A new report by the JPMorgan Chase Institute indicates that while participation rates in what it calls the ‘online platform economy’ have grown to 0.9% of American adults, the rate of growth has slowed dramatically since 2014. Its research focused on work made possible by advances in online working platforms and didn’t consider freelance work more broadly.
Growth in wages from driving cabs or renting out rooms also is slowing, it found—and in some cases wages have even fallen—as increased competition between players forces them to charge less to attract customers. That’s making gig-economy jobs a far less attractive proposition for workers.
Individuals working on ‘labor’ platforms, defined as those involving work rather than just selling or renting something, are now earning 6% less than they were in 2014, for example.
And, perhaps as a consequence, retention rates are very low, with 52% of people using labor platforms such as Uber quitting within a year. For ‘capital’ platforms such as Airbnb, meanwhile, 56% of users vacate within the same time period.
“The traditional labor market has strengthened, narrowing the pool of likely platform participants,” the report’s authors said. “Those without a job are more likely than the employed to participate and they are more likely to continue participating after 12 months.”
U.S. gig-economy workers also are finding that increased flexibility comes at a cost. Notwithstanding the results of a few ongoing court cases, they are typically hired as independent contractors, therefore forgoing perks such as pension payments, health insurance, holiday pay and sick leave.
In the meantime, the U.S economy is getting back on track, with third-quarter gross domestic product growing at 2.9%. Wages also have started rising for the first time since 2007, while the unemployment rate falls to 4.9%.
“The flexibility afforded by platform work alone might not be sufficient to continue to attract and engage participants on existing terms,” the authors concluded. “Efforts to make independent work more sustainable and supportive for workers across all types of platforms might be necessary to realize continued growth.”
That’s not a great message for gig-economy CEOs who’s business models are largely based on keeping operating costs low.