We've been in a lot of meetings lately where people talk about the "Uberization of Work".
These discussions tend to go the same way. The claim is made that Uber is creating the gig economy by hiring independent contractors instead of traditional employees.
We don't agree.
In fact, we believe the opposite - Uber exists because of the growing need for highly flexible part-time work to supplement incomes. In other words, Uber didn't invent the gig economy, they tapped into it.
Several recent articles and studies help explain this. The Atlantic's The Secret Shame of Middle-Class Americans is written by one of the 47% percent of all Americans who couldn't come up with $400 to cover an emergency expense without borrowing or selling something.
This is not new news. As we pointed out last year, even many relatively high income households are living paycheck to paycheck.
But the article generated so much interest, The Atlantic is publishing a series of responses from academics and researchers.
The article and the responses blame the usual suspects - wage stagnation, the loss of middle income jobs, lower unionization rates and fewer traditional jobs with benefits. And these are all part of the problem.
But the response that caught our eye came from one of the folks who worked on the U.S. Financial Diaries project, which we consider one of the most important projects looking at economic uncertainty. Key quote from their response:
In the U.S. Financial Diaries project, Jonathan Morduch and I found that, on average, households in our sample experienced more than 5 months a year in which their income was 25 percent more or 25 percent less than the average. The same was true for spending.
Echoing this, recent research from the JP Morgan Chase Institute confirms the high degree of income volatility many Americans experiences. As their chart below shows, over half of Americans experienced an income swing of greater than 30% over the past year.
This income volatility means even those with the annual income needed to pay their bills often hit bumps in the road that lead to financial stress.
So what does this have to do with Uber and the rise of the on-demand economy?
The answer is Uber and the other on-demand economy companies have created simple, highly flexible ways for people to supplement their income. Because of this, they are able to top into a growing pool of people who due to wage stagnation, the decline of middle class jobs and greater levels of income volatility who are looking for highly flexible part-time work.
Airbnb was one of the first companies to recognize and tap into the growing need for highly flexible, supplemental income. They recognized this in part because the founders of Airbnb themselves needed supplemental income.
But they weren't the first. The multilevel marketing industry has long tapped into this pool of workers, but they only offered work to people who enjoyed or were at least willing to do sales. The on-demand economy provides an opportunity for pretty much anyone to generate supplemental income in a highly flexible way.
And, of course, our work with Intuit shows the majority of those working in the on-demand economy are doing just that - working part-time to generate supplemental income.
We're often asked if we think on-demand economy jobs are good or bad. The quick answer is they are both, depending on the job, person and situation.
But the reality is they are a necessary source of income for a growing number of people.