What’s Happening to Wages in the Gig Economy? (And, what the heck is a gig anyway?…)

The ease of entry into the on-demand job market through Internet “gig platforms” has increased employment opportunity for many in the Maryland mid-Atlantic region, but it has not necessarily had a positive effect on wage growth. Employment data from the United States Census Bureau shows that wages from several segments of non-employee workers declined in the decade between 2005 and 2015.

The number of independent residential construction establishments (workers) rose 32 percent over that span, according to the Census data. However, their average income declined 27 percent during the same period of time. A similar inverse relationship was experienced by independent taxi and limousine drivers, with a whopping 256 percent increase in their jobs and an eight percent decrease in average income by 2015.

Basic economic theory would explain the income drop as the expected result of a significant increase in the supply of workers.  However, in the gig economy, reading market indicators has not been that simple.

“That’s the $99 question – the issue is that we just don’t know exactly why it’s declining,” said Industry Analyst, Steve King a partner at Emergent Research in San Francisco, California about the falling income numbers. “We know the averages are down because there are a lot more part-timers.  That is clear from the data.  What we don’t know accurately is whether overall wages are down because of the increase in supply.”

Something that is more easily measured is what has happened to the taxi industry, especially in New York City (NYC).  Ridesharing services like Uber and Lyft are causing the prices of NYC’s taxi medallions, which are required to operate yellow cabs to plummet.  There are only a finite number of medallions to go around – 13,587, according to the New York City Taxi and Limousine Commission.  They have become a currency of their own in the NYC taxi business. The price of a single NYC taxi medallion in 2013 was $1.32 million, but as of August of 2016, they were being sold for as little as $650,000, according to Bloomberg.

It is apparent that the gig economy has been disruptive to income levels of workers in some sectors of the economy.  At the moment, however, the average income numbers are a little bit messy.

There haven’t been any good economic studies on wages in the gig economy because the data is not available, added King

Income shrinkage is not just being felt by manual laborers like construction workers and taxi drivers. The Census Bureau’s national data shows some office-based industries such as advertising, public relations, and graphic design, are also experiencing a decline in yearly average income.

For example, the number of people working in public relations grew 31 percent during the 10 years between 2005 and 2015. Yet, their average wages fell by 3 percent, according to Census data.  The employment and income statistics for the state of Maryland reflected a similar trend with the number of PR workers increasing by 26.4 percent and their wages declining 13 percent over the same period of time.

The Race to The Bottom

 The global economy of the Internet has created a hot market for freelance work that is a few keystrokes away, according to the Oxford Internet Institute.  Many businesses are taking advantage of this affordable workforce.

 “More people are getting used to the idea of hiring people overseas through online platforms, and that opens the door to unlimited low-cost supply,” said King.  “That definitely does put wage pressure on for American options. India and Eastern Europe are large suppliers of online gigs.”

An example of this is the international gig platform, Fiverr, based in Israel.  Fiverr started in 2010 with a simple concept: offer a job or service – a gig – for $5 or less.  The allure of affordable graphic design, visual imaging, and other media services was so popular with consumers that the website has grown from a few hundred thousand sellers in 2010 to over 4.2 million gig by 2015, according to the company’s year-end review.

However, not everyone is thrilled with this trend.

“I find Internet platforms exploit the currency exchange differences across countries,” said Rajan Sedalia, a visual artist who bases his business, Artjar, in Washington, DC.  “(They) undermine a country’s livable wage. It’s a race to the bottom for clients scouring the world for cheap services and labor.

“I have been in the business for 18 years, and I just have to say ‘no’ to some jobs rather than trying to compete on price,” added Sedalia.


 It’s Alive and Kicking

There is no official definition of the “gig economy”—or, for that matter, a clear definition of a gig.  In this work paradigm, workers are usually employed for a specific task or job and have little connection with their employer.  Gig jobs generally do not offer predictable hours, health benefits, retirement plans, or defined career paths.  Yet, according to the Freelancers Union and ReportLinker, a growing number of people are attracted to this work arrangement because of the lure of flexible hours, a less stressful work environment, and the feeling of “being their own boss.”

More than 57 million Americans work as independent contractors or moonlighters, according to the Freelancers Union, a figure that is approximately 36 percent of the American workforce, according to the Bureau of Labor Statistics (BLS).  While project-based work used to be most common among recently laid-off workers or those unable to find permanent work, it could soon become the prevailing modus operandi for a significant portion of the population. On-demand or “gig” talent is in high demand. CareerBuilder’s 2017 forecast indicated that more than half of employers were seeking contract workers, a 47 percent increase from the previous year.  Intuit estimates that by 2020, 43 percent of the U.S. workforce will be freelance.

The Gig Economy, The Internet, and Jobs

 The Internet has revolutionized the way independent workers market their services and obtain new business.  This increased demand for gig workers has created a niche for web platforms such as Upwork, Toptal, and Fiverr, which give freelancers a central place to market their talents.  The increased exposure and ease that this technology offers freelance workers has set the stage for greater numbers to enter the market independently as nonemployees.

Gigs work is more likely to be available in some occupations than in others. Jobs that involve a single task, such as designing a website, are conducive to this type of employment arrangement. Any occupation in which workers may be hired for on-demand jobs has the potential for gig employment. The BLS Occupational Outlook Handbook (OOH) covers about 83 percent of the jobs in the U.S. economy. Its 329 detailed profiles of occupations are sorted by group. In its Career Outlook publication for 2016, the BLS grouped the most significant gigs in the following categories:

Arts and design. Occupations in this group, include, fine artists, musicians, and graphic designers. These workers offer specific one-time services or customized products, which makes them a good match for gig work.

Computer and information technology. Web developers, software developers, and program coders are among the jobs in this group.  Workers are usually hired to complete a single job, such as to create a smartphone application or a new type of software.

Construction and extraction. Carpenters, painters, and other construction workers frequently take on short-term, individual projects. They tend to market their services on gig websites like Thumbtack.com.

Media and communications. The services of videographers and editors, technical writers, interpreters and translators, and photographers make up this group. They are often project-based jobs that can be delivered electronically.

Transportation and material moving.  These are the jobs that are most commonly associated with gig work. Ridesharing apps like Uber and Lyft have disrupted the taxi and limousine industry by providing transportation to passengers as needed through smartphone apps. Also, on-demand shopping services such as Amazon have led to gig jobs for delivery drivers.

 Taking Your Show on the Road

 Sarah Rose Andrew works all hours of the day on jobs all over the world, and most days she doesn’t have to leave her Bethesda studio.  She is a graphic designer who acquires online clients through an Internet platform where she gets hired on a regular basis.

Sarah Rose Andrew specializes in branding and identity systems

“I get about 80 percent of my work through people who find my business website through direct searches,” said Andrew. “And, I get the balance of my work through a gig platform I use.  Those clients are very easy to work with.  I set the rates and chose with whom I work.  The website handles all the accounting and collection of payment. It’s very convenient in that respect.”

Andrew has been working as a full-time graphic designer for the past six years.  She moved her business, Gyst Design Co., from the west coast (Portland and San Francisco) to Washington D.C., when her husband relocated for a new job assignment in August of 2017.  Gyst Design specializes in comprehensive branding and identity systems.

“Since I do a large percentage of my work electronically over the web, it did not disrupt my business that much at all,” said Andrew with a laugh. “Well… not THAT much.  I live working face-to-face with clients, but I could see working gigs online becoming the way that I do most of my business in the near future.”

 Revenge of the Nerds

Despite evidence of wage shrinkage in some sectors, not all gig workers are suffering. In the financial management and software design occupations, Internet gig platforms have led to more jobs and higher wages.  For those with highly specialized skills, freelancing can be a way to maximize earning power.

“What we have been seeing in our numbers is average income bifurcating much like it is in the general economy,” said industry analyst King. “Higher skilled people with better networks are making more, with more of them making more, and new people with less strong networks, less expertise, etc. For, those people, wages are declining.”

It is becoming increasing challenging to make definitive statements based on data about whether the gig economy is having a positive or negative effect on American workers’ income.

“We are used to using means and median income numbers to gauge economic trends,” added King.  “However, when you have two groups going in different directions, the mean is no longer indicative of what’s going on.  The median is better, but it is still problematic.  The economic world is breaking down into segments that no longer move in tandem.”

A 2017 study by Mavenlink  revealed that executive-level professionals are some of the most in-demand gig workers.  The survey found that 47 percent of executives are seeking temporary hires for management, senior executive, and even c-suite roles.  It went on to state that the two qualities leaders value most in potential candidates are specialized degrees (35 percent) and a decade or more of experience (29 percent).

These highly skilled upper-level workers add immediate value in strategic areas, without requiring lengthy onboarding.

Mavenlink’s survey also found that on-demand professionals with IT skills are in the highest demand. As a result, Internet platforms such as Toptal.com have developed a fruitful market niche by catering to a global network of top engineers, IT designers, and finance experts.

“Toptal reduces freelancers non-billable time, the time they spend looking for work and hence increasing their earning potential,” stated Raj Jeyakumar, Toptal’s VP of Business Talent. “We provide access to projects that match the freelancer’s skillsets and help them get started in days instead of weeks or months thanks to our pre-vetting and technology platform.”

A rising number of IT professionals are leaving their full-time jobs and entering the freelance market to take advantage of that demand, according to Jeyakumar.

 From Both Sides Now

Daryl Mitchell, a native Washingtonian, owned a successful on-site computer repair business between 2006 and 2012.  During the last two years of their business, he and his business partner often used the gig platform Workmarket.com to hire IT talent for short-term jobs when their 14 full-time employees could not cover all of the assignments.

“My partner was the one who usually interacted with the platform whenever we needed extra coverage,” said Mitchell in a phone interview. “He loved it because it was not time

Daryl Mitchell has used gig platforms as an employer and on-demand employee

consuming. Workmarket made sure that the talent had all of the proper certifications, were bonded, and had background checks, and he negotiated a rate that worked for our business.”

When Mitchell decided to sell his portion of the business and move to Minneapolis to care for a family member in 2012, he knew exactly what he could do to get quick short-term employment until he settled into his new living situation. He listed his computer repair and networking skills on Workplace.com.

“It was relatively easy to do, and once they did the background and verification work, I was getting job offers pretty quickly,” said Mitchell.  “It certainly makes the transition easier.”

A large company made me an offer with benefits that I couldn’t refuse, but if I had to get a quick job again, I wouldn’t hesitate to list with another IT gig platform, added Mitchell.

Census Bureau data for the number of non-employee computer system design workers grew nationally by eight percent between 2005 and 2015, and by a whopping 23% in the District of Columbia.  Wages increased as well during the decade, growing six percent nationally and 11% in D.C.

Stemming the Race to the Bottom

 In January of 2017, Fiverr, the gig platform earlier described as contributing to a “race to the bottom” for the services of graphic designers, announced a premium tier for handpicked freelancers.  According to a 2017 press release from the company, freelancers invited to participate in Fiverr Pro were chosen based on “demonstrated excellence across the transaction experience, from producing the work, to communication.”

Fiverr Pro lists professionals offering services from graphic design and social media marketing, to writing and translation, to video and animation. It is the platform that Andrew started listing Gyst Design’s services on right before she made her move to D.C.

“I like the site because it attracts the type of client who is more in line with the type of work I do,” said Andrew. “There is more interaction with the client than on the regular Fiverr site. Therefore, the client/talent match is much better.  I am hired because the clients like my work and are willing to pay my rates.  It’s been a great experience, and my clients are happy.”

“I will always focus on getting my own business, but I will continue to use a gig platform like Fiver Pro as long as it continues to be reliable source of work,” said Andrew.

Howard R. Fletcher is a journalist and podcaster who lives in Silver Spring, MD.  

The Number One 2 Podcast is available on iTunes, SoundCloud, and Buzzsprout.

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