The rise of gig workers is changing the face of the US economy

The number of gig workers is growing, and their alternative working arrangements are rippling through the economy.

The rise of gig workers is changing the face of the US economy

Los Angeles CNN --

Lazarus Limo starts its day around 10 a.m. ET, driving Uber passengers and delivering meals around Chapel Hill in North Carolina.

'I usually set a target for how much money I want to make by the end the day. He said that as soon as he reached his target, 'that's it, I'm finished for the day'. He said that his goal is to earn between $200 and $300, and depending on the day it could take between 8 and 10 hour.

It's only his job during the week.

Limo, a 28-year-old woman, delivers food orders to DoorDash on weekends.

He is just one of the millions of Americans who are part of the so-called "gig economy," a term which has gained in popularity in the past decade as a way to describe the increase in freelance work done through apps such as Uber, Lyft and Doordash.

The government does not have any data about this group. The Bureau of Labor Statistics last officially tracked workers who had alternate work arrangements in 2017. Experts in the workplace say that the number of gig worker is increasing, and their impact can be felt across the economy. They say it could distort government economic data. The fact that mobile phones make it easy to access work may keep the unemployment rate in the country lower than if these workers had not increased. They say it may be a factor in helping people avoid bankruptcy, as it provides a fallback for those who were laid off of work recently.

People who are able to access the gig economy tend to borrow less than those who do not. It can be seen as an alternative to borrowing money for some people - a way of getting through turbulent times', said Louis Hyman a professor at Cornell University of Labor and Business. "Society must take into account these different experiences."

Online platforms are generating millions of dollars in revenue

During the Covid Pandemic, as millions of people hid at home, and began to use online delivery, there was a surge in popularity for newer digital-first platforms, such as DoorDash and Uber Eats. Recent data shows that the number working on these platforms has also increased. The University of Chicago published a paper in May tracking earnings via tax filings. It found that in the last few years, the number of people reporting income from platform-based gigs to the IRS has increased from just over 1 million to nearly 5 million.

The companies' own internal data shows that the gig economy is even more popular. Uber announced in February that the number of its "earners," as they call their drivers and food delivery employees, had reached a new record of 5.4 millions by the fourth quarter 2022. Jenn Rosenberg is a spokesperson for DoorDash. She said that the company has over two million Dashers who are active every month. Since its launch a decade earlier, more than 13 millions Dashers have made use of the platform. Flex, the trade association that represents DoorDash and other online platforms such as Grubhub, HopSkipDrive Instacart Lyft Shipt, Uber, HopSkipDrive etc., estimates that over 23 million Americans earned money in the last 12 months.

Hyman stated that the growth of online platforms is'made possible' by the shortcomings in service work, since workers are able to set their own schedules -- an advantage they might not have had with traditional service jobs.

It's always an alternative. He said that if you do not want to work at a restaurant, or in any other service-related job, this is an alternative.

Economic impact

Online gig work has some benefits despite the fact that most gig workers do not have access to workplace benefits such as health insurance and retirement benefits.

It allows people to look for their next job longer. They have more safety than unemployment insurance, and can rely on their family, friends, and savings if they're laid off.

Limo is one of those services. He started using platforms such as Uber, DoorDash, and Grubhub to pay for college part-time but began working full-time after his contract to be an electrical technician expired last year. The work is temporary for him, but he does not see it as permanent. He said, 'Once i make a certain income, I won't need to do this'.

According to a 2020 study by the Massachusetts Institute of Technology, platforms such as Uber and Lyft could help lower personal debt and reduce the burden on unemployment insurance. This was done by comparing data from Equifax credit reports and car registrations with unemployment data. The study found laid-off workers who had access to Uber were much less likely to apply to unemployment insurance and to borrow money.

This phenomenon is reflected in the current economic data. Despite a slowdown of the economy, unemployment has remained low for many years and stands at just 3.6%. The number of personal bankruptcies is also lower than it was before the pandemic. According to data from the government, between March 2022 and March 2023 there were over 388,000 non-business bankruptcy filings. This is significantly lower than levels a few short years ago. In 2019, for example, more than 750,000 such non-business bankruptcy filings were made.

DoorDash and Uber both claim that most of their employees work part-time to supplement income from other sources. According to Doordash 90% of its workers work less than 10 hours a week on the platform. Uber reported that in the first quarter 2023, 48% of its 'earners,' on average, worked less than 10 hours a week online. 71% of them averaged fewer than 20.

Lack of data is a challenge

When it comes to officially counting gig workers, the federal government does not pay attention. In the last BLS survey of workers with short-term work and alternative working arrangements, only 1% used an app for work. Susan Houseman is the director of research for W.E. Upjohn Institute for Employment Research, Kalamazoo Michigan, says she believes that the federal government undercounted the number of workers in its survey.

BLS spokesperson confirmed it would restart a new survey in order to count those working in temporary jobs or alternative occupations. The data will be released'sometime in 2024'.

Groshen stated that the official government data about the working conditions of participants in the gig economy would be a great benefit to lawmakers who are looking to regulate this industry.

We all need this information to guide us in our investment decisions, our career choices and to help our policymakers make the best policy decisions. Groshen stated that all of this depends on data and we have been undervaluing ourselves in that regard. We could do much better.

Local governments have recently tried to strengthen the protections for platform gig workers. In June, New York City set a minimum wage for app-based food delivery workers at $17.96. DoorDash Grubhub and Uber filed a lawsuit against the city saying that the law would hurt customers and delivery workers. A judge temporarily stopped the enforcement of the law earlier this month. California's Prop 22 was passed in 2020. It allows delivery and ride-hailing drivers to be treated like independent contractors, with certain benefits.

Lack of data quality also has an impact on the wider economy: it prevents the Federal Reserve to get a complete view of America's labor force. Price stability and maximum stable job growth are the Fed's primary goals in setting monetary policies. A lack of reliable data on the gig economy workforce may handicap the central bank. Groshen was a Federal Reserve System member for 27 years.

She said that they rely heavily on official statistics to form a complete picture of the economic situation. Data that isn't timely or detailed could mean they are a bit more blind than they would like to be. If they don't capture all forms of work then they aren't getting the whole picture.