The gig economy: don’t give up your day job

Everybody seems to be talking about the gig economy at the moment. It’s an ill-defined term but basically it means more people making their living by picking up bits of freelance work through online marketplaces.

Every so often, a survey, usually by an agency or a freelancers’ organisation, tells us that a large proportion of the US workforce (usually somewhere between 30 and 40 percent) is now self-employed and that the number will inevitably rise, possibly to 50 percent, by the end of the next decade. This has perplexed many American economists and business writers who point out that there is no evidence behind these claims and quite a lot to suggest the opposite. As Bloomberg’s Justin Fox points out, the surveys with these big numbers include anyone who has done some freelance work over a given period and would include “an 18-year-old who lives with his parents and plays video games all day but occasionally mows neighbors’ lawns or walks their dogs”.

Josh Zumbrun, in the Wall St Journal, says the US economy is actually getting less giggy, with the proportion of self-employed people falling in recent years.

Screen Shot 2015-11-04 at 14.29.39

The gig economy might fit with the American legend of independence and self-reliance but the data show that, just as the US is not a country of small business, it’s not a country of freelancers either.

In the UK there is at least has some data to support the notion of the gig economy. The proportion of self-employed workers rose to a record high last year and, though it has eased off slightly since, it is still high by historical standards.

Screen Shot 2015-11-04 at 17.31.03

Chart via ONS Economic Review, 3 November 2015

Even so, says Laura Gardiner, it is not clear whether this represents a new economic model or just the lack of employment opportunities after the recession. The data give mixed messages:

Maybe there are signs of the gig economy in the jobs self-employed people are doing? Here, the picture is mixed – the three biggest growth sectors for self-employed workers since 2009 have been hairdressing, cleaning and management consultancy. Granted, these services could be traded in the gig economy, but they’re also jobs with a history of growing self-employment incidence that pre-dates the birth of the online marketplaces we’re talking about. The next biggest riser is ‘renting and operating real estate’, which – promisingly – could reflect people offering their homes and driveways online. On the other hand, taxi operation is the biggest faller, perhaps quelling the suggestion that Uber is taking over.

That said, it is possible that some of the gig economy doesn’t get picked up in employment stats. It could be that people in employment are doing bits and pieces of freelance work, using online marketplaces. The standard figures on who is employed or self-employed, full-time or part-time and permanent or temporary might be hiding a lot of freelance activity.

My hunch is that some of the rise in self-employment reflects a longer term change in the nature of work. As the Economist said a couple of weeks ago, if the jump in self-employment had been caused by the recession it would have fallen more quickly once employment started to recover. All the same, the idea that, five years or so from now, many people will earn their main living from picking up bits of freelance work is fanciful.

The astonishing collapse in self-employment income over the last decade or so shows just how difficult it is to make a living from freelancing. There may be a record number of self-employed people but their share of the UK’s turnover and the overall cash amount they earn between them have fallen. It’s rather like one of those nature documentaries where, as the drought sets in, more and more animals arrive to drink from an ever-shrinking water hole. As Paul Nightingale and Alex Coad point out, the typical British startup just adds to the churn by putting another small firm out of business. It’s likely to be the same with giggers. The more of them there are, the less each one will earn.

That’s the trouble with gigging. A few big bands make good money from but most play in small venues for beer money, or sometimes just for fun. The gig economy might be good for supplementing income but it is no substitute for proper paid work. As the old showbiz saying goes, don’t give up your day job.

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4 Responses to The gig economy: don’t give up your day job

  1. David says:

    All pretty self evident really . There can only be so much stuff to be done that someone else is prepared to pay money for .
    Any information as to what sort of ‘work’ is being done and by what sort of person , with what sort of employment record ? I mean we’ve had here today gone tomorrow gardeners , builders , cleaners and even ‘lay a bit of tarmacers’ in the past , so are these giggers number crunchers , software menders , or writers of some kind ?
    It’s that market place again !

  2. TonyM says:

    Rick, the picture on self-employment is more complex than you make out. Yes, there is something structural going on. That is why the number in self-employment has increased by c.100,000/yr on average every year since 2000. The recessionary influence has been relatively small. Your 2nd graph shows that.

    But the self-employed are an incredibly diverse group. 1 million of the self-employed report that it has been their main labour market activity for at least the last 20 years (LFS). Growth in the stock of self-employed is most rapid in those aged 55+ and, for many of those, continuing in self-employment will be a labour market alternative to retirement.

    If you look at wealth (i.e. stock) rather than income (i.e flow), then you observe from the ONS Wealth & Assets Survey that the self-employed are actually rather rich. They live in households of greater household wealth than either employees or pensioners (both on mean and median measures). And of course, there is lots of evidence from the self-employed about their high self-reported well-being scores and enjoyment from being their own autonomous boss (e.g. recent RSA publications).

    Where all that stock of wealth comes from we don’t know? It may not have been generated from self-employment at all; maybe not even been generated by the self-employed respondent, and could have come from the other householders. The causality is unclear.

    Pen portraits are tricky because of that diversity of the population, but rather than characterising the average self-employed person as a poverty-stricken beast at the waterhole (and without doubt many will be), I think the more typical self-employed person is better painted as a relatively comfortable ageing-hobbyist-rocker, gigging more the enjoyment than being motivated for the necessity of putting food on the table.

    Argued from this perspective, your final concluding paragraph nails it spot-on. The perils of new, young entrants into this gig market (lacking the cushion of household wealth) are that too many of your existing competing bands are perfectly able and happy to play for beer money.

  3. metatone says:

    That last link touches on a sore spot for me. We have a small firm and we’re at least noticeably different to other firms who are nominally in the same sector. But we’d have had more support starting up and get more support exporting if we were yet another Graphic Design firm, or the like.

  4. Pingback: Preferences, Hidden and Revealed | (Fund) Raising Voices

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