BALTIMORE - Chef Malik Anderson preparing a meal for dinner guests in his Baltimore home. His multi-course meals, offered through a meal-sharing site, are a prime example of the services people are providing in the gig economy. (Samantha Subin/Capital News Service)

Bad news for gig workers: A crowded labor market is depressing income, census data shows

By: Thomas Kendziora, Captial News Service

COLLEGE PARK, Maryland – The “gig” economy has increased employment opportunities for thousands of Maryland residents, including high-skilled and low-skilled workers. But as the number of people jumping into gig work grows, the competition for jobs means smaller paychecks for many.

It’s well-known that the income of taxi drivers has been hit hard by the growth in ride-sharing companies Uber Technologies Inc. and Lyft Inc., which have saturated cities with low-cost cars for hire. However, earnings also are falling for graphic designers, freelance writers and others who face strong competition for jobs. In some cases, the competition is coming from workers in other countries who can access the internet as easily as Americans to vie for jobs.

“Ten years ago, maybe a graphic artist would have charged you four, five hundred dollars for a logo design,” said Angela Heath, a College Park, Maryland resident and the chief executive of TKC Inc., which advises businesses and workers about the gig economy. “Now you can get logos done for $30. Some of that global competition has driven some of the prices down.”

There is no standard definition or measurement of the gig economy. One of the broadest measures, which counts more than 40 million workers, includes independent contractors, freelancers and other self-employed Americans who work short-term jobs, or gigs, rather than hold steady employment with a single company.

A narrower definition counts “on-demand” workers, which includes people who get jobs through digital platforms, such as drivers who pick up fares through Uber, carpenters who find jobs on TaskRabbit.com, designers who book customers on Thumbtack.com and skilled professionals who get jobs on TopTal.com. Emergent Research, a firm in San Francisco that tracks the gig economy, estimates that the on-demand workforce numbered nearly four million workers in 2016 and is expected to double by the year 2020.  

“Anyone entering the workforce today, at some point in their career, is likely to work in a gig or independent manner,” said Ellen Harpel, an economist who tracks trends in the Washington region, including suburban Maryland and Virginia. “It’s not like everyone’s going to be doing it all of the time, but everyone will probably do it at some time.”

Revealing census data

The federal government doesn’t compile data specifically on gig workers, but economists rely on a U.S. Census Bureau data series called “non-employer statistics,” meaning small establishments, or businesses, that don’t have employees. Economists reason that most establishments that don’t have employees are actually independent workers who operate as businesses for tax purposes.

The Census data shows that between 2006 and 2016, the number of non-employee establishments rose from 18.8 percent in Maryland to 487,540. But average receipts for the Maryland establishments during the 10-year period declined 15.8 percent, after adjusting for inflation, to $44,053 in 2016. The trends for Maryland closely track the national averages.

Not surprisingly, the taxi and limousine sector saw a large increase in establishments and a steep decline in receipts. The number of non-employer taxi and limousine establishments jumped more than  400 percent in Maryland between 2006 and 2016, while inflation-adjusted average receipts declined nearly 48 percent to $16,231.

The Census data also show declines in some white-collar occupations, such as specialized design services, which include graphic designers. The number of establishments in that category rose almost 13 percent between 2006 and 2016 to nearly 4,000 while average receipts were down nearly 25 percent, after adjusting for inflation, to $33,941.

The decline in revenues for design services partly reflects increased global competition made possible through a myriad of freelancer internet platforms that have popped up in the past decade, said Steve King, an economist, and partner at Emergent.

Worldwide gig economy

Fiverr.com, for example, which is based in Tel Aviv, Israel, is used by freelance and gig workers from around the world, including those in low-wage locales such as India and Eastern Europe. On Fiverr, companies and consumers can hire artists for as little as $10 per project.

“The quality is quite good and the wages are substantially lower,” King said, which means the American workers often have to lower their prices to get business.

Economists note that while receipts for some categories are falling, they point out that the size of the declines may be overstated by a large number of workers who hold down full-time traditional jobs during the week and moonlight in the gig economy during evenings and on weekends.

That describes 57-year-old Teresa Bronson, who is employed by the state of Maryland during the week and spends weekends running Shore is Delicious Catering by Teresa.

The Eastern Shore company gets 60 percent of its business through Thumbtack and the remainder through referrals and WeddingWire, an online marketplace for the wedding industry. She enjoys the flexibility of working when she wants to work and likes using internet platforms.

But as the platforms have become more crowded with caterers, Bronson says there isn’t always enough work to go around, which has pushed down catering rates.

“I’ve lost out to other caterers,” she said. And at times, “I have taken my quote down to get jobs but not down to the point to where I’m losing money,” she said.

Some are doing well

Not all gig workers are suffering. Management consultants, computer network designers, information technology specialists, and others with special skills are enjoying rising incomes, Heath said.

“Their prices can go up because they don’t have that global pressure from the competition,” she said, adding that many companies like to hire specialized workers who near their businesses.

According to the Census data, average receipts for Maryland establishments in computer design and related services were $60,268 in 2016, up 13.6 percent from 2006 after adjusting for inflationThe number of establishments, meanwhile, declined 7 percent to about 7,000.

Brian Loebig, a resident of Silver Spring who specializes in web design and social media marketing, is a prime example of how technology professionals are enjoying success in the gig economy.

After being laid off from an $85,000-a-year job at a nonprofit in Roanoke, Virginia, in 2010, he started Loebig Ink LLC, which specializes in web design, social media and search optimization.

In his first year on his own, Loebig estimates that he earned about $35,000, but his income doubled each year for the first three years and he says his income will grow to about $500,000 this year.

While his clients – most are in Washington, Maryland, and Virginia – receive proposals from international workers offering to do similar jobs for less, Loebig’s proximity to his customers has been a big advantage.

“I would say that you have a strategic competitive advantage, especially on the internet, if you’re local,” Loebig said. “People want to hire people next to them. You could hire someone in India for $15 an hour or even less, but a lot of people, they like to know that somebody’s physically near them.”

While he used multiple internet platforms as he grew his business, including Craigslist, Thumbtack, and Elance (now part of Upwork.com), Loebig said he stayed away from Fiverr because there was too much international low-cost competition with people offering services for as little as $5 an hour.

Emergent’s King said the divergent income trends of workers like Loebig when compared to other workers, are part of a national pattern.

“Years ago when we started tracking the gig economy, we thought it was interesting that there wasn’t as much income inequality,” King said. “But over time we’ve seen income distributions widen and the middle-income segment share of full-time independent workers decline. This is likely due to the same forces that are causing this in the overall economy – the hollowing out of middle-class jobs, growing demand and higher pay for highly skilled workers and growing numbers of lower-paid jobs.”

(Jack Wisniewski contributed to this story.)


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