Friday, November 4, 2016

Brookings: "Is the Gig Economy Cannibalizing or Creating Jobs? Here’s Some Early Evidence"

From the Wall Street Journal's The Experts column:
Mark Muro (@markmuro1) is a senior fellow at the Brookings Institution and the policy director of the Metropolitan Policy Program there.

Does the so-called gig economy of app-based freelancing for platforms like Uber or TaskRabbit complement or “cannibalize” more conventional payroll work?  Given the sketchiness of the data available, it’s been hard to tell.

However, last month, the economist Ian Hathaway and I were able to piece together a plausible look at trends in two slivers of the much larger gig economy—the rides and rooms industries anchored by Uber and Airbnb, respectively—by looking at data from the Census Bureau’s “nonemployer firms” series, which tracks the activities of small freelance businesses that employ no workers.

In doing that, a picture emerges that is by no means definitive but that suggests—to my eyes at least—that the spreading gig economy (at least in the case of ride-sharing) is, in fact, substituting for some payroll employment, or at least depressing its growth.

To be sure, a first reading of the data lends credence to the view held by enthusiasts of the “sharing” economy that Uber and Airbnb are serving unmet consumer demand or stimulating new demand—and so are creating new work opportunities that complement those in existing taxi or hotel companies. You can see that in our data, which show that both nationally and in most of the 50 largest U.S. cities, payroll employment has actually increased somewhat in those industries during the years 2010-2014, even despite the influx of nonemployer contractors working for Uber and Airbnb.
However, payroll growth in the two industries looks surprisingly weak by our count.  And I believe that a closer look at the metro-by-metro data suggests that platform freelancing was already substituting for some payroll employment and cannibalizing it in the 2012-2014 period.
Payroll employment, after all, had declined in 15 metros by 2014 in ride-sharing and 10 in room-sharing, despite a modest economic recovery.  Especially on the ride-sharing side, where Uber and Lyft offered marked quality advantages over many incumbent cab companies, payroll employment growth in incumbent firms remained anemic in most markets or else turned negative while platform-based freelancing (measured by nonemployer firms) took off. In San Jose, nonemployer-firm gig employment spiked 145% but payroll employment slumped by 31% as taxi and limo companies shed 250 payroll jobs.  In Sacramento gig employment jumped 92% but payroll employment declined by 22%. And in Pittsburgh, freelancing surged 85% (by 560 drivers) but payroll employment slumped 5%.

All in all, these early developments raise the possibility that the online freelance marketplaces may well gain workers at the expense of competing payroll businesses in some industries, particularly where incumbents are struggling in weaker markets or fail to respond with better service.
All of this is important because the rise of online temping, freelancing and independent contracting has huge implications for the circumstances of workers and families in cities....MORE
HT: FT Alphaville's Further Reading post.