Is The Jig Up For The GIG Economy?
The great recession precipitated relatively high levels of unemployment and a material reduction in opportunities for full time work. Consequently, people were open to new things, such as picking up temporary, low-commitment contract work. Workers in this type of work are generally not legally employees and, while they gain flexibility, they lose out on traditional benefits and must pay their own payroll taxes.
This employment environment provided a fertile field for the burgeoning major players in the gig economy, notably, Uber, Lyft and a broad range of delivery based services.
Currently, unemployment is at record lows, and a strong economy suggests that almost anyone seeking full-time employment with traditional benefits is likely to be successful. Consequently, the pool of potential gig workers is probably shrinking. Those individuals who place a high value on flexibility are likely to continue as gig workers, and some full-time employees may also continue to supplement their income through occasional gig work, but the availability of full-time work provides employment alternatives.
Investors should note that the gig industry has always seen high turnovers, and more recently, an increasing level of discontent over pay. Perhaps the long term success of the ride-sharing and delivery businesses may require significant advancements in driverless technologies.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA