Roughly 1.5 million Americans depend upon the gig economy to provide for their livelihood. Some people have chosen to work in gig-type work, such as driving for Uber or Lyft, shopping at supermarkets for families through Instacart, delivering food via DoorDash or offering a creative service through Upwork.
This could either be a side hustle to bolster what they’re earning through their primary job or serve as the sole source of income. Many people have been pushed into this space due to the lack of alternatives. They’d rather hold full-time, permanent jobs with benefits, but were unable to procure appropriate opportunities.
As over 53 million Americans recently filed for unemployment, there’s an enormous overhang of people desperately seeking out new jobs. This staggering number doesn’t even capture the vast amount of people in between jobs. There are those who’ve finished collecting benefits and aren’t included in the official government data. Large numbers of people have given up looking for a job and are sitting on the sidelines.
Some of the folks who are out of work slowed down their search, as the unemployment benefits they received were close to or even more than what they earned in their jobs. A portion of the people in between jobs decided to take a wait-and-see approach to the job market. Without appropriate jobs available, dealing with rejection, lack of feedback and getting ghosted, they’ve decided to take a break and hold off on their searches until things turn around.
Unfortunately, there’s now more stress heaped upon the unemployed to find work, as the federal government enhanced $600 per week in unemployment benefits will end this month. In what feels like a potential Hunger Games scenario, we could foresee intense competition for opportunities, as millions of people pivot into the gig economy to put food on the table and have a roof over their heads.
Large numbers of people are likely to swarm toward Uber, Lyft, Instacart, Amazon Flex, Fiverr, Uber Eats, DoorDash, TaskRabbit and Target’s Shipt. Adam Ozimek, chief economist at Upwork, an app connecting freelancers with gigs, has seen a 50% increase in signups.
It is Economics 101. When there are more people looking for jobs than positions available, wages will be driven downward. As greater amounts of people hit the job market, the overall hourly pay will decline. With a continuing oversupply of people desperately needing work, it will force down the wages of everyone involved.
There will be other adverse effects. Companies will be emboldened to cut back on their expenditures on workers, in addition to lowering their pay. At the height of the Covid-19 pandemic, workers were given the necessary protections and hazard pay to compensate for the risks they were undertaking. Most, if not all, of these bonuses were withdrawn.
This could have a ripple effect on the overall job market too. With so many people searching for jobs at the same time, corporations won’t have to worry about having to offer large salaries to entice workers to hire them. They’d be able to cut the compensation and benefits, while demanding more. This could impact both the lower end of the salary spectrum, as well as white-collar office workers.
Instead of paying a nice, comfortable salary to a marketing or creative person in New York City or San Francisco, the company could seek out a consultant to do the work at a fraction of the pay without any long-term commitments or costly benefits required. Workers across the board will be fearful to ask for raises—out of fear of being replaced by someone less expensive or that they’d hire an outside contractor.
This won’t bode well for the economy. With less people working and those who are earning less money and holding tenuous jobs, they won’t spend too much money. We will enter a period of austerity. This means fewer people will buy new clothes and cars, travel, go on vacations or make other expenditures. Consequently, businesses will receive less revenue, profits will fall and more people will lose their jobs.
It’s crucially important that our elected leaders figure out solutions before things deteriorate even further.