As companies lay off employees, competition for gig work is soaring, and prices for gigs are dropping.
For years, Jennell Lévêque has been getting up early and swiping through her phone in the hope that Amazon Flex would drop some shifts for delivery drivers and that she’d be quick enough to nab one. But since the COVID-19 pandemic, even with six apps open for various delivery platforms, Lévêque has gotten barely any jobs delivering packages, meals, or groceries. The Facebook group she runs for Instacart workers, meanwhile, is deluged with requests from new shoppers who want to join.
Before the pandemic, there were millions of people like Lévêque who could make a living, or at least earn decent pocket money, off gig work: driving people from the airport to distant homes, delivering dinners, designing logos for strangers half a world away. But as the U.S. unemployment rate approaches 15% and as the International Monetary Fund predicts a 3% contraction in the global economy, people who have relied on gig work for income are seeing their earnings plummet as more people compete for jobs.
“Each week is getting worse and worse with every platform,” says Lévêque, whose lament is borne out by company numbers. Upwork says it has seen a 50% increase in freelancer sign-ups since the pandemic began. Talkdesk, a customer service provider that has launched a gig economy platform, got 10,000 new applications for gig work in 10 days. Instacart hired 300,000 additional workers in a month and said in late April it planned to add 250,000 more.
Though more people are having food delivered, receiving packages from Amazon and searching online for their graphic design and customer service needs, the surge of new workers has upended the law of supply and demand in the gig economy. Put simply, with at least 36 million newly jobless people in America alone as of mid-May, there are now too many would-be workers to make the gig economy viable for many of them, and this may be irreversible as companies adapt to the reality of a global recession. By keeping head counts low, they’ll drive more desperate people into the gig economy, expanding the potential labor pool for jobs and driving down the prices that workers can command.
“The rates on DoorDash and Uber Eats are the lowest I’ve ever seen, but they’re all bad right now,” says Lévêque, who’s watched the trend unfold in recent weeks. Apps like Amazon Flex, whose drivers use their personal vehicles to make deliveries for the company, “drop” or release jobs at a certain time, and Lévêque and other drivers say that these jobs are snapped up within seconds. Some Amazon Flex drivers have taken to sitting in parking lots near Amazon warehouses in hopes this will help them beat the competition.
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Apps like Instacart send “offers,” which let workers see how many groceries a customer has ordered, how much they’ll get paid, and what the tip will be. On some apps, these offers are lower than ever, Lévêque says. (Instacart says its shoppers are earning 60% more per batch of orders they complete in part because tips have nearly doubled, and that while they may not see the same volume of orders as they did before, the average number of batches has stayed essentially the same.) As we talked, Lévêque turned down a food delivery offer for $3 because it wasn’t worth the gas she’d have to use. Another driver named Kevin, 43, who didn’t want his last name used because he doesn’t want his full-time job to know that he drives on the side, says Amazon Flex shifts now pay around $18-20 an hour, down from $28-$32 an hour before the pandemic.
As more workers rush to apps, there’s also a rise in people trying to take advantage of their desperation. Hustlers are launching bots that use algorithms to grab jobs before humans can and then charge potential workers to use these bots, says Matthew Telles, a longtime Instacart shopper who has been outspoken about the platform’s flaws. The so-called “grabber bots” take a bunch of jobs as soon as they come out, which means only people who have the bots installed can find work. Instacart shoppers pay a fee to use the bots, which are also a problem on services like Amazon Flex. Instacart in particular “has become a target for these exploitative apps that force laborers to pay just to get them access,” Telles says. (Instacart says that using unauthorized third parties in an effort to secure more batches is not permitted and that anyone found to be doing so will be deactivated.)
Delivery drivers like Lévêque have one advantage—they are only competing for jobs with people from their own geographic area. On sites like Fiverr and Upwork, where people can sell services as diverse as logo design, digital marketing and voice acting, workers are competing with others from around the world. Anyone with an internet connection can vie for these gigs, and the worse the global economy gets in the wake of COVID-19, the more people will stream on these sites looking for work. The World Bank estimates that COVID-19 will cause the first increase in global poverty since 1998.
“It’s a race to the bottom, honestly,” says Melanie Nichols, a 40-year-old marketer who has been freelancing for tech startups in Los Angeles for seven years. With business slowing in the wake of the pandemic, Nichols created an Upwork account from England, where she was staying with family, and tried to earn some extra money. Before the pandemic, she could charge between $100 to $150 an hour to clients, whom she’d meet in person or through referrals. On Upwork, she says, clients advertise jobs that require the same amount of work but pay $50 an hour, or less. Getting those jobs is nearly impossible—Nichols says she’s applied for 20 since March and heard back from four. One led to an actual paying gig, which ended up being more work than she was pitched, and so Nichols did 25 hours of work for 10 hours of pay. “Upwork seems to be such a good idea,” she says, “but I’d be curious to find people who are actually making money from it.”
Steven Lee Notar, 24, is in the same situation. He worked as a graphic designer at a media agency in Germany until the company first reduced his hours and then laid him off. He started advertising on Fiverr for services like designing online ads, posters and business cards, but says he has to set his prices low to get any orders. “A lot of people in my field have turned to the website,” Notar says. “It is a lot of supply but not a lot of demand.”
Sites like Upwork and Fiverr say the demand is still there. Adam Ozimek, the chief economist at Upwork, says that a third of Fortune 500 companies now use the platform, and that client spending has been stable since the pandemic hit. Upwork has not tracked whether freelancer pay rates have gone down, but Ozimek argues that Upwork’s borderless business model is good for gig workers because it gives them the freedom to find employers anywhere, not just in their city or country. “This is where the U.S. has the advantage,” he says. “The U.S. leads the world in skilled services, and our freelancers do find work all over the world.”
What worries some workers is that this scramble of competing with more people for lower-paying gigs is going to become the new normal as businesses try to stay lean by spending as little as possible. Twitter said Tuesday that going forward, employees could work from home forever if they so desired. But once people are working from home, what’s the incentive to keep them on as salaried employees? Arguably, companies could save money and balance their budgets by hiring overseas marketers or coders willing to work for less money and no benefits. Nearly half of the world is now connected to the Internet, up from just 15% in 2007.
Giant marketing companies like WPP and Omnicom have already talked about significant headcount reductions going forward and restructuring—they could turn to online freelancers once business starts up again. One survey found that as early as 2017, average hourly earnings on some platforms like Clickworker and Amazon’s Mechanical Turk were as low as $2 to $6.5 an hour.
There are signs this transition is already happening. Companies that are trying to grow online are hiring many gig workers on Fiverr, and Fiverr has seen an increase in demand for these workers, the company said on its earnings call in May. Fiverr hit all-time daily revenue records four times in April, CEO Micha Kaufman said. Nichols, the marketer, says she has seen big advertising agencies that have laid off hundreds of people hiring gig workers for marketing jobs on Upwork. Upwork said on its May earnings call that a multinational cybersecurity company used Upwork to find designers and developers, and a sports marketing agency hired software developers and animators on the site for projects. Aside from a moral obligation to treat workers well and pay them a living wage, there’s nothing to prevent more companies from jettisoning full-time employees and shifting to lower-paid gig workers.
They’d just be following what has been happening for decades in other fields. Just as manufacturing shifted overseas for cheaper labor and as gig economy apps drove down wages for taxi and delivery drivers, the pandemic has hastened the gig-ification of white-collar jobs. The gig economy might have been a crowded space before COVID-19, but the booming economy masked its workers’ struggles because many of them could find other jobs to supplement their income. Now, that extra work has dried up, and their desperation is more evident than ever. When gig work is the only pie that’s available to millions of people, sharing it means that some don’t even get crumbs.