The on-demand economy is a punching bag that is an irresistible target to a wide swath of people who find the current economic dynamic somewhat imperfect.
There are, broadly speaking, three arguments that make people want to throw a punch:
- The on-demand economy preys on vulnerable workers by stripping them of the benefits, fair wages, and job security. Salon’s epically titled “Good riddance, gig economy: Uber, Ayn Rand and the awesome collapse of Silicon Valley’s dream of destroying your job” neatly summarizes this argument.
- The on-demand economy is a fad. These people are not concerned with the impact on workers, but rather on the idea that the business model will never scale beyond Uber and maybe a few others – see the Wall Street Journal’s “The Entire Online Gig Economy Might Be Mostly Uber” for a take on this.
- There is no real consumer demand. A new study from the American Staffing Association titled “The Gig Economy’ Is Just Jargon to Most Americans” encapsulates this thinking by arguing that “the majority of Americans don’t believe that gig work will be a dominating force in the economy in the coming years.”
I believe that each of these lines of argument are fundamentally misguided; the real reason that the on-demand economy is here to stay is because there is a significant population who need and want the work. And it’s not a new phenomenon – in fact, the rationale for people turning to the on-demand economy is decades in the making.
On-demand work fills gaps created by the disappearance of the safe career job of a generation ago. A generation ago, there was a real expectation that hard work and loyalty would lead to longevity and a comfortable retirement. But that is a distant memory. In 1985, more than 60 percent of workers had a pension – today it’s less than 14 percent.
During this same time, there has been massive growth in the number of full- and part-time contingent workers. A study prepared by Intuit in partnership with Emergent Research found that the self-employed have grown from 17 percent of the U.S. workforce 25 years ago, to 36 percent today, and a projected 43 percent by 2020.
More near-term, a study by Harvard’s Lawrence Katz and Princeton’s Alan Krueger showed that the number of workers employed in “alternative arrangements” – defined as any type of temporary, gig, or contract work – increased by 9.4 million between 2005 to 2015, accounting for nearly all net U.S. job growth over the past decade.
So, why is contingent and on-demand work suddenly desirable?
The data shows that it is playing an increasingly prominent role in our labor force because it forms a new kind of safety net, an always-on opportunity to generate additional income when needed.
For example, the recent Intuit study found that on-demand work is almost exclusively used as a secondary source of income to turn to when the primary source is not enough – on average, on-demand work accounted for 24 percent of total income. The study also found that 41 percent of those who turned to on-demand work did so because a financial hardship – such as a job loss, medical problem, or unexpected major expense – impacted them during the prior year. By comparison, just 18 percent of all Americans in a recent U.S. Federal Reserve survey reported encountering a financial emergency.
The on-demand economy is a convenient punching bag for everything that is wrong with the modern economic environment of slow job growth and lack of career longevity. But it hasn’t created that world – it has emerged in its wake.
Swinging at the punching bag will do nothing to solve the very real challenges of people working on-demand jobs, who need additional income to make ends meet or feel the need to create a nest egg unattainable with a traditional 9-to-5 job. Instead of dismissing the on-demand economy, we should be focused on more deeply understanding the needs of the millions of people who use it to help get by.