The COVID-19 (coronavirus) pandemic has hit the economy hard, causing massive layoffs and business closures. IBISWorld estimates that in 2020 alone the unemployment rate spiked 176.0%, leaving many people without income and searching for new jobs in a tight and volatile job market. The gig economy was booming and crowded with freelancers that wanted different revenue streams before the pandemic, and now it is at risk to become overcrowded.
Impact on gig and digital economies
Still, the gig and digital economies have experienced an adverse impact as well. As the nation starts to recover from the coronavirus and the high unemployment rate, companies have started to shift from full-time job offers to multiple gigs, side jobs and temporary employees in order to save on wages and benefits as they try to recover as well. According to IBISWorld estimates, corporate profit has decreased 25.1% in 2020, making it harder for companies to absorb increasing operational costs as a result of the pandemic. As more companies hire gig workers, competition within the gig economy will increase, which could harm gig workers’ commissions and earnings.
Digital economy serves as an opportunity
The digital economy has provided more room for freelancers, and as more companies try to open shop online, they are turning to gig workers. For example, digital advertising agencies and software developers have an easy way to outsource freelancers. Also, marketing companies, such as Omnicom, have expressed the interest in restructuring and shifting toward more online freelancers for different jobs such as digital marketing, logo design, video and animation, among others. Furthermore, Fiverr, an online marketplace for freelance services, has experienced an increase in demand for these workers during the coronavirus.
A boom in delivery services
Uber drivers, grocery delivery services, and local gig jobs benefit from the fact that they are only competing with local workers. Conversely, online marketplaces, such as Fiverr and Upwork, a global freelancing platform, have a global reach and people are competing with workers from across the globe. Upwork has experienced a 50.0% increase in freelancers entering the marketplace since the coronavirus begun. Instacart, an online grocery delivery service, has also hired an increasing number of temporary workers and freelancers to cater to the increase in demand, hiring as much as 300,000 people in one month. Overall, in 2020, IBISWorld estimates that the number of temporary employees will increase 1.8%.
An increase in competition harms earnings
The coronavirus pandemic has increased competition in the gig economy as more people have been looking for side jobs and gigs due to volatility in the job market. People that used to compete before the pandemic and relied on gig jobs have experienced a drop in their earnings, especially performers and creative artists. As more people compete in the gig economy due to worldwide layoffs, furloughs and salary reductions, the price paid for a gig has significantly decreased, and freelancers have seen their earnings decline. Moving forward, as large companies plan to keep the number of full-time workers limited, more people will be encouraged to enter the gig economy, which could keep lowering prices and commissions, harming the overall gig economy and its workers.
