If you were to read the coverage of a new report from the JPMorgan Chase Institute, you would think that wages at Uber, Lyft, and other such gig economy employers is plummeting, possibly even to half their previous levels. But believing that would be an error, one brought on by the manner of the coverage. The actual events being reported in the original report are that many more people are working for such companies and treating it as, well, a part-time gig, not a full-time job. It is not obvious that gig economy jobs being done as part-time gigs is a bad idea.
The error is widespread. The New York Post said, “Earnings for Uber and Lyft drivers are plummeting.” Recode said, “The gig isn’t as good as it used to be for people working through online transportation apps in the U.S.” Marketwatch said, “Drivers for Uber, Lyft are earning less than half of what they did four years ago, study finds.”
But this is not what the study found, not at all.
The average driver doing the job today is earning less than the average driver who did the job those years ago was. There is a considerable difference between those two statements. The difference is that many more people do those jobs now than then, meaning that we’re looking at a very different population of people.
What hasn’t been studied is the manner in which wages have changed for the people doing the work over those four years. Instead, JPMorgan Chase looked at the wages received from those companies into accounts at the bank (Note: the JPMorgan Chase Institute is separate from the bank, but …). But quite obviously, given the expansion of the sector, there’s a rather different number of people getting those checks.
We might make an obvious point about economics being the study of what happens at the margin — that was the great revolution of the 1870s which should have been enough time for people to get up to speed. And it’s not a huge surprise that the marginal worker makes a different, possibly lower, amount than the average one. Vast areas of economics depend upon that very observation.
Four years ago there was some hardcore group of Uber drivers, now there are many more. From this study we know nothing at all about what happened to the earnings of the hardcore nor long lasting. We only know that the expansion of the sector has led to lower average earnings. This is to be expected as more people pick up a side gig and do it part-time.
We don’t have information that says earnings are plummeting and the gig isn’t as good as it used to be — at least, not in the manner we would normally take that meaning, that those working at it full time are making half of what they used to. Instead we’re really being told that many more are doing this work part-time.
At a more basic economic level, this is great. The one great economic benefit of this sort of gig economy work is that we can indeed expand the workforce, and thus provision of the service, to meet those times of higher demand. We’ve not got some vast full-time workforce capable of meeting Saturday-night-in-the-rain demand that we’ve then got to keep fed seven days a week. The marginal driver only works at that point of peak demand then goes off and does something else the rest of the week. That’s the very point of the gig economy.
The real message of this report is that the gig economy works. Many more are doing it as a part-time occupation at those times of massive demand. This is exactly what we want to be happening in the first place.
You can still not like Uber if that’s what you want to do. But “gig economy company provides gigs that many more people want to do” is hardly a condemnation of the sector, is it?
Tim Worstall (@worstall) is a contributor to the Washington Examiner‘s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at the Continental Telegraph.
