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Rise in gig work during a recession unlikely with hot labour market, say economists

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Economists say the expected economic slowdown in 2023 may not result in higher levels of gig work, unlike past recessions when levels of contract labor and the self-employed have surged.

They say this year’s recession could be different from previous years, with a tight labor market combined with a changing labor force and stubborn inflation.

“This is a confluence of factors that we have never seen before,” said economist Armin Jarnijan.

When we think of gig work, we think of app-based jobs like driving for Uber or looking for clients on Fiverr, but they’ve been around for a long time. More broadly, it includes contract, part-time, piecemeal work, or what Jarnijan calls “just-in-time” work.

And that kind of work tends to skyrocket during recessions, Yalnizyan said.

The likelihood of a recession in 2023 is different from past recessions

Sheila Bullock, senior economist at the Canadian Center for Policy Alternatives, said there were two big reasons for the surge. One of them is that recessions are usually characterized by widespread unemployment. This means more unemployed people looking for jobs wherever they can be found. Second, during an economic downturn, employers typically look to cut costs and are more likely to hire contract or part-time workers instead of offering full-time permanent jobs.

According to Statistics Canada, the share of gig workers in the total workforce increased from 5.5% in 2005 to 8.2% in 2016. There were two sharp increases during this time, one corresponding to the Great Recession of 2008-2009.

Statistics Canada data show that self-employed people increased by 3.9% in Canada between October 2008 and October 2009, adding more than 100,000 self-employed people, while the number of employed workers declined. The number of people with disabilities has decreased by almost half a million.

Of course, the 2023 recession will be the first major recession where app-based jobs such as driving for ride-hailing apps are even a widely available option, Yalnizayn said.

WATCH | 2023 could be another tough year, analysts say.

Analysts expect another tough economic year ahead

The International Monetary Fund predicts that one-third of the world will be in recession in 2023. The Bank of Canada says the economic pain Canadians suffered last year has not gone away.

Indeed, the widely predicted 2023 recession differs from past major recessions in several important ways.

Despite the economy showing signs of slowing, the labor market remains tight, Yarnidian said. The unemployment rate remained as low as he 5% in December, and the market added a very large 104,000 jobs last month.

Employers in many industries struggle to hire the workers they need. This means more full-time job options will be available to workers.

A customer enters the restaurant with a sign asking for help in Laval, Coué. His widely predicted 2023 recession could differ from past large recessions in several important ways. (Ryan Remiorz/Canadian Press)

These two factors that typically lead to increased gig work during recessions are absent compared to previous recessions, Block said.

“We haven’t seen a surge in self-employed people this time yet,” said Jarnijan.

Baby boomers exiting the labor force leads to employment

Baby boomers also continue to lose their workforce, leaving more jobs. This could allow the labor market to remain strong in 2023, he said, Yalnizyan.

“As long as this demographic phenomenon continues, we may not see a surge in gig work,” she said. She added that it wouldn’t turn the tide unless it improved its ability to adapt quickly to work on set.

Jarnijan said it was unusual to see both the demand and supply sides of the labor market change at the same time.

“What will the recession look like? Well, it won’t look like any other recession we’ve seen before,” she said.

Rising inflation, Block says, means app-based gigwork will pay even less when you factor in costs like gas, making it an unattractive option for many.

But Block said much would depend on the depth of the recession in 2023, with experts so far predicting a relatively mild recession. Markets could start looking like previous recessions, with widespread unemployment, fewer full-time jobs, and a surge in gig work.

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But whether or not gig work will increase significantly in 2023, Canada already has a large number of self-employed people, many of whom are app-based gig workers or other types of independent contractors. If they lose working hours or income due to the recession, they will have a harder time recovering than other workers because they are not protected by labor regulations or employment insurance, Block said.

“Whether increased or not, the lack of protection for these low-wage workers continues to be a big problem,” she said.

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