How the Online Platform Economy Has Changed the Business and Labor Landscape | Tech Trends
[electronic music] [Anish Bhimani] Welcome to TechTrends. TechTrends is a podcast series and provides perspective on the latest trends in technology, FinTech, and digital. On today's episode, we'll provide some insight into the online platform economy and how it's changed the business and labor landscape over the last number of years and how companies and employees can take advantage of its fast paced developments to ensure success.
I'm Anish Bhimani, Chief Information Officer for Commercial Banking. And joining me today is Fiona Greig, Co-President of the JPMorgan Chase Institute. Fiona, welcome to TechTrends.
[Fiona Greig] Thank you. Thanks for having me. [Anish Bhimani] So a lot of our listeners may not be familiar with the JPMorgan Chase Institute or that the firm even has its own internal think tank. Can you talk a little bit about the mission of the organization and your role with them? [Fiona Greig] We are a think tank inside JPMorgan Chase, and as a co-president, I lead a team of economists and data scientists who are mining the daily transaction data of all of the activities that flow through the bank in a de-identified and anonymized way. The work that we do is intended for the public good.
Everything goes on a public website with the goal of informing policy makers, business leaders, CFOs of businesses like this audience on exactly what's going on in the economy with the intent that given that the firm has a relationship with roughly half the households in the U.S. this can be a window onto the world, onto the U.S. economy that's pretty broadly representative of that economy, not just the Chase portfolio.
[Anish Bhimani] So you're able to basically take all of that aggregated anonymized data and identify trends and what's going on, whether it be in economy or certain other trends going on. [Fiona Greig] Yeah, exactly. I mean, the goal is to use the vantage point that is offered by these data. And if you think about the highest level, Chase has a relationship with roughly half the households in the U.S. and so this is an incredibly large data set from which we try to then build an understanding of what's going on in the economy as representative of the economy at large. [Anish Bhimani] So it's clear that the online platform economy has had a big impact on the way business is conducted, and labor is defined both in the U.S. and across the globe.
Can you dig a little deeper into some of your findings and how you see the online platform economy affecting the global economy going forward? [Fiona Greig] Yes. And the language, as you point out, is a tricky one. There are many words for this phenomenon. And I think our intent with the term online platform economy was actually to carve out the small piece of this, that we observe with the bank data.
So if you think the original economy on this earth, would have looked a lot like gig work People being paid in a casual way for services that they were being offered. And so to that casual work still exists be they, caretakers, painters, any number of people who are working for themselves and perhaps not through the form of sort of W2 standard contract labor. When we first started thinking about this project, we said, "Well, what is our viewpoint into this?" And our viewpoint was limited, but very powerful. And that is to say with the rise of online platforms, the first of which would probably be something like eBay.
It was a selling platform where sellers could be connected in a sort of peer to peer way with buyers. You didn't have to be a big store like Amazon or a big store like Nike. You could just be somebody selling stuff out of your garage. And that's probably the origin story of the online platform economy.
Over time, if that was where it got its beginning, it quickly with really the entrance of the transportation platforms shifted from a marketplace of goods to a marketplace of services. And so over the last 10 years is when we really started to see this rise. We see an enormous increase in people supplying their time on these transportation services. And I'll talk about actually four different segments that we are now tracking. So if the original one were selling platforms, we identified three others that are pretty important now.
So one is transportation. The other would be all the other non-transport work where people are selling their time. This could be things like dog-walking, cutting people's hair, legal surfaces, any kind of service that is not transportation. And then the fourth one is the leasing sector. And that is, would be things like Airbnb and alike where you're leasing assets of kind, whether it's real estate or vehicles and things like that.
And clearly since 2012, I mean the big growth has been transportation, but there's also been significant growth in some of these others that are just still in their earlier stages, whether it's the leasing platforms or other non-transport work. [Fiona Greig] I mean, after Uber and Lyft entered, you would hear in the tech circles, well, "I'm the Uber for dog- walking" or "I'm the Uber for..." Every new entrant was "I'm the Uber of X." And as we tracked these platforms where you started with the data at a list of 30, then we moved to a list of 42, and then we were up to 128 or some platforms even in 2018.
And actually the sector that has seen the largest growth in the number of platforms was this non-transport work category, where people were trying to emulate what Uber and Lyft had done with another kind of service. So a couple of things I'd just call out about this space in general, and maybe some of the specific sub sectors. So as of the end of 2018 at any given month, we observed about one and a half percent of the population earning income from one of these platforms. And I should be clear that we were really studying the supply side of this.
People earning income from this, not so much the purchase or the demand side, where people are buying goods and services, obviously a much larger share than 1% of the population was buying goods or services off of these platforms. So one and a half percent in any given month. However, if we looked over the prior year, it was more like four and a half percent, meaning that lots of people were doing this on a very sporadic basis. The vast majority would earn income off of these platforms in a couple of months out of the year, not really the whole year. In the month in which they were participating, this is a meaningful source of income for them, roughly maybe as much as half of their income was coming from these platforms.
But over the course of the year, it was actually a small piece of their income. And so you can kind of get a sense of the ways in which people were churning in and out of these platforms in order to supplement their income. They were not necessarily treating this like a full-time job.
They were treating this as a side gig, to the term. So I think that's important because with the emergence of this space came so many policy questions. What does this mean for the future of work? How should we be classifying these participants? Are they being underpaid in the form of all of the non-wage benefits that normally come with a job like healthcare, like unemployment benefits, like disability insurance, any number of other benefits? And on the one hand with the growth, I think these are really important questions and we're seeing the growth of the contract workspace as a whole, the larger gig economy that you started with of which the platform economy is just a small piece, there has been work suggesting that has really been growing. We've see sort of a fissuring in the workplace and that those larger questions of what should the social contract be of the future if the typical job that someone has is no longer a W2 job that comes with all these benefits. So I think those questions are all still real. And at the time that we were studying this, the suppliers themselves weren't actually treating this like a full-time job.
So I think there in came the idea of things like portable benefit structures, can I accrue across a number of different employers or workplaces, points towards, or can I cobble together some package of benefits across these different places that I'm earning income, be it a formal job, or be it a platform job or otherwise? So there remain many open policy questions about how these workers should be designated, what kinds of benefits should they be able to have access to many of which have been reopened even during COVID. And I know we'll talk about that a little bit later. [Anish Bhimani] It is interesting. You've seen that come up in a lot of places on, should these individuals be considered employees let's say of the ride share platforms, or are they independent contractors and what are the implications on companies for that as well? Is there anything that companies that employ folks from this economy should think about? Be aware of as they do that? [Fiona Greig] Yeah. So as an economist, part of the elegance of these marketplaces is that you could have the supply curves shift in and out, and the demand curve shift in and out, and the pricing automatically adjust. And that's sort of the perfect marketplace.
And so, on the other hand, I think there are really important questions around minimum wages, for example, there is nothing in some of these platforms' pricing algorithms that prevents the price or the wage from falling to zero. There's nothing in the algorithm that enforces a lower bound. And I say that because we did see over time that revenues... "revenues," specifically revenues, not necessarily wages, because we couldn't discern how many hours people were working, but revenue on these transportation platforms had fallen considerably over the time that we had the number of months and years that we were studying this.
And that kind of makes sense. I think some of these transportation platforms drove really hard in a particular place to attract workers to the platform to stand it up so that the first time you're in the city of Cincinnati and you open up one of these apps and you try and call somebody that a driver actually shows up at a decent amount of time However, the apps continue to innovate. So for example, one of the features that came up was that drivers could choose their destination, and they could try to pick up a passenger, they could specify that they wanted to pick up a passenger on their way home or on their way to work.
And in economic terms, what that does is it lowers the opportunity cost of that driver's time right then and there because this is their commute anyway. So in some sense, it lowers the price that they're willing to be paid for their time. So I think in a world where, we do care about inequality in this world.
I think thinking about those lower bounds, that minimum wage framework in the context of even these marketplaces is pretty important. [Anish Bhimani] So it's clear that the online platform economy has had a huge impact on the way business is conducted the way people think about labor, both in the U.S. and around the world. Can you dig a little bit deeper into some of your findings and how you see the online platform economy impacting the global economy moving forward? [Fiona Greig] The online platform economy is interesting in so far as it opens up in the way that we've been seeing trended anyway, an entire world of supply of services. Especially in so far as as some of these services, aren't in person They're not driving from A to B, they are legal services, they are coding services.
They are market or the graphic design services, whatever they may be, especially in these non-transport work platforms. And if you pair that concept where you've got a marketplace where you can find a lawyer anywhere who's willing to work on an hourly basis on any matter with the work from home acceptance and every way in which our workplace has been transformed through COVID, you can see how we might see more and more fissuring of the workplace. It might be more and more acceptable for a firm or reasonable for a firm to contract out their legal services, as opposed to feeling like this is a job that needs to sit in a cubicle in an office. So I think the emergence of these platforms, which creates that marketplace, where it's easy to find people, it's easy for people to find business, suppliers, and buyers can be paired in this peer-to-peer way and pay through those platforms. Paired with COVID and the work from home virtual workplace kind of positions this space for growth, I think is fair to say.
[Anish Bhimani] It really does not just lower, but almost decimate the barrier to entry on the supply side, at least. So the same way you mentioned when he first came out, you didn't have to have a big retail store. You could find a way to sort of sell your goods. And now it's the "Hey, I have some free time I can sign up with Handy or a TaskRabbit," or somebody an offer up services individually. It does open that up dramatically and you don't have to necessarily be in all the big cities you can do whatever you need to do from a lot of different places too. [Fiona Greig] Yeah.
The only thing I would say is that I think that's true when it comes to Handy and services, per se, I think when it comes to selling goods it's really hard to compete on the world wide web. [laughs] as a small person or a small shingle. [Anish Bhimani] But now let's talk about how a growing economy, like you said, there's lots of opportunity for growth.
A growing online platform economy creates space for either new companies to form or current businesses to pivot in order to take advantage of this space. So a lot of our viewers are business owners and entrepreneurs themselves. What sort of opportunities do you see for them ahead? And how might business leaders capitalize on these trends in terms of how commerce is conducted and labor is deployed? [Fiona Greig] Because my team and I look at banking data all the time, one of the rather maybe dorky, but fascinating for me, aspects of this work is we get really interested in the channels by which people transact And they matter to us because if you swipe a debit card, I know generally what kind of merchant one was at, and whether that was a grocery store or something else.
But if you pay by cash, I have no idea what this was spent on. And I can't make sense of that transaction. And obviously with COVID, we've seen just a huge increase in electronic purchases, movement away from cash/check, and whether that's for the purposes of paying rent or paying medical bills or buying stuff, or paying people for any kind of service, moving on to these electronic payment platforms, I think is just a thing that businesses should be adopting and enabling that.
And that is the way of the future, for sure. But it is also one of the important premises of the platform economy itself. One of the huge innovations, it didn't seem like rocket science, but of course, as a consumer, this is one of the ways in which these transportation platforms create value, consumer surplus is that you no longer had to stop and pause at your destination to rifle through your wallet, or either the right amount of cash or a credit card and swipe. And it never went through, you just exited. You just left the vehicle and off you went.
And so I wouldn't underestimate the power of payment channels and those electronic payment channels as being a means, a super highway to additional ways to serve people in more convenient ways. So that's one, I would say, secondly, as an example of that, we've seen huge growth in online purchases generally, as opposed to brick and mortar purchases. So when we track commerce growth across cities, you see this both in our administrative data from the institute, but also in things like federal surveys, like the Monthly Retail Trade Survey. Almost 30% growth in year-over-year growth in online spend.
And I think raises questions for lots of businesses, how can we deliver the same goods and services online? I'm sure every business has been wrestling with that question during COVID, but not only is that interesting as perhaps a business challenge, but also not a business opportunity The minute you're online, you're no longer restricted to the dotted line circle around your geographic storefront, you could be selling to the entire globe. So that's kind of another thing. [Anish Bhimani] So we've talked about COVID. Obviously, it's hard to think about this without thinking about the impact the pandemic has had on the gig economy and around that too. Can you talk about sort of know how that has either changed or accelerated the online platform economy? [Fiona Greig] Yeah.
So I should be clear at the outset that our data go through the end of 2018. So I don't have actually platform economy data to speak of that's from 2020 or current. However, I think a couple of things, one is if I were to interrelate the lines forward through COVID of the four different sectors I mentioned, I think transportation probably took a down tick with offsetting sub-components of that, where nobody's driving people from point A to point B anymore. However, those same drivers might be driving stuff around town.
They might be driving food deliveries and lots of it. So do I think the food deliveries offset all of the people moving? Probably not. And that's why I think probably the platforms probably took a dive, but I can't confirm. The goods, merchants, selling merchants, for sure, a big uptick. I think the leasing, the Airbnbs probably a big downtick. I mean, yes, we had people needing long-term rentals to get out of town and have a change of pace.
I know in my family, we offloaded for an Airbnb for four weeks, but we're not seeing the onesies and twosies, the weekend getaways and all that sort of thing in COVID just because of the huge drag on, on travel in general. And the vast majority of us are stuck at home more than we would prefer to be. [Anish Bhimani] It's also interesting as well. If I look at our neighborhood, we were joking the other day that we used to see black cars everywhere, driving people around and they've all been replaced now with delivery drivers.
So there's no shortage of a lot of people in the environment. It's just a different nature of what they're doing, but I also have to think that a lot of those consumption patterns that we've seen in COVID, whether it be buying more goods online, employing more services, whatever, it might be here to stay. So could you talk a little bit about how looking forward, let's say in a post pandemic environment, how the labor market, how the economy might be changing and how the online platform economy can compliment the traditional labor market of tomorrow? [Fiona Greig] Yeah. That's a big question. So let me take some pieces of it in turn. So during COVID, we've seen tremendous growth in purchases of goods and a big downtick in purchases of services. So how much of that is going to continue.
I think that balance of goods versus services probably won't continue There's only one refrigerator that you can replace [laughs] and people have a huge pent up demand for all of the services they used to enjoy, rather be it leisure, restaurant, travel, all sorts of things like that. So I think some of that balance will revert back to what we're used to seeing in the past. On the other hand, what I think is here to stay is the shift to online. If we hadn't already learned how to be a consumer online, we have now, and whether that's buying groceries online, buying clothing online, you name it, people have learned how to do that, seeing that it can work, done it for months and months and months, consumed a year's worth of a family life online. And I think that's here to stay.
I think other things that are here to stay are I think many firms are re-evaluating their appetite for work from home. And that has downstream impacts on all kinds of services. Whether it's quotidian things like dry cleaning or whether it's the types of businesses and the number of them and their vibrancy of businesses that rely on those business commuters, an example of that, not just working in person, but the business-related travel, which I don't think will ever come back, or at least not for a while to the volumes that we had prior to COVID. So I think there are some things that are going to change in more durable ways, specifically in the services' sector, and the ways in which people are transacting move to online, move to electronic payment channels, I think that's here to stay. And those are examples of-- I've heard folks say, we've experienced 10 years of innovation in 10 months. And those are examples of it.
I don't know if you've experienced this, but I certainly consumed healthcare remotely and virtually. And that first week when mom and dad were both on calls and baby falls down the stairs, the first thing we did was have a virtual visit with our pediatrician. And it was phenomenal. It delayed all my worries that my child had a concussion. That's amazing.
I think that sort of thing should stay in. So anyway, there'll be winners and losers in terms of what stays and what returns. [Anish Bhimani] So finally, just for our viewers out there, I think the message is that no matter what this shift to online, this shift to digital is really an imperative.
If it wasn't before, I think there's just sort of really underscored to everybody, how important that's going to be. But equally, if you think about all of the backend logistics and fulfillment processes and all that kind of stuff, that became a big part of how everybody sort of dealt with daily business should probably get looked at as well. Are there things where you can involve more individuals from the gig economy to do fulfillment on those sorts of things? How can you compete with a lot of these platforms that are offering those same sort of services [Fiona Greig] That's right. [Anish Bhimani] So Fiona we've talked a lot about COVID and it's hard not to think about the impact of the pandemic has had not just on the online platform economy, but the economy more broadly. Can you talk about sort of what COVID has meant to the online platform economy? [Fiona Greig] Yeah.
So obviously through COVID, we've seen dramatic job losses, and those job losses have been disproportionately felt by low income families, by women and women of color. And that's a backdrop That means that there's a huge amount of labor supply out there. People who need income, many of these people, would have received the stimulus payment of April 2020, as well as unemployment insurance benefits, but many people may not have, or may have had to wait several weeks for those benefits to arrive and may have turned to the platform economy for work or for a source of income.
So certainly not only has there been an increase in demand because people have moved to these online and electronic payment platforms, but there's likely an increase in supply of the labor of people who are seeking income through any number of ways. There were hiring freezes in many sectors and this kind of gig or short-term employment might have been a way in which people might've been able to find flexible work or short-term work to bridge the gap between their employment from the past or the job that they lost. And either a recall back to that job, or the employment benefits, unemployment benefits that they might've been waiting for. I think within that though, one of the things we saw from our work prior to COVID was that actually there was a reasonable gender difference in the extent to which people were participating on these platforms. So in the transportation sector in specifically which has contributed most of the growth to the platform economy, there was a big gender gap.
Men were more likely to be participating in these platforms. They were more likely to turn to these platforms when they were between jobs. And so that raises a question for me, because if this seems like an income generating strategy, but more so for men than for women, but it was actually the women who lost the jons, would they turn to the platform economy? And if so, to what kinds of platforms, if not transportation, maybe they were exploring some of these other services, non-transportation related services, or leasing services where we did see more gender balance in those non-transport work platforms, leasing platforms, selling platforms. I mean, Etsy is an example of a platform that is disproportionately women.
So to what kinds of sectors did they flock that there may have been a big gender difference? And certainly there was a gender difference in how the economy was hit. So those would be a few things that I would underscore. [Anish Bhimani] Well, I think it's clear that between the as you point out the job loss is causing an increase in supply and also the increasing shift to online purchasing or consumption of services, whatever that some of what we see in COVID might be here to stay going forward.
Can you talk a little bit about how the online platform economy might compliment what us would assume and subsume some of the more traditional labor market, and especially when we think about the increased acceptance of remote work, work from home, other things like that, what does that mean for this going forward? [Fiona Greig] If firms starts to think outside the box and realize that certain occupations within their firm or business doesn't need to be on premise. They've just learned over the last 10 months that this job can be performed perfectly well from home remotely then that does kind of call into question as to whether this needs to be a full-time worker. Does this need to be a W2 worker or can this rather be a contract that I have on a temporary basis as needed when I need this service or this role? And so, I worry because some of those that does create potential growth for these platforms and maybe cost savings for firms at the same time back to the policy questions and sort of the social contract, if more workers end up in these kinds of contract gig economy arrangements, they're likely to experience fewer benefits from the lower retirement savings, lower health insurance benefits and things like that.
Now, some of those have come into question. The CARES Act provided a lot of relief for families during COVID. And one of the really important things it did was it actually expanded unemployment insurance benefits, not just in terms of the level A lot of people have heard about the extra $600, which has been renewed to the tune of $300 per week, but it also expanded the eligibility. And for the first time contingent gig workers were now eligible to receive unemployment insurance benefits, which hadn't previously been the case.
And so at the same time that there's all this discussion about whether we need to re-up cares and which parts of the benefits and relief need to be extended or continued while while we're still in the pandemic. I think it's opening up a broader long-term set of research or policy questions around should there be more broad based unemployment insurance reform? I know I'm getting a little bit beyond the question of tech, but when we talk about the future of work these ended up being important, externalities associated with those transformations. And right now we have not just one unemployment insurance system, we have 53. Each and every state has their own system and the federal government playing a role in indicating that gig workers ought to be eligible for unemployment insurance during a pandemic, raises the question as to whether they should be eligible in business cycles more broadly, or even on a go-forward basis when people experienced job loss on their own. [Anish Bhimani] I've seen the signs in New York for the insurance for freelancers and things like that for years.
I think it is just making that more and more mainstream and affecting a much broader part of the population [Fiona Greig] Yeah. [Anish Bhimani] Yeah. Well, Fiona, thanks so much for joining us today on providing your insights on such an important topic that's so relevant with what's going on right now.
I can't wait to see what the future holds. [Fiona Greig] Thanks for having me. [Anish Bhimani] And to all of our listeners. Thanks very much for joining us today. Remember, if you enjoyed this episode, you can subscribe and rate us on Apple Podcasts, Spotify, or wherever you get your podcasts. Tune in next time.