No one wants to find themselves staring down the barrel of a pink slip — just ask the tens of millions of Americans who lost work this past spring as the COVID-19 pandemic hit.
New research, however, suggests the gig economy may be able to take some of the sting out of unemployment for many workers.
In “Gig-Labor: Trading Safety Nets for Steering Wheels,” authors Vyacheslav Fos (Boston College), Naser Hamdi (Equifax), Ankit Kalda (Indiana University Kelley School of Business), and Jordan Nickerson (MIT Sloan School of Management) analyzed Uber’s rollout across different American cities in the period between 2012 and 2017. The team compared how people responded to unemployment in cities where Uber was present to how they responded in the cities Uber had not yet entered.
“In our study … we do look at cities that experience large six-month increases in unemployment to see how well the gig economy serves as a substitute when local economic conditions aren’t doing well,” explains Jordan Nickerson, a visiting professor at MIT Sloan and coauthor of the study. “Interestingly, we see larger effects in these areas.”
To wit, laid-off workers who owned a car and had access to Uber in their city were 4.8 percent less likely to file for unemployment insurance (UI) benefits than those who did not have the option to drive for Uber. Extrapolated nationally, that would mean a reduction of between $492 million and $750 million in UI benefits every year if all unemployed workers had the option to leverage Uber, according to the research.
The team also found that gig work correlates with lower debt. While many unemployed workers turn to credit cards and loans to help pay the bills while they search for work, laid-off workers who owned cars saw their average outstanding debt balances decrease by $544 following Uber’s arrival in their local areas. Additionally, Uber’s entry into a market was correlated with a relative decrease in credit delinquencies of 2.9 percent among car owners.
In a nutshell, the study suggests that the availability of Uber — and other gig work opportunities — acts as an important safety net. When people lose work, they can turn to gig jobs to help them fill income gaps as they. . .