MIT professor says Uber has acted as a safety net for US unemployed

COVID has led to soaring unemployment with many either leaning on unemployment benefits, unemployment insurance or accumulating personal debt. As unemployment hit 15% in April, MIT Professor, Jordan Nickerson, said that companies in the gig economy – such as Uber (NYSE:UBER) – can have a ‘profound impact’ on labour markets, by decreasing unemployment claimants and indebtedness.

“The gig economy allows people to quickly find work with a flexible schedule and earn higher wages than they would generally receive through Unemployment Insurance (UI). This study looks at whether the introduction of the gig economy into a region can lessen the demand for UI and mitigate the need to accumulate personal debt,” says Nickerson.

Looking into the introduction of Uber across the US, the MIT study found that unemployed car-owners were less likely to rely on UI. In particular, workers who had access to the ride-hailing service were 4.8% less likely to receive UI benefits.

“Our analysis suggests that the decrease in UI usage if Uber were present in all areas translates to a yearly reduction of between $492 million and $750 million in UI benefits distributed by government agencies,” Nickerson adds.

The research illustrated similar trends in credit usage, with laid-off workers seeing a relative decrease in total outstanding balances of $544 or 1.3% of the average individual’s debt burden. Similarly, in credit performance, workers experienced a relative decrease in delinquencies of 2.9%.

Noting that the effects were most pronounced in areas with the greatest increases in unemployment, Nickerson continued: “We found that driving for Uber is viewed as a temporary safety net rather than a long-term job replacement. It is a way to quickly earn money in exchange for work, but it provides the flexibility to continue looking for another job. This was even the case when looking at individuals from high-income areas,”

While the MIT analysis focused on Uber, Nickerson also noted that similar benefits could be identified across gig labour, in firms that offer unemployed people instant access to jobs, such as TaskRabbit and Thumbtack.

He adds that the findings are consistent with his own belief: that, if given the choice, most people would rather work and be self-sufficient, than rely on government support. He believes that the gig economy makes this a more viable option.

He concludes: “Until now, policymakers have largely highlighted the negative aspects of the gig economy, which is indeed less than perfect. However, this study shows that there are other sides of the argument and that the gig economy can have a profound impact on labour markets. With potentially large UI cost savings to the government on the line and significantly less consumer debt, it is well worth it for policymakers to consider the benefits of the gig economy.”

Arguably, we might also say that companies have a greater obligation to offer job security to hard-working staff, even in times of hardship. With our jobs becoming a large part of who we are and how we understand ourselves as people, and the social networks we form, there is something to be said for the ‘job for life and progression in one company’ model. Indeed, constant change and fluid hours will never allow a worker to settle, and many being either informal or recently unemployed, they are largely at the mercy of prospective gig employers. For this reason, we should see companies, such as Uber, as plasters, not panaceas.

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Jamie Gordon
Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.