We consider the trend towards rising levels of economic uncertainty and insecurity to be one of most powerful trends we follow. We also think it's one of the least studied and understood.
A combination of factors drive economic uncertainty. These include relatively slow growth, stagnant wages, middle class job losses and declining job security.
In addition, a growing amount of research also points to income volatility as a cause of economic uncertainty.
The New York Times article Steady Jobs, With Pay and Hours That Are Anything But covers research by the JP Morgan Chase Institute showing that income volatility, while most pronounced for those with lower income, is common across all earning levels.
The excellent article chart below (click to enlarge) nicely summarizes this data.
Key quote from the article:
“Since the 1970s, steady work that pays a predictable and living wage has become increasingly difficult to find,” said Jonathan Morduch, a director of the U.S. Financial Diaries project, an in-depth study of 235 low- and moderate-income households. “This shift has left many more families vulnerable to income volatility.”
The article points the main culprit is shifting pay and variable work hours at a growing number of traditional jobs.
This fits with the findings of The 2017 edition of the Intuit On-Demand Economy Workforce study.
This study found a large percentage of gig workers are doing gig work supplement their income in response to financial shocks and/or income volatility associated with their primary source of income.
Key quote from the Aspen Institute's New Findings Reveal the On-Demand Economy Plays Key Role in Improving People’s Financial Stability, which covered the Intuit study:
... income volatility is growing and more Americans are facing financial hardships and shocks than in the past. Second, it’s clear that our traditional safety nets are not working as well as they need to.
Because of this, a growing number of Americans are turning to gig work to help them work through a financial hardship or smooth volatile income streams.
In other words, the gig economy is being used as an alternative safety net for many gig workers.
This is not to say there aren't income volatility issues with gig work. There clearly are, especially for those working full-time in the gig economy.
But for the majority of gig workers who work part-time or occasionally in the gig economy, the gig economy reduces instead of causes income volatility.
Economic uncertainty has a number of effects. It leads people to avoid long term or major commitments, both in their personal lives and as consumers.
Examples include delayed and lower rates of marriage, having children and home ownership. It also leads to a resistance to large purchases of all kinds. All of these have major impacts on the economy.
See our Economic Uncertainty section for more on this trend.
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