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The ‘Gig Economy’ is an Answer to a Sluggish Job Market, but not the Answer

By Dean Inouye

If you’ve hit the wall in finding a job, the idea of chucking the job search and driving a car for Uber may have crossed your mind at some point. That could be an option; recent research shows more and more people taking part in the so-called gig economy. But there are drawbacks as well.

In the broadest sense, the gig economy includes several types of “alternative work arrangements,” according to a study published in March by Lawrence F. Katz of Harvard University and Alan B. Krueger of Princeton University.

The category consists of workers from temp agencies, on-call workers, contract workers, and freelancers. The researchers found that the percentage of Americans with these jobs rose to 15.8 percent of the workforce in late 2015 from 10 percent a decade earlier.

It’s also worth noting that these jobs have been growing in industries that traditionally provided stable employment, such as manufacturing, education, legal services, and government. Another change is that 12 percent of men worked in alternative arrangements in 2005, compared with 8 percent for women. The percentages are now 17 percent for women and 15 percent for men.

An attraction of these jobs is flexibility for contracting companies as well as workers. The Freelancers Union, a nonprofit group with 300,000 members, says that nearly 9 out of 10 of its members would not return to a traditional job if given the chance, The Boston Globe reported. But Sara Horowitz, the group’s executive director, also noted that freelancers don’t receive benefits such as health insurance, and that 7 out of 10 members said they’ve had trouble getting paid promptly—or at all in some cases.

More narrowly, the gig economy refers to work that relies on apps or online platforms, such as Uber or the vacation-rental site Airbnb. For these types of jobs, the Katz-Krueger study and a February report by JP Morgan Chase & Co. dampen the notion that Uber and its ilk are taking over the employment market.

The Katz-Krueger study said these types of jobs made up just 0.5 percent of the U.S. workforce. JP Morgan Chase did find a sharp rise in participation in the “online platform economy.” Still, from October 2012 to October 2015, only 4.2 percent of adults in this random sample of JP Morgan Chase customers had earned money in this sector at one time or another. In September 2015 alone, 1 percent of adults earned income in this economy.

Online platforms can provide a “secondary source of income,” JP Morgan Chase said, with a median of $533 a month for workers who were paid for labor, such a driving a car for Uber. For “capital platforms,” through which users rented their properties or sold items, the median monthly income was $314.

The gains may be modest, but to cash in on the opportunities, you may need to move quickly. Thumbtack Inc., an online marketplace, released a report in March predicting that over the next 20 years, automation, such as driverless cars and drones, will eliminate lower-skilled jobs in the current gig economy. It will be replaced by a gig economy geared toward skilled professionals—just the kind of people Thumbtack is trying to serve.

Dean Inouye

Dean Inouye, a longtime newspaper editor with experience in financial, national, and local news, can be reached by email.

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