It may be possible to earn $252,000 a year on Uber, but a high income is far from the rule among people who work through platforms for independent workers, according to newly released data from MBO Partners, a firm in Herndon, Va., that studies the independent economy.
According to the research:
- 56% of people who work in the on-demand economy through online platforms report total earnings of $40,000 or less. For independent workers who do not participate in the on-demand economy, 46% are in this income range. This income figure includes what they earn from all sources of income, combined.
- 36% of on-demand workers report total earnings of $25,000 or less, compared to 22% of those who work outside of platforms
- 17% of on-demand workers bring in $75,000 or more, compared to 28% of free agents who work outside the platforms.
- 83% of respondents said they work part time on the platforms, not full-time, and 68% view it as a source of extra money.
“They are not going to make real money on these platforms,” says Gene Zaino, president and CEO of MBO Partners. “You are competing with people willing to work for prices that are very, very low.”
The data, released last week, comes from MBO Partners State of Independence research project. As part of that initiative, MBO Partners surveyed several thousand workers who participate in the on-demand economy.
These new findings are significant because the number of people making money as independent workers has skyrocketed in recent years. The study found that there are 30 million Americans who put in at least one hour a week as an independent worker, about 12 million who do independent work from one to 14 hours a week, and about 18 million who work 15 hours or more per week on their own. And that is just in the U.S. Many of these platforms have huge global participation. Freelancer.com, for instance, now reports it has more than 15 million users around the world.
Most of these folks drum up work on their own, but a small percentage of the 30 million independents—9%–find work through at least one online platform. They are turning to marketplaces such as Ebay, Amazon, and Etsy, where 2.2 million U.S. workers are earning money; talent marketplaces such as Freelancer.com, which collectively have attracted about 900,000 independent American workers; and sharing economy platforms such as Uber, Lyft and Handy, where half a million U.S. workers generate independent income, according to the data from MBO Partners.
Generally, they’re not trying to quit their day jobs. In focus groups, MBO Partners found that many people are looking to independent work to diversify their income stream, provide a backup in case they lose their main source of income, make money from a passion and explore new career and business opportunities.
Those findings are very intriguing and worth further study. To me, it appears these folks have no illusions. Hiring may have rebounded, but they know good jobs are scarce in America and there is no such thing as a permanent one. They are building income security that does not depend on any one employer.
This is a monumental shift in mindset from that of the traditional American worker. Understanding that you could eke out a living–albeit a small one–on Uber or by renting a room on Airbnb if your job vaporizes is very different, psychologically, than knowing that collecting unemployment is your only option. When having a job isn’t the only game in town, it means your employer does not have all the power in your relationship.
Certainly, some of these entrepreneurs are hobbyists who will work for far lower hourly pay than they do in their full-time job. They may, for instance, love making crafts and view an Etsy shop as an extension of that, or find it fun to break with their normal daily desk job and drive an Uber car.
“They do it almost socially,” Zaino says. “They meet people. They talk. They learn. It’s becoming a social experience as well as it is an income-producing capability.”
Nonetheless, they are learning something valuable: How to make money from their own “excess capacity,” notes Zaino. Working through these platforms is giving them a safe training ground for running a business—one that does not require them to take the risk of quitting their day job. Instead of giving their discretionary efforts to an employer who doesn’t—and won’t—pay them extra for it, they are earning money from it themselves.
The youngest workers are leading the trend. Freelancer.com recently found that 74% of the workers on its platform are millennials. MBO Partners’ similarly found that young people make up the largest group using sharing-economy platforms, though otherwise, independent workers span the age spectrum.
It doesn’t surprise me that millenials are ahead of the other generations in seeing why it makes sense for everyone–even people with full-time jobs– to know how to run a business. They got their start in a brutal job market, often while trying to cope with staggering student debt. They have fewer lingering illusions about corporate America and what it promises than their parents.
Zaino wonders if the experience of working through the platforms is akin to an independent apprenticeship for the young workers, who may not have a long track record in their fields. “They are learning and getting their feet wet,” he says. Some free agents who meet clients on the platforms may later go off them to do higher paying work, as they become more experienced, he notes.
There’s another interesting aspect of MBO Partners’ research: Some of the demographic groups that have the highest representation on the online platforms are those that historically have had a hard time getting startup capital. These talent marketplaces, which make it easy to start a business on a small budget, have democratized microbusiness in an instant way that no government or private sector program has.
Women make up 55% of on-demand workers, for instance. They tend to gravitate to platforms like Etsy, where they make up 89% of workers, and Airbnb, where they make up 67 as opposed to Uber and Lyft, where 7% of drivers are female, according to MBO Partners’ research. On the on-demand platforms, 29% of participants are from demographic groups other than white, vs. 19% of independents who find work off the platforms.
Some people don’t like the trend toward a free agent economy, arguing that it lets employers off the hook from creating traditional jobs. But the workers in MBO Partners’ survey seem to be thriving.
Among the on-demand workers, 79% said they are either highly satisfied or satisfied with their work, with most highly satisfied. And among the on-demand workers, 82% plan to continue working on their own for the next two to three years.
Who can blame them? They may never be independently wealthy enough to avoid the need for a job–at least not from their earnings on digital platforms–but, as many are realizing, there’s a real value in being able to develop an independent income stream—even a small one. And if pay rises in the platform economy, they’ll be well-positioned to benefit from it.
This article was written by Elaine Pofeldt from Forbes and was legally licensed through the NewsCred publisher network.