America's Affordability Crisis Driving Growth of Gig Work
The Atlantic's The Great Affordability Crisis Breaking America covers how the rapid rise in the prices of housing, healthcare, education and childcare and their impact on Americans. Key quote:
In one of the best decades the American economy has ever recorded, families were bled dry by landlords, hospital administrators, university bursars, and child-care centers. For millions, a roaring economy felt precarious or downright terrible.
Hyperbole aside (the economy hasn't been roaring, it's been growing moderately; "bled dry" is also a bit much), we agree that these costs are leading to greater levels of financial stress and instability.
Coincidently, last week the McKinsey Global Institute released The New Social Contract in the 21st Century,
This report covers much of the same ground as The Atlantic article, but they report their findings more clinically. Key quote:
Among the findings: while opportunities for work have expanded and employment rates have risen to record levels in many countries, work polarization and income stagnation are real and widespread. The cost of many discretionary goods and services has fallen sharply, but basic necessities such as housing, healthcare, and education are absorbing an ever-larger proportion of incomes. Coupled with wage stagnation effects, this is eroding the welfare of the bottom three quintiles of the population by income level ...
The report chart below (click to enlarge) shows the changes in U.S. consumer prices by category. It is indexed to the overall inflation rate.
McKinsey didn't include childcare in its report. But as The Atlantic article explains, childcare costs have also grown at a much faster pace than overall inflation.
As we've pointed out in the past, growing levels of financial fragility mean more people turn to gig work to supplement their income - especially if they face a financial shock.
Given the cost increases for non-discretionary items like housing are likely to continue outpacing inflation (and wage growth), it's likely more Americans will need to turn to gig work to make ends meets and/or deal with financial hardships.