As in so much of modern society, opinions around the gig economy tend to be quite polarized. There is reasonable evidence to suggest that many “gig” workers are actually highly skilled individuals able to operate independently (and enjoy this freedom). Opponents, however, see gig work as lacking security and reliability, with the scales tipped in favor of employers who aren’t actually employers.
A new study from Rice University paints a slightly different picture and argues that gig work can actually act as a stepping stone into entrepreneurship. The researchers came to their conclusion after exploring the impact ride-hailing services such as Uber had on around 1,200 cities and towns across the United States during 2016. The researchers believed that the staggered entry of these services into each town allowed them to gain a before-and-after perspective of entrepreneurship in each place.
Rising entrepreneurship
The data showed that both new business registrations and Small Business Administration loans to new businesses grew by about 5% after ride-hailing companies entered a town. What’s more, searches on Google for things such as “how to incorporate” and “how to start a business” also grew by around 7%.
This trend was such that wherever interest in gig work was at its highest, so too was interest in entrepreneurship. Of course, correlation does not mean causation, but the researchers believe that gig work may allow budding entrepreneurs to earn a side income while they work on their new venture, which allows them to bring in some cash during the inevitably lean early days of their business. It also provides an easy fallback source of revenue should their business fail.
Perhaps understandably, the impact of ride-hailing was greatest in cities where levels of both income and educational achievement were lower. Entrepreneurship was particularly affected in areas where wage growth was volatile, which the researchers believe underlines the important role the gig economy can provide in giving people a degree of income insurance.
There was also a significant growth in entrepreneurship in areas where there was significant variance in the credit ratings of people. For instance, in areas with high levels of creditworthy borrowers, economic activity was higher, which in turn meant demand for the goods and services provided by entrepreneurs was also higher. In areas where poor credit prevailed, the gig economy was a ready source of capital for potential entrepreneurs, which helped them get their businesses off the ground.
Suffice to say, there isn’t a clear and direct line between ride-hailing and entrepreneurship, and the relationship is not so clear cut that simply introducing one will see a boost in the other. The researchers accept that ride-hailing didn’t seem to affect the kinds of businesses that were created, nor indeed in which parts of the city those businesses were created in. Nonetheless, it provides a reminder that the kind of gig economy jobs that are so often derided are not always a bad thing.
