The gig economy boom is over as workers go back to traditional jobs, Bank of America says
Carlo Allegri/Reuters
- People may not be as interested in gig opportunities as they were a year ago, per a Bank of America Institute report.
- Per economist Anna Zhou, the reversal is partly because of weaker consumer demand for some services.
- But this could also be due to attractive wage growth in traditional jobs per the report and Zhou.
Gig workers are seemingly saying goodbye to the delivery-app and side-hustle life and are interested in going back to making money through traditional jobs, according to a new report from the Bank of America Institute.
One reason behind this is recent wage growth, which is making more conventional jobs like those in restaurants and retail stores more attractive.
The new report highlights how the gig economy isn't as hot as it was during the pandemic when people turned to things like delivery apps to get their food, leading to a surge in demand for these kinds of gig workers. Some workers doing gig work on social commerce marketplace platforms, which per the report can be "online platforms where users can buy and sell goods," may have lost interest too. That could be because there has been an "overall weaker demand for goods," according to Anna Zhou, an economist at the Bank of America Institute and the co-author of the report.
Zhou told Insider that "it's interesting that we're seeing a reversal in the gig economy" and that this is in part due to a drop in demand for some services.
Additionally, some gig workers could be "rotating into the traditional job market because the wage growth in the traditional job market has been so phenomenal," Zhou said.
The report stated that "for those gig workers who also have a traditional job, large wage increases in their primary jobs could mean less need to make up any shortfall in the gig economy. As a result, they may do gig work less frequently or even exit from the gig economy."
Average hourly earnings in March 2023 were higher than in March 2022. And some industries in particular have seen hourly pay soar, such as leisure and hospitality, which saw wages up about 6% over the year, the highest growth among major industries. However, leisure and hospitality and the retail sector still have the lowest hourly wages among major industries as of March 2023.
The new report noted the more robust year-over-year percent changes from the Employment Cost Index for accommodation and food services as well as retail trade compared to the overall growth for all sectors.
"By contrast, we saw no meaningful increase in the average monthly income from gig platforms, based on Bank of America internal data," the report stated, adding that "in February 2023, average monthly gig income deposited to consumer accounts was actually slightly lower than the 2019 average."
That decline in monthly income could come from a mix of lower pay rates per hour or gig and workers taking on fewer gigs.
Gig workers who also hold traditional jobs are typically in sectors like restaurants and retail, which have seen especially high wage growth. Zhou said "this could be the reason that higher wage growth are attracting some people back into the traditional labor market."
"And, in fact, we think this could explain the rise in the labor force participation rate for younger people," Zhou added. "So, specifically those between 16 and 24, were seeing a very notable increase in their labor force participation and at the same time a very steep drop in their gig activities."
Overall, Zhou said it could be the case that the gig economy has peaked "given that the trend has been going for more than a few months." Zhou added that the trend might stick around "at least for the near future."
However, Zhou did point out that the share of Bank of America customers who had gig income is "still elevated versus where we started in 2019, early 2020." According to the report, the share has dropped from the 3.3% peak in March 2022 to 2.7% in February 2023, "after rising threefold during the pandemic."
And while the share of gig workers doing delivery or social commerce has dropped, the analysis shows the share for ride-hailing has mainly been trending upward.
Are you a gig worker or a former gig worker who now works in a traditional job? Reach out to this reporter to share your story at mhoff@insider.com.
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