Seeing Through the On-Demand Smoke Screen
The latest headlines dominating the media narrative about the on-demand economy suggest that all the hype is overblown. While Uber and AirBnB have staying power, the argument goes most other on-demand companies are little more than a flash in the pan.
This argument misses the point. The inevitable rise and fall of on-demand startups is a smoke screen that masks a fundamental shift in employment in America. This shift is decades in the making and it will continue to accelerate, with or without the headline-grabbing startup success stories and failures.
Let’s peer through the on-demand smoke screen and look at three big facts that show what’s really happening.
1. The rise of self-employment pre-dates the on-demand economy: A recent study from Harvard economist Lawrence Katz and Princeton economist Alan Krueger showed that the number of Americans employed in “alternative arrangements” -- defined as any type of temporary, gig, or contract work -- increased by 9.4 million between 2005 to 2015. In fact, they found that “all net U.S. employment growth since 2005 appears to be in alternative work arrangements.”
Looking even further back, we can see that the number of people engaging in full- or part-time self-employment has risen from 6 percent of the workforce in 1989 to 34 percent today. So, on-demand companies did not create a new supply of workers. Instead, these new platforms tapped into a labor market trend that had already been dramatically accelerating.
2. The on-demand labor force is small and primarily part-time: Uber launched in 2011, and many other on-demand platforms are more recent, so it’s not surprising that the on-demand work remains a relatively small part of the overall labor market. Recent research from my team at Intuit showed that there are about 3.2 million Americans currently engaged in on-demand work. Of these, 79 percent do so part-time, spending an average of 12 hours per week working via their primary platform. In fact, 43 percent of people in the on-demand economy also have a traditional full- (29 percent) or part-time job (14 percent). Data from Katz and Krueger tells a similar story, showing that only about 14 percent of people engaged in alternative work arrangements earn all of their business income from on-demand work.
This data shows that the on-demand economy has not created a new kind of labor market, but is instead providing people with new opportunities to earn supplemental income. This meets an acute need. As the traditional notion of a secure career with a single employer as faded from view, so too has the sense of long-term financial security and stability. In 1985, more than 60 percent of workers had a pension, while today it is less than 14 percent. Even before contemplating retirement, many workers are not able to meet the income they need to support their family. In response, they are actively looking for opportunities to diversify and supplementing where they can.
3. Delivering frictionless connection between supply and demand is an enduring value proposition: On-demand companies are technology platforms that specialize in connecting supply and demand in a frictionless manner. They solve what has traditionally been the number one challenge any entrepreneur or small business owner faces -- finding customers (for all of the debate about the on-demand business model, there are few who would question the fact that consumers are hungry for -- and, in fact, expect to be able access goods and services on their phones in the moment).
Amazon, eBay and Etsy were early examples of companies that found enduring success by leveraging technology to deliver frictionless connections between supply and demand. Uber and AirBnB are more recent examples of companies executing this same basic formula. More success stories in different industries will continue to show up. For example, HourlyNerd is showing how the consulting market can be disrupted by solving demand for MBA’s, and UpCounsel is showing early signs of upending the legal profession.
More than an argument for the enduring power of the on-demand business model, the three trends outlined above describe structural changes to our economy. So, the really important question is not “will there will be an Uber for every industry?” Instead, it should be: “how can we re-imagine the ways in which people operating in a new labor market reality find stability and support?” The answer to this question runs much deeper than the staying power of any single company or trend.