts, which limited their researchable pool.

But regardless of the reason, the fact remains that driving in the gig economy is not as profitable as it once was. The “10 hours a week” statistic from Mishkin’s statement is troubling enough as it is, since it could imply an oversaturation in the company’s workforce. Either way you look at these statistics, they don’t exactly paint the industry in a positive light.

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