A recent JPMorgan Chase report found that workers earning money through the online platform economy are particularly vulnerable to economic shocks.
The online platform economy, which includes ride-sharing services like Uber (UBER) and Lyft (LYFT), online marketplaces like eBay (EBAY) and StockX, telemedicine companies like Teladoc, and other online services, supports almost 8% of families in the United States, according to the report.
This sector also experienced a higher rate of unemployment than the general economy, the report found. “Overall, we see significantly higher UI rates among platform participants relative to the non-platform group,” authors Fiona Greig and Daniel M. Sullivan, wrote in the report.
“At its peak, the UI receipt rate of drivers was just under 19 percent, over twice the rate of the non-platform group. UI receipt rate among platform participants in other sectors are also elevated, peaking between 13 and 15 percent.”
Workers in such industries may be particularly vulnerable to economic volatility like the one induced by the coronavirus pandemic, the report found. “Almost one in five drivers in 2019 was receiving unemployment insurance at the beginning of the pandemic,” the authors wrote. “Of all platform workers, drivers appear to be the group of biggest concern for policymakers from a welfare perspective. They are the most numerous group, have the lowest family incomes, were the most likely to have received unemployment insurance during 2020.”
Drivers were the group which, in the aggregate, were most reliant on the gig economy for income, with leasing platforms accounting for 15% and 20% of the median family’s total income. However, this share of income has decreased since the onset of the pandemic, in part due to reduced demand for riding services as well as an influx of support from government transfer payments.
“The continued rise of the Online Platform Economy raises the importance of strengthening the social safety net for contingent workers and reducing the administrative burdens associated with platform income,” Greig and Sullivan wrote. “Reducing administrative hassles associated with verifying platform income for the purposes of filing taxes, qualifying for social safety net programs, or gaining access to credit, could materially improve and simplify the financial lives of platform workers.”
Online platform economy ‘on the rise’
Despite the new and continuing risks associated with it, the gig and app-based economy has provided a significant role in generating income for people, especially during the pandemic.
“The Online Platform Economy is a crucial source of income for many families even after the shock of the pandemic,” the report noted. “At its peak, almost 8 percent of families earned platform income in any 12 month window.”
Drivers in the ride-sharing economy make up a large portion of the growing gig economy. The online platform economy is especially important for these drivers, who “represent the lion’s share of supply-side platform participants and have the smallest total family incomes,” the authors wrote. “Additionally, lessors derive the highest revenues and the largest share of their total family income from platforms.”
Though concerns regarding the treatment of drivers in the ride-sharing companies have abounded recently, the online platform economy continues to grow and already represents an important part of the total economy, the authors found.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.