Rapidly growing online platforms, such as Uber and Airbnb, have created a new marketplace for work by unbundling a job into discrete tasks and directly connecting individual sellers with consumers. Raq reports from the front lines of the Online Platform, or gig, economy.
I recently ran into someone I hadn’t seen for a long time. Let’s call him Howard. Last time I saw him, Howard was an investment banker who worked for heads of state. He had a swanky apartment in Manhattan and a swanky flat in London. He was the poster boy for the 1%. For reasons that don’t bear exploring at this juncture, his gravy train derailed…and now he drives for Uber. He’s part of a different minority – the 4.5% of American workers who made all or part of their income from freelance work in 2016. (This is a “best guess” based on as much of the available data as I could crunch. In truth, no one can agree on the size of the gig economy, because no one can agree on what to measure. See How Big is the Gig on Medium.)
Uber is the mascot of what the media calls the “gig” economy, but a recent report by JP Morgan Chase says this change in income sources should more properly be termed the Online Platform Economy. Advanced connection and communication technology means that the corporations whose brand is associated with the product or service only provide access. As TechCrunch puts it, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. “
These brands have unbundled previous offerings; just as Uber owns no vehicles, it also does not employ drivers. It enables people willing to drive for pay to connect with people needing a ride. That ease of access for service providers and clients alike means that people in need of work have more options than ever. Which is good, because people seeking traditional employment have fewer.
As a fast-growing and highly accessible new marketplace for work, many have characterized the Online Platform Economy as the “future of work.” JP Morgan defines the Online Platform Economy as economic activities involving an online intermediary that provides a platform by which independent workers or sellers can sell a discrete service or good to customers, and that’s good enough to be getting on with. Examples come from both goods and services, or better for the info economy, capital and labor. Labor platforms, such as Uber or TaskRabbit, connect customers with freelance or contingent workers who perform discrete projects or assignments. Capital platforms, such as eBay or Airbnb, connect customers with individuals who rent assets or sell goods peer-to-peer.
The man I mentioned earlier, Howard, seems to have the same motive for participation in the gig economy as most people, according to that JP Morgan report. While media portrays the gig economy as growing because it offers things people want, like the ability to work from anywhere, set your own hours, and build your own brand, the JPM report tells a different story. JP Morgan surveyed 1 million bank accounts to analyze almost 300,000 types of sources of deposited funds, and determined that people are using gig work as a buffer against income and expense shocks.
Americans experience tremendous income volatility, and that volatility is on the rise. The typical household faces a shortfall in the financial buffer necessary to weather this volatility. Moreover, the decline in real wages since 2009 for all income groups except the top 5th percentile means that life is harder to afford in general, but even more so when earnings dip below average. Cost of living is increasing for the poor more rapidly than for the wealthy, and American companies are reacting to Obamacare by trading salaried employees for freelancers.
I know what income volatility is, but what is this “gig” thing of which you speak?
According to a recent survey by Pew, there are many Americans who aren’t using on-demand services and, in fact, are wholly unaware an on-demand economy even exists, according to a first-ever Pew Research Center survey on the collaborative, shared economy. The survey found 89 percent of U.S. adults weren’t familiar with the term “gig economy” and 73 percent are not familiar with the term “sharing economy.”
Congrats! By reading this post, you’ve moved into the informed minority! While you still may not use Uber or AirBnB, at least you have made the acquaintance of a trend that is separating the digitally literate from the not and changing the rules of economics. By 2020, several studies estimate that more than 40% of the American workforce, or 60 million people, will be independent workers—freelancers, contractors, and temporary employees.
That won’t affect the Intelligence Community, right?
Probably not as much as it’s affecting the goods-and-services workforce, but it will affect it. I’ve long maintained that major media sources should provide micropayments for reports to those who provide the content – if your tweet gets used on the Today show or CNN, they are using your intellectual property to help sell their product and you should get a penny for your thoughts. What if Neal Stephenson’s prediction came true and the IC paid stringers?
The IC workforce might also start taking gig work. As budgets shrink and sequestration becomes the norm, many government employees have to find alternative and additional income sources. The high cost of living in the Washington DC area has outpaced government salaries for years. There are limits, of course; no one’s going to take gig work that will endanger their security clearance or take them away from their job, which means you won’t see too many IC employees offering rooms on AirBnB or driving for Uber. But you might see them selling things on Etsy or providing grunt labor on Mechanical Turk.
Long-term employees in any company gig to keep skills current and to keep themselves positioned for the inevitable retirement. Those who want or need a second career need to have a CV that will make sense to future clients. The number of my acquaintances who gig is growing. As my older friends retire, they are piecing together gig work to avoid having to start a second career or having to start eating cat food.
Primarily, I think intelligence work will become unbundled within the walls of the agencies. Rather than a stiff bureaucracy with deep divisions, online platforms on a secure cloud will enable employees to contribute their expertise as needed, regardless of office. This will reduce costs, saving money for the taxpayer, and speed responsiveness, providing better information to policymakers. It will also improve security, as fewer people will have full access to any program. The weak spot will be the network, so cleared cybersecurity rockstars may be the best IC gig of all.