Gig Workers Are Feeling Inflation’s Sting

Rising costs, little-to-no tips and increased competition mean freelancers are earning less.

August 11, 2022

ALEXANDRIA, Va.—Inflation is starting to impact the gig workforce, reports the Washington Post. As fees and prices are increasing for consumers, they have begun to tip less or not at all, and gas prices are still elevated, impacting take-home pay for workers.

Additionally, more people are joining the apps as a side job to help deal with inflation, creating more competition for jobs. On a recent earnings call, Uber CEO Dara Khosrowshahi said that over 70% of new drivers on the app have said that inflation was one of the reasons why they joined. New Uber driver sign-ups are up by more than 75% year over year. Lyft has the most drivers it has had in the past two years.

If the U.S. economy does take a downward turn as many economists predict, gig workers could face even more competition as newly unemployed workers flock to the apps to make money.

“With a significant influx of workers, people are going to be getting fewer shifts and fewer gigs,” Erin Hatton, a professor at the State University of New York at Buffalo who studies labor and the gig economy, told the Post. “That would in general have pretty significant negative consequences for workers who are already there and the workers that are coming in. There is going to be a finite amount of work.”

Enrique Lopezlira, director of the low-wage work program at the University of California at Berkeley’s Labor Center, also makes the point that if the economy does go into a recession, consumer spending will drop.

“I’m not sure how many real opportunities for gig type of work there will be, or whether people will be able to live on those kinds of jobs,” he told the Post.

Both Uber and Lyft told the Post that earnings rates are up double-digit increases year over year, with both companies saying drivers make $37 an hour on average. However, gig workers say those higher rates are at least a partial reflection of incentives to get drivers who had stopped because of high gas prices back onto the app.

“That is all temporary,” Jerome Gage, a Lyft driver in California, told the Post. “They will pull the rug from under us as soon as they get enough drivers back on the road.”

According to Lindsey Cameron, a professor at the Wharton School of the University of Pennsylvania, who studied the impact of the pandemic on gig workers, gig work appears more attractive than retail jobs, but there are hidden costs that eat away at wages. App costs may have increased for customers but not at the same rate as worker expenses, Cameron told the Post.

“They are not as good jobs as they used to be in 2014 and 2015, but they are still better than so many other options,” she added.

The Post reports that companies that employ gig workers use trip-count bonuses and demand-based price surges to quickly reward new drivers. But gig workers explain that once they are on the platform for a while, the rewards aren’t there anymore, and they have to work harder to earn the same amount of money that they did in the beginning.

“You get accustomed to the money and when they drop rates and they tell you that you have flexibility, it just means that you have to work more to make the same amount of money,” Ben Valdez, an Uber driver based in Los Angeles who also organizes for the labor group Rideshare Drivers United, told the Post.

In July, the U.S. added 528,000 jobs, which was more than expected by analysts and brings payroll back to pre-pandemic levels. The unemployment rate was 3.5%. However, total job openings remained well above the number of unemployed workers looking for a job in July.

Forbes recently reported that six in 10 c-suite executives expect gig workers to substantially replace full-time employees at their company in the next three years. The rise in gig workers is forcing changes in business strategies in ways that will help organizations with labor shortages, inflation and prepare for the future of work.

Here are three reasons why businesses are tapping into the gig economy.