Can Uber Save The Middle Class?
A report from JP Morgan Chase Institute titled ‘Paychecks, Paydays, and the Online Platform Economy’ has taken a deep dive into the demographics and sources behind an alarming trend of income volatility in the United States. The report takes a compelling look at how the major players in the Online Platform Economy such as Uber, TaskRabbit, eBay and Airbnb can help stabilize income volatility, as opposed to Americans relying on less than attractive alternatives such as constraining spending or taking on additional credit.
JP Morgan Institute found that while income volatility was prevalent across the board, it was most predominate among the young, those in the bottom income quintile, and those living in the West. Moreover, median income individuals experienced nearly $500 in labor income fluctuations across months, with spikes in earnings larger but less frequent than dips. Interestingly, most of the month-to-month volatility in take-home pay (86 percent) came from individuals staying in the same jobs.
Image Credit: JP Morgan Chase Institute
As a fast-growing and highly accessible new marketplace for work, many have characterized the Online Platform Economy as the “future of work.” The JP Morgan Institute 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. 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.
Image Credit: JP Morgan Chase Institute
The report found that while only 1 percent of adults earned income from the Online Platform Economy in a given month, more than 4 percent participated from October 2012 to September 2015, indicating that there is a rapid adoption of these new ways to earn money. Although labor platforms grew more rapidly than capital platforms, participation on capital platforms was more than 60 percent higher than participation on labor platforms in every month.
It was found that the platform economy was a secondary source of income for most people, and reliance on platform earnings did not increase for individuals over time. Additionally, earnings from labor platforms offset dips in non-platform income, but earnings from capital platforms supplemented non-platform income. What this means, is that the typical person earning income via Uber or TaskRabbit are working to offset shortfalls in their monthly earnings or are looking to find extra income that can be directed into personal savings accounts.
Image Credit: JP Morgan Chase Institute
Based on these findings, it was concluded that the Online Platform Economy adds an important new element to existing labor markets. Simply put, landing a platform job is easy and quick. Individuals can, and do, generate additional income on labor platforms in a timely fashion when they experience a dip in regular earnings.
Can Uber save the middle class? Clearly, sources of secondary earnings are easier to attain by the existence of companies such as Uber and TaskRabbit. The additional income earned from platform jobs meets a targeted need for the increasing number of Americans that need help getting themselves back on a stable economic footing. Airbnb has even described itself as an “economic lifeline” for middle-class families.
As lawmakers grapple with whether emerging work relationships arising in the Online Platform Economy should be regulated under the existing legal definitions of ‘employee’ or ‘independent contractor’ status, or whether a new labor category called an “independent worker” should be created for such labor participation, the question as to whether Uber can save the middle class will be more clearly answered in the intermediate term. In the meantime, the systematic tensions within traditional employee/employer relationships continue to drive American workers to find new ways to either get a leg up or tread water in their quest to save money and pay bills.