What an Economist Learned About the Gig Economy by Working in It

Headlines are replete with technology news about the gig economy — the increasing use of contract, freelance, and other paid by the hour workers by companies rather than salaried, full-time employees. More and more Americans are gig economy workers, and some economists forecast that the numbers will rise even higher in the future.

But what is it really like to work in the gig economy and what effects does gig work have on income? Well, Stanford Economics professor Paul Oyer worked in several gig economy firms as part of his research. His findings from stints at Uber, the ride-hailing app firm, and Upwork, which employs freelancers in writing, design, computer programming, and other work, are surprising.

The Gig Economy as Equalizer

For one thing, Oyer sees the gig economy as something of an alternative safety net for both people and categories of workers. As he notes, over the past several decades, the income of men without a college education has gone down in real terms, while the income of people with a professional degree has more than doubled.

When asked about the contribution of the gig economy to rising U.S. income disparity, however, he says that a gig economy job might not be the driver of income inequality, but serve as an equalizer of salaries. People who may have lost jobs in manufacturing or retail, for example, can take up at least some of the slack by finding gig economy jobs for firms like TaskRabbit (where people perform multiple tasks requested by customers) or Shiftgig.

He also feels that gig economy workers make more. Data show that they make 6% less per year than salaried workers do, but also that they make 15% more per hour. Oyer hypothesizes that the lesser earnings may stem from the increased flexibility of gig work.

In addition, he points out that the gig economy equalizes wealth around the globe. At least some gig workers come from relatively poor overseas countries, and the income they earn contributes to equalizing the wealth disparity between those countries and the developed world.

Uber drivers and other gig workers make entrepreneurial decisions every day.

Mini-Entrepreneurs

Oyer also thinks that gig workers are mini-entrepreneurs. Those who are successful must make precisely the same determinations about business strategy and cash flow as both start-up and established entrepreneurs do.

He found, for example, that even though the gig economy is supremely flexible — gig workers for both Uber and Upwork, his chosen companies, ostensibly work when and as much as they want — the workers in it often feel pressure to work more. Demand is variable, and Uber drivers, for example, make more if they drive at night and at times of surge pricing. Thus, they may be balancing their desire for flexibility with the desire to increase their cash flow for the month.

Indeed, Oyer and his colleague were initially interested in gender disparities in the gig economy and were investigating them in Uber. Male Uber drivers make, on average, 7% more than women do. Their hypothesis when the study first began was that men worked at night and chased higher-paying assignments, such as surge hour work, and that women fitted it in with family responsibilities, driving primarily on the weekend.

However, they found that the gender pay disparity was actually due to two factors: 1) men drove more (and faster, which increases earnings on the Uber platform) and 2) they tended to be Uber drivers over a longer period of time, which increased their ability to strategize methods to maximize their earnings.

So the benefits of the gig economy might be the increased entrepreneurialism of the American workforce, according to at least one source.

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