Worker Welfare in the Gig Economy

Abstract

Globally, there has been a rapid rise in the prevalence of solo self-employed individuals earning income through platforms that mediate exchanges of short-term labor services—gig work. Revealed preference sug- gests that growth in gig work participation indicates workers are deriving a significant surplus, yet many ob- servers have concerns that these work arrangements undermine labor protections and leave workers worse off. In this paper, I quantify the surplus workers receive from participating in a typical gig economy: the UK’s food delivery market. I use administrative data that track workers’ labor supply across different plat- forms and contain information on a novel cost structure choice to evince that workers have misperceptions about the return to gig work which lessen over time through learning. Embedding these phenomena in an empirical model of gig work participation implies a large average surplus of £1,000 per month, but there is substantial heterogeneity and misperceptions cause one in six gig workers to suffer a negative surplus. Participants working less than 25% full-time in the gig economy enjoy the majority of the gig work surplus. Consequently, policies mandating platforms to provide full-time workers with benefits, as in California’s Proposition 22, are welfare decreasing for plausible degrees of incidence on all participants earnings.