We have all at some point in time talked about or heard about the growth of the gig economy and how this could potentially be the future of work. While the number of people participating in the gig economy has been on a growth path, their ability to earn from their gigs alone to support them and their families has not been growing in proportion.
JP Morgan Chase Institute recently did a study on the state of the online platform economy. It tried to answer a fundamental question – “Has all the technological and business model innovations that have led to the flourishing of the gig economy, actually created viable new options for making a living for those who participate in this economy.”
Their dataset was the following:
For this study, we extend the JPMorgan Chase Institute Online Platform Economy dataset in order to track supply-side participation and earnings. We identify 38 million payments directed through 128 different online platforms to 2.3 million distinct Chase checking accounts, out of a de-identified sample of 39 million, between October 2012 and March 2018.
Here are some findings of the study that I find interesting.
- Transportation (people and goods) is the biggest sector of the gig economy.
- Most people who participate in the gig economy only participate part time (only active during sometime of the year). What this means is that they need to build and maintain other sources of income as well à participating in the gig economy is not their primary work.
- With more people participating, the average income for each of the participants has been declining due to increased competition and reduced demand.
- Participation in the gig economy varies significantly over geography. People in certain geographies are more inclined to participate.
- In some sectors (selling through marketplace and leasing), high platform earnings are concentrated among a few participants. Just like any other online economy, we have significant winners and insignificant followers.
What all of these indicate to me is the following:
Potential of Gig Economy:
There is enormous potential to create gig economy business models for sectors other than transportation. More service sectors can still be opened up to benefit from the gig economy. High end services is another area that still needs to be explored by more players.
Challenge for marketplaces:
Marketplaces that play in the gig economy will be well-advised to figure out a way to help increase the number of players who earn enough income to support themselves by just being part of the gig economy. These marketplaces can only survive as long as there are people who are willing to participate in them and provide their services. If these marketplaces replicate the significant few (concentrated high income) and insignificant others (mid-to-low income) in terms of income distribution, there is a risk of losing the interest of the majority of the low income generating participants.
Gig Economy as the side hustle:
By the current status, it still looks like the gig economy might not yet replace more traditional forms of income for a significant number of workers. They might still need to find traditional work and supplement it by participating in the gig economy, as their side hustle. Having said this, we will continue to see increased number of participants getting involved in the gig economy.
- Income from gig economy will not replace income from traditional work as the primary source of income anytime soon.
- Overall, the number of participants in the gig economy will continue to grow significantly.
- We will see a lot more sectors (high-end) open up for the gig economy soon.
PS: You can find more information about the study and download the report from here.