Access to the ‘gig economy’ could potentially decrease dependence on credit and unemployment insurance

In today’s rapidly evolving economy, the gig economy has emerged as a viable alternative for individuals facing job loss and economic uncertainty. Traditionally, laid-off employees have turned to consumer credit and unemployment insurance to maintain their consumption levels. However, recent research has shown that the gig economy serves as a substitute for many seeking other, more permanent work opportunities.

A study conducted by researchers at Indiana University, Boston College, Equifax Inc., and the University of Washington analyzed anonymized data from credit profiles and unemployment insurance to understand the impact of the gig economy on laid-off Americans. The researchers found that individuals with access to platforms like Uber as a source of income were less reliant on household debt, experienced fewer delinquencies, and were less likely to apply for unemployment insurance benefits.

The introduction of ride-sharing opportunities, such as Uber, into various markets across the country between June 2012 and February 2016 had a significant impact on the financial behavior of laid-off workers. Those with access to these platforms saw a relative decrease in total outstanding credit balances and delinquency rates, indicating a reduced reliance on credit and insurance. Eligible car owners were also less likely to lean on unemployment insurance programs in areas where Uber was present.

The researchers estimated that the decrease in unemployment usage resulting from the availability of ride-sharing platforms led to a yearly reduction of between $492 million and $750 million in unemployment benefits distributed by government agencies. This shift in behavior highlights the potential of the gig economy to provide a safety net for individuals seeking more permanent work in the formal job market.

Moreover, the study found that gig labor can help reduce labor market frictions and provide a buffer for individuals experiencing job loss. Workers who participated in the gig economy were more likely to regain formal employment within a year of being laid off, indicating that platforms like Uber can serve as a bridge to more stable employment opportunities.

Overall, the research underscores the importance of the gig economy as a valuable resource for individuals navigating economic challenges. By offering flexible work opportunities and a source of income during periods of job loss, platforms like Uber can help individuals maintain financial stability, reduce reliance on credit, and facilitate a smoother transition back into the formal job market. As the gig economy continues to grow and evolve, its role in supporting workers during times of economic uncertainty is likely to become even more significant.