How gig work is changing during the pandemic
Kevin Ross runs a pet care service from his home in Indian Trail through Rover.com. By mid-March, as cases of COVID-19 were rapidly rising in the US, his typically steady stream of clients began to dwindle. When states began issuing stay-at-home orders, many of his clients started working from home or cutting out travel. That’s when he saw a wave of cancellations.
As an entrepreneur in the gig economy, Ross, 33, doesn’t have access to many benefits that traditional employees get, such as a 401(k), employer-sponsored health, vision and dental insurance, and paid sick days. Under normal circumstances, he wouldn’t have access to unemployment benefits either. And like many other self-employed workers, his income was drastically reduced due to the pandemic.
On March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into federal law and expanded unemployment insurance in several significant ways. For the first time, self-employed individuals now have access to unemployment benefits. But what will happen when they run out?
The pandemic has been a humanitarian and economic disaster. The World Bank estimates that the global economy will shrink by 5.2 percent this year. Nationally, initial claims for unemployment benefits have reached tens of millions.
In North Carolina, 172,000 initial unemployment claims were filed for the week ending on March 21, the highest number ever recorded in a single week. By comparison, the mean number of initial claims in 2019 was 3,200 per week.
Continued claims, which track the number of individuals that continue to draw unemployment, peaked at 620,000 by May 9, more than doubling the previous peak in 2010. Continued claims have since stabilized but continue to remain elevated.
Younger workers and lower income individuals have been hit exceptionally hard, according to an April 21 report from the Pew Research Center. Forty-three percent of all respondents say that someone in their household has lost a job or taken a pay cut due to COVID-19.
Locally, Mecklenburg’s 211 resource hotline has been flooded with phone calls. Requests for food assistance jumped by 731% from March to April and housing requests increased by 219%, mostly for rent assistance.
Ross says he is adapting to this new situation.
“Like everyone, we haven't been able to go out and do anything social or what we would typically do for entertainment,” he said. “Between that and having a lot of payments put on hold, we've definitely cut our spending.”
His wife, Beth, 30, who helps run the pet care service, was also working as a house manager and a painting instructor until she was let go from both jobs. She has been able to file for unemployment and received benefits. Ross has filed for the Federal Pandemic Unemployment Assistance, but hasn’t still hasn’t been able to collect. North Carolina, like many states, has been slow to adapt it’s system to allow for these changes.
Ross is concerned for the future.
“I don’t believe things will just bounce back,” he said. “Things will never be the same.”
In the U.S., there were 9.6 million self-employed workers in 2016, according to the Bureau of Labor Statistics. That number is projected to increase almost 8 percent by 2026. The BLS only counts workers as self-employed if that is their primary income source. This explains why recorded self-employment fell by about 11 percent from 1990, despite the rise in “side hustle” work like Uber.
The shutdown directly affected many of the top occupations for self-employment: Childcare workers, hairdressers, real estate agents, housekeepers, and taxi drivers have likely been impacted by the shutdown.
The BLS found the median salary for gig workers was $32,200 per year in 2016. While less than the annual median wage of $49,800 for all employment, about half of the most popular occupations require no formal training or education. Higher paying professions such as analysts, lawyers, accountants, doctors, dentists tend to have high rates of self employment.
A New York Times analysis of IRS tax returns, which counts any revenue from gig work, shows that “side hustle” work has been rising since at least the 1980s, when only about 10 percent of filings reported some income from self employment. By 2017, that number had risen to 18 percent. About half of these workers also receive a W2, indicating traditional wage employment.
Thirty-six percent of workers have some kind of non-traditional work arrangement: either working multiple jobs, having a side hustle, or being entirely self employed.
This has caused concern over potential predatory corporate practices. App-based companies like Uber hire independent contractors in an arrangement similar to a traditional employee, but are not required to provide minimum wage and benefits. States like California are introducing legislation requiring some contract workers to be treated as employees.
Shane Somerset delivers fresh tomatoes in the Charlotte area for his uncle’s distribution business. They serve mostly local restaurants and one major sandwich chain.
“Initially the business dropped about 70 percent. Most of the mom and pop restaurants shut down,” he said. Since then, restaurants with patio seating or drive throughs have fared better. The restaurants near commercial areas are still slower than normal. But the ones near residential areas have picked up.
“I started back full time the first week of June.” Shane said. “I see a lot of the small restaurants that didn’t have a drive through or online sales still struggling...but everyone else has rebounded and in many cases increased their business as online sales continue to grow.”
Like many gig workers, Shane also runs a landscaping service on the side. That business has remained steady.
In the Charlotte region, 96,000 people, or 9 percent of all workers, were self-employed, according to the 2018 American Community Survey 5-year estimates. About 22 percent of those were involved in a professional occupation, which includes, legal, accounting, architectural, veterinary, building maintenance, landscaping, and more. Construction, finance, real estate and insurance were also popular occupations.
Agriculture work had the highest rates of self-employed work, making up 26 percent of all workers in that field. The construction industry also had high rates of self-employment, accounting for 21 percent of all workers.
The “other services” category was the fastest growing category for self employment from 2010 to 2018. That category includes automotive repair, beauty salons, nail salons, dry cleaning and funeral services. Since 2010, gig work in professional services, transportation, education, finance, insurance and real estate have grown quickly. Only manufacturing and retail trades have seen declines in self employment.
The BLS projects that construction managers, truck drivers, mechanics, housekeepers and insurance sales agents will be among the fastest growing fields for self employment by 2026.
Rates of entrepreneurship and gig work vary by county. Both Iredell and Union county are above the national average. As a whole, North Carolina and South Carolina are close with 9.2 and 9.4 percent, respectively.
A recent report by the Urban Institute points to concerns over the racial wealth gap in Mecklenburg. Though entrepreneurship rates by race are proportional to the demographic makeup of the county, White-owned businesses are much more likely to employ other workers, and they took in $35 billion more in revenue 2012 than Black- or Latinx-owned businesses.
Self employment comes with inherent risks; increased stress, inconsistent income, more complicated tax filings, governmental regulation, and a lack of benefits. Providing unemployment benefits and health insurance to self-employed workers might help encourage more people to take the leap into being their own boss — and cushion the blow during downturns like the coronavirus-fueled recession, especially as more people turn to self-employment.
When asked if gig workers should have access to unemployment insurance benefits, Shane said yes, but worries about the extra costs that could come with. Small businesses already have low profit margins and high tax rates. He feels that requiring gig workers to pay into the system might do more harm than good.
“I owned a concrete pumping company for about seven years,” he said. “I was taxed to death. Finally the proverbial juice wasn’t worth the squeeze.”
But many entrepreneurs, like Shane, seem eternally optimistic. It’s that kind of determinism that keeps them going in the face of mounting challenges. When asked about the future, he says: “I think all our animals will appreciate the walks and demand they continue to get them.”
Nathan Griffin earned a master's degree in economics from UNC Charlotte in 2018 and a bachelor's degree in business management from Pfeiffer University in 2016. He works as a project developer at Trane where is involved in commercial construction projects. He is an Adjunct Instructor of Economics at Central Piedmont Community College.