it261: Lack of "Good Jobs" Means More People Turn to the Gig Economy

Tuesday, 3 December 2019

Lack of "Good Jobs" Means More People Turn to the Gig Economy

One thing that comes out loud and clear in our research is many turn to the gig economy because of a lack of "good jobs".

By "good jobs" we mean jobs that pay well, are reasonably secure and provide benefits. But while the U.S. unemployment rate is low, the economy is creating more low wage jobs than middle and high wage ones.

This leads more people to do gig work to supplement their income. it also leads more to turn to gig work in the hopes of being able to make more than low paying traditional jobs. And even if they can't make more, they can potentially have greater levels of work control, flexibility and autonomy.

The lack of good jobs is highlighted by the U.S. Private Sector Job Quality Index (JQI).

As the chart below shows (click to enlarge), job quality has consistently declined since the 1990s and after a brief uptick is near its all-time low.

The JCI divides U.S. jobs into two groups: “high quality” jobs that pay more than the average weekly wage and tend to have more hours per week, and “low quality” jobs that pay less than the average weekly wage and generally offer fewer hours.

The current reading, about 80, means that there are only 80 high-paying jobs for every 100 low-paying jobs. That's a substantial decline from 1990 when there were 94 high-paying jobs for every 100 low-paying jobs.

The main reason for this decline is a shift from goods-producing jobs to service sector jobs, which tend to pay less.

For example, employment in food services and drinking places has increased by 65% since 1990 while manufacturing employment has decreased by 30%. Since food services and drinking places tend to pay below average wages, they have created a lot of low quality jobs.

The growth of low quality jobs - coupled with rising costs for housing, education and healthcare - means more people turn to the gig economy as a second source of income.

There's a lot of noise about making gig economy jobs better. We agree this is a good idea.

But we believe it's more important to fix the traditional job quality problem. As long as the economy creates more low quality than high quality jobs, people will struggle regardless of what happens with the gig economy.

For more on the JCI, see Quartz's The great American labor paradox: Plentiful jobs, most of them bad.