J'accuse...Seattle! Ted S. Warren/AP

An estimate of where businesses with no employees—like Uber drivers or AirBnB hosts—have grown.

The rise of the internet and digital technology has disrupted industry after industry, from the way we shop, bank, and consume media to the way we make restaurant reservations, hail rides, and find places to stay when we travel. But now it appears that digital technologies are disrupting and reshaping our cities and metropolitan areas, too.

A big part of this has been the ongoing transformation of traditional jobs into essentially freelance “gigs.” Companies like Uber, Lyft and Airbnb, among others, have created online marketplaces to transform traditional jobs, like driving taxis or working in hotels, into independent work. The “gig economy” refers to the growing share of employment and the economy that is made up of this independent work, where apps and digital technology essentially match freelance workers to customers and service providers.

These changes have led to a heated debate on whether the gig economy is a good or bad thing for workers or the economy. The optimistic perspective believes that the gig economy is leading to new forms of work and more efficient service delivery.  The more pessimistic take is that the gig economy is essentially replacing higher-paying, more secure traditional jobs with more contingent and precarious work.

We all have an intuitive sense of these issues, as the gig economy is growing and becoming large. But, up until now, we’ve lacked comparable and systematic data on its true scope and extent.

A new report by Ian Hathaway and Mark Muro of the Brookings Institution’s Metropolitan Policy Program pulls data from the Census bureau on “nonemployer firms,” which tracks the activities of business establishments that make $1,000 a year or more in gross revenues but employ no workers. The report uses that data to estimate both the extent and reach of the gig economy, and the geographic shape it is taking on across America’s 50 largest metro areas. While they are cautious to stress the limitations of these data, their research generates a couple of big takeaways.

The ‘gig economy’ is larger than we think, and growing rapidly

The economy writ large has added nearly 10 million gig-economy firms over the past decade and a half, growing from 15 million non-employer businesses in 1997 to 24 million in 2014, a 60 percent increase. For comparison’s sake, payroll jobs grew from 129 million to 145 million over this same period, an increase of 12.4 percent. Another way of putting it is that today’s gig economy firms are roughly equivalent to roughly 16.6 percent of payroll employment.

Percent change from 2010 to 2014 in nonemployer firms and payroll employment by sector.

The study takes a deep dive into the so-called “rides and rooms” segment of the gig economy. As it notes, the vast majority of gig-economy firms—more than 90 percent of them in the ride- and home-sharing industries—are composed of self-employed, unincorporated sole proprietors.

Gig-economy firms in the rides-and-ride-sharing sector grew much, much faster than regular employment, with gig-economy firms growing by nearly 70 percent between 2010 and 2014, compared to just 17 percent growth in payroll employment. That said, gig-economy firms in the room- and home- sharing sector grew more modestly, at 17 percent between 2010 and 2014, but still substantially more than regular payroll employment, which grew at just 7 percent.

The gig economy is spiky, but there are some surprises

The gig economy is not only growing rapidly; it is concentrated in the largest metros. Like many other dimensions of today’s knowledge economy, the gig economy is spiky.

Between 2010 and 2014, the 25 largest metros accounted for more than 80 percent of the net growth in gig economy firms in the ride-sharing sector, with 90 percent concentrated in the largest 50 metros.

Change in Nonemployer Firms and Payroll Employment in Select Passenger Ground Transportation, 2012 to 2014 (Brookings Metropolitan Policy Program)

The chart above shows the change in gig economy firms in ride-sharing for the 50 largest metros between 2012 and 2014 and compares it to the growth in payroll employment in this sector. Not surprisingly San Jose (the Silicon Valley) and San Francisco lead, but Los Angeles and Austin are close behind (though the numbers for Austin may be different now that it has cracked down on Uber). But gig economy growth has also been significant outside of leading tech hubs. Nashville, Las Vegas, Pittsburgh, Sacramento, Riverside, Oklahoma City, Charlotte, Columbus and Indianapolis have all clocked 60 percent growth in gig economy firms over this period.

The pattern is less pronounced in the room- or home-sharing sector. Between 2010 and 2014, the 25 largest metros accounted for 56 percent of net growth, with the 50 largest metros accounting for 70 percent. That’s just slightly more than for all industries as the report notes. The chart below shows the metro-by-metro pattern.

Change in nonemployer firms and payroll employment in select traveler accommodation industries, 2012 to 2014. (Brookings Metropolitan Policy Program)

Austin is the leader in room-sharing growth, followed by San Francisco and Portland. But New Orleans is third ahead of San Jose. Salt Lake City tops New York and Boston.

The authors take great care to contextualize their findings and to caution that the data are at best imperfect measure of the gig economy. And they also point out that these data only cover the year 2014 and potentially miss the even larger growth that has occurred since. Still, they show how substantial the gig economy is to the economy broadly and even more so to our largest urban centers.

Cities as platforms

One thing is for certain: The gig economy is an urban economy, centered in and growing most rapidly in our largest cities and metro areas. The rise of app-driven services like Uber, Lyft, and Airbnb are about addressing the inefficiencies in moving people around and lodging them in our cities. They have the ability to take underutilized capacity in cars and rooms and put it to work.

This puts cities themselves at the very center of what Martin Kenney and John Zysman, two researchers at the Berkeley Roundtable on the International Economy, have dubbed in a new article the rise of a “platform economy”—a powerfully disruptive online economic structure for organizing and channeling economic activity and capturing the value that flows from it. This platform economy extends beyond gig-economy firms Uber and Airbnb and includes the very largest digital behemoths: Google, Facebook, Amazon, Snapchat, YouTube, and beyond. Little wonder that tech behemoths like Google are venturing into the city-building business with initiatives like Sidewalk Labs. From my vantage point, the core platform of the emerging platform economy is our cities.

Previous economic revolutions have disrupted our corporations, industries, and the ways we work. This one promises to disrupt the very fabric of our cities as well, which will have implications not just for how we work, how we are paid, and how well we will be paid, but how we live, travel, socialize and interact with one another—boring deep into the very fabric of our daily lives—as well.

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