Trends in the Online Platform Economy: Who Works Independently and Why?
Thanks to technological advances, it’s easier than ever to work from the comfort of one’s own home. As a result, to online platform economy (OPE) has attracted a significant number of workers.
The OPE is composed of people who use online platforms to connect with temporary work opportunities, like freelance writers, Uber drivers, and Airbnb landlords. In 2016, nearly 40 million Americans participated in the OPE, according to the State of Independence in America 2016, a report from MBO Partners, which provides technology solutions that connect self-employed professionals and their clients.
Societal perceptions of what constitutes “normal” work have shifted dramatically thanks to the OPE. This past November, global think tank JPMorgan Chase (JPMC) Institute explored these changes in the report The Online Platform Economy: Has Growth Peaked?
For Many, the OPE Isn’t a Long-Term Source of Employment
In any given month, one in six independent workers is new to the independent workforce, according to the JPMC Institute report. In addition, more than half of those workers will exit the OPE within a year.
“The study suggests that participants in the OPE don’t treat their platform jobs like a traditional nine-to-five role and therefore often leave within a year,” says Gene Zaino, CEO of MBO Partners.
Zaino notes that this is not the first time he’s seen data like this.
“We see some independents who don’t necessarily want to be self-employed in our own State of Independence study as well,” he says.
In the MBO study, 1 in 10 full-time workers reported they were not independent by choice.
“These workers tend to leave independence when they find a full-time role in traditional employment,” Zaino explains. “It’s important to take all of these studies with a grain of salt and to remember that when it comes to independents, one size does not fit all.”
According to Zaino, platform- and app-based workers mainly participate in the OPE in order to supplement their income, learn new skills, or interact with other people. These workers are likely to join and leave the OPE frequently.
“Independence is not for everyone,” Zaino says. “That said, our data shows that those workers who do stay independent by and large do so willingly, and they are highly satisfied. Six in 10 workers say that it was their choice completely to be independent, and the average independent worker has been self-employed for about 10 years. That’s an impressive number, particularly given the number of millennial workers in the workforce today.”
Location, Location, Location
The success of OPE workers may be tied to where they live, according to the JPMC Institute study. This, in turn, may be affecting OPE participation rates. For example, New York boasted 236 percent growth in OPE participation between 2015 and 2016, while San Francisco only saw 26 percent growth.
“The success of online platform workers is typically reliant on the unique attributes of the local economy where they live,” Zaino says. “In comparison, full-time independents have been successful across the country, having generated approximately 65 percent of their income – about $719 billion – in their local areas last year.”
The Unemployment Factor
Growth in the OPE has slowed slightly since 2014, according to the JPMC Institute. This is due to the fact that unemployment has gone down steadily, and many workers who turned to the OPE out of desperation have found traditional employment again. The JPMC Institute study shows that the unemployed are more likely than the employed to participate in the OPE beyond the 12-month mark. As the traditional labor market has strengthened, the number of platform participants has trended downward.
Still, not everyone looks at the OPE as a last resort. Many enjoy the freedom that comes with being one’s own boss.
“MBO’s State of Independence in America study reveals that both full- and part-time independents say their career choices stem from a desire to have greater freedom, flexibility, control, and purpose,” Zaino says. “The results of our study challenge the notion that people are working as independents only because they can’t find full-time jobs.”
In 2016, with unemployment at 5 percent, 5.8 million jobs open, and the addition of 2.74 million payroll jobs, the number of self-employed workers stayed relatively constant at about 40 million.
“I think the key differentiator is what kind of worker you’re looking at,” Zaino says. “Gig economy workers may in fact be more likely to return to full-time jobs as unemployment goes down. However, those who consider themselves professional independents are staying the course.”
Even with the total number shrinking slightly, 40 percent of workers participating in the OPE is nothing to scoff at. The nine-to-five job might still be the norm, but independent work isn’t as rare as it used to be. Perhaps one day it will overtake traditional employment as the main source of work for Americans.