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Gig work used to be a recession-proof safety net. Not anymore

With gig work even more unstable and uncertain than before, independent contractors are surviving the pandemic by cobbling together piecemeal labor, unemployment benefits, and COVID-19 stimulus aid.

Gig work used to be a recession-proof safety net. Not anymore
[Photo: Jon Tyson/Unsplash]
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In early March, Din, an Uber driver in Baltimore, took a passenger home who had a violent cough. Din (all names in this article are pseudonyms) came down with COVID-19 a few days later.

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“My throat became all sore,” he says. “I had a fever, sweating—I couldn’t sleep. I stayed in the house for two weeks, even without stepping outside. Then I put my mask [on] and then went out, bought some food, came back again, stayed for two weeks.”

Unable to work for two months, Din slowly sold all his furniture and fell behind on rent. He tried to return to driving, but on his first day back two riders pulled off their masks midride complaining they were uncomfortable. Scared to say anything to the customers, lest it affect his rating, he decided he was done with ride-hailing. When we talked, he was putting everything he still owned in the back of his Honda Accord. He immigrated from Sierra Leone, and without local family to help, he planned to drive to Alabama to move in with a family friend and become a truck driver.

As the pandemic began to spread, fear and uncertainty about working conditions became common among gig workers, particularly as demand for services on big platforms such as Uber plummeted. In late March, the CARES Act extended pandemic unemployment assistance (PUA) to gig workers for the first time. PUA is a specific form of federal unemployment insurance (UI) for independent contractors who are ineligible for traditional, state-based unemployment insurance. In addition, all workers who received any unemployment insurance qualified for Federal Pandemic Unemployment Compensation (FPUC), an additional $600 weekly payment that expired in the last week of July.

The expansion of unemployment insurance has generally worked: Even though unemployment claims are more than twice that during the Great Recession, the effects have been blunted because of the generous UI, which helps people protect their health by staying at home. But, with the expiry of the $600 enhancement and 14 million more unemployed people than jobs, more people might have to turn to subcontracted and gig work, just as they did in previous recessions. As ethnographers, with over 11 combined years of studying the gig economy, we pooled our observations from more than 100 gig workers to understand how they are navigating the pandemic. We found that workers are managing to stay afloat through a patchy network of gig work, unemployment insurance, and assistance from family and friends. These interrelated safety nets have been functioning as lifelines during a devastating period of uncertainty.

Now, an extension to the $600 enhancement is being hotly debated in Congress as Republican and Democratic lawmakers negotiate the terms of another stimulus bill. For millions of low-wage workers across the country, the money has been a barrier between them and food and housing insecurity. And, for gig workers in particular, the pandemic relief money has given some a new sense of stability in precarious work—even when accessing relief money comes with its own uncertainties.

A recession-proof back-up plan

During the Great Recession in 2008, gig platforms exploded by providing a back-up plan—a predictable, if low-wage, way to earn money from piecemeal tasks for people who were experiencing financial instability. Denise, who lives in Houston, has always used the gig economy as a safety net when she was in between jobs. After being laid off in early 2015 from her telecommunications job, she started driving for Uber and Lyft as an independent contractor, only stopping when her severance payments ran out and she started collecting unemployment. When Denise lost her full-time job again during the pandemic, she says, “I wasn’t upset . . . I’m going to make it regardless, because I always have a backup plan. And my backup plan back then was Uber. My backup plan this time was DoorDash.”

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My backup plan back then was Uber. My backup plan this time was DoorDash.”

As demand for gig services has changed dramatically, gig workers are choosing new types of work. Demand for high-contact gig services, such as Uber, cratered by up to 80%, as people were advised to stay at home. In contrast, demand for low-contact services, such as grocery delivery by Instacart, increased by 450%. By outsourcing food and grocery delivery, consumers transferred the health risk of shopping to gig workers. Frannie, who lives outside of Pittsburgh, was furloughed from her executive assistant job in mid-March. She turned to Instacart because she needed the money to supplement her income and wanted to provide assistance to those who needed it. “I wanted to help people because, well, I’m healthy and can do this, and if people are not healthy and can’t do this, I should be buying them their groceries,” she says.

Workers who were willing to take the health risk could see their earnings rise. Gig firms offered temporary incentives, such as a $150 bonus for 10 hours of work (Amazon Flex), an extra $3 to $10 bonus for every ride (Uber and Lyft), and $2500 referral bonuses (Instacart). For Derek, an Uber driver in Detroit, more than half of his nearly $3000 earnings (before expenses ) for 55 hours of work one week was from promotions. “There’s a lot of drivers missing. I guess everyone’s looking for unemployment . . . That made it very lucrative for me,” he says.

Even in the best of times, workers must strategize to find the most lucrative jobs. On some platforms, the pandemic has made competition fiercer: Some gig workers are waking up at 5 a.m. to compete with automated bots that grab the best batches or orders, or they’re camping out overnight in wealthier neighborhoods to receive dispatches. Though some workers are still doing gig work during the pandemic, this option is steadily becoming less certain given the health risks, decreased demand, and increasing competition.

A new kind of social safety net

Others have turned to the unemployment benefits available to them under the CARES Act, but they have faced barriers and inconsistencies in receiving benefits. Many have been forced to continue working, putting their health at risk, or rely on other social programs to make ends meet.

Shifting worker classifications and bureaucracy have made it challenging for workers to receive promised benefits. Daiwak, a New York City Lyft driver, stopped driving and filed for unemployment in April, but had to return to driving in May because he was his family’s sole provider. In New York State, ride-hail drivers are classified as independent contractors, which excludes them from the rights associated with employee status, yet they are considered employees for the purpose of receiving UI. Still, they’ve struggled to get UI because Uber allegedly hasn’t turned over the data state unemployment agencies need to process workers’ claims. In late July, a federal judge finally ordered the NY Department of Labor to promptly pay ride-hail drivers what they’re owed.

Turning to the gig economy as a safety net poses a series of contradictions. Because workers are generally classified by their employers as independent contractors, they lack rights employees have, such as a guaranteed minimum wage, and earned benefits, such as unemployment insurance. At the same time, gig employers create jobs that are relatively easy to enter, which is especially valuable for workers facing financial instability. And many enjoy the schedule flexibility that comes along with being an independent contractor, even when they work largely under the control and direction of their algorithmic managers. This tension, between limited rights and economic opportunity, has direct implications for how gig workers struggle to receive unemployment insurance during the pandemic. As employees, drivers would get state unemployment insurance that can be hundreds of dollars more than pandemic unemployment assistance because of the way it’s calculated. And because gig workers may be misclassified as independent contractors, rather than as employees, it’s not always clear whether they qualify for state UI or federal pandemic assistance, which can complicate the process of applying for those benefits.

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Still, unemployment insurance has given some gig workers a steady source of income for the first time. The pandemic unemployment assistance that Kenneth, an Uber driver, received allowed him to return to Atlanta to support his aging parents. He was able to break his lease in Baltimore early, and after waiting three months for his unemployment claim to be processed, he was able to use the lump sum and his stimulus check to finance the move. “I’m blessed, but I can see how it can be devastating for a lot of people, especially if you have kids,” he says.

I’m blessed, but I can see how it can be devastating for a lot of people, especially if you have kids.”

Kenneth’s choice is reflective of a larger debate taking shape over whether the weekly $600 benefit should be extended in the next stimulus bill. Treasury Secretary Steven Mnuchin echoed concerns that it could disincentivize work for some people, despite several studies that find there’s no evidence of negative effects on the labor market, or on the relationship between the extra money and people staying at home. As economist Ioana Marinescu, who coauthored one study, observes on Twitter, “It can both be true that $600 is a disincentive to find a job in some cases as @stevenmnuchin1 says, AND that this has no effect on employment. When there are too many applicants for the few jobs we have, one person not applying makes no difference to the job being filled.” Neither can workers simply quit their jobs to obtain UI benefits, including pandemic unemployment assistance, because that is considered fraud by the U.S. Department of Labor.

“But it’s harder to determine what work refusal looks like,” says Michele Evermore, a senior researcher at the National Employment Law Institute. “When a constructor worker is offered a job and they refuse, the employer in many states is required to notify the state agency. It’s not that cut and dried, say, for an Uber driver.”

Navigating a maze of benefits

Even accessing these benefits in the first place can be a challenge. Navigating the process for obtaining benefits can be complicated, and some workers are unaware they even exist. Jake was working for a local taxi and app company in Asheville, North Carolina. He had no source of income after he stopped working and didn’t know he was eligible for pandemic unemployment assistance. In comparison, Uber has set up a dedicated website and crisis communications to help drivers navigate what programs they’re eligible for, including small business loans, which can reduce the knowledge gap.

Despite broader eligibility for benefits, many workers are experiencing inconsistencies and time lags in receiving benefits. After initial delays, Julie received a month’s worth of payments all at once, until the State of Kentucky put her claim under investigation, with no further communication. She waited another month, without income, before returning to Uber, where, fortunately, she was able to find enough work.

“It’s good to be in control of my finances again, but I’m literally two months behind, and playing catch-up really sucks,” she says. “With hindsight I should have just kept working.”

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Others are not receiving the full amount promised. After ride-hailing demand plummeted, Queen in Philadelphia tried all the major platforms, for food, grocery, and package delivery, but got increasingly anxious about gig work due to the rising number of COVID-19 cases and civil rights protests. While she’s technically eligible for the $600 additional benefit in addition to UI, Queen says she only receives $300 a week and relies on donations to get by. “It’s tight, but I’m just taking care of myself and my mom,” she says. “I’m getting pandemic unemployment, but that’s just helping me to get by. A lot of churches are offering up free food. So I will go get a box of that if I need it—it don’t take a lot for me to get full.”

I’m getting pandemic unemployment, but that’s just helping me to get by.”

To be sure, many low-wage workers, gig workers included, have a social safety net that predates pandemic interventions. The average hourly compensation of an Uber driver is only $11.77 after deducting Uber fees and vehicle expenses. Unlike most traditional jobs, gig work lacks benefits beyond wage compensation, such as health insurance. That means that among NYC drivers, the majority of whom work full-time, 40% qualify for Medicaid, 16% have no health insurance, and 18% qualify for federal supplemental nutrition assistance—nearly twice the rate for New York City workers overall. The pandemic has also given rise to a surge in applications for the Supplemental Nutrition Assistance Program (SNAP). Yet government interventions available through the CARES Act may impact workers’ access to preexisting social safety nets: For example, Pennsylvania asserts that the $600 weekly FPUC can impact eligibility for SNAP, but not Medicaid or the Children’s Health Insurance Program.

While the pandemic relief has provided alternatives to unacceptable working conditions for gig and other low-wage workers, these changes are temporary—and inconsistent. A more reliable and consistent safety net that raises labor standards is needed, whether that’s making UI for gig workers permanent, creating portable healthcare benefits, pursuing reclassification of workers as employees rather than independent contractors, or instituting a universal safety net for all work regardless of employment classification status. While the administration of UI benefits has been patchy during the pandemic, policy interventions in the public interest would ultimately shore up trust in government institutions in the long term.

In the meantime, workers are watching and nervously waiting to see if the additional $600 weekly benefit will be extended in the next stimulus package, although the pandemic unemployment assistance program can continue through the end of December. By the time Daiwak received his unemployment money in late July, he had already returned to work. But he still worries that soon other drivers will flood the streets, and there won’t be enough passengers.

“Whenever the government’s honey is done, there’s going to be big pain,” he says.


Lindsey Cameron is a professor of management at the Wharton School, University of Pennsylvania. She researches the changing nature of the contemporary workplace, and her work has been profiled in Forbes, CNBC, and Kiplinger’s.

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Alex Rosenblat is the author of Uberland: How Algorithms are Rewriting the Rules of Work. She is a senior researcher at the Data & Society Research Institute and a Fellow at the Aspen Institute’s Tech Policy Hub.