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Living Paycheck to Paycheck: The Rise of the Gig Economy

Metro Station
Support Provided By
USC Price Center

Published in partnership with the USC Price Center for Social Innovation in support of the Neighborhood Data for Social Change platform (NDSC): The platform is a free, publicly available online data resource that provides reliable, aggregated data at the city, neighborhood, and census tract level. The mission of the USC Price Center for Social Innovation is to develop ideas and illuminate strategies to improve the quality of life for people in low-income urban communities.

For most Los Angeles workers, the wages they earn each month go directly toward making ends meet -  paying their rent on time, putting food on the table and keeping up with monthly bills. But, are the wages workers earn enough? A recent survey found that 78% of full-time American workers are living paycheck-to-paycheck. Workers need a steady paycheck more than ever before, and too many workers aren't earning enough to get by.

How Much do L.A. Workers Earn?

The Longitudinal Employer-Household Dynamics (LODES) data from the U.S. Census Bureau categorizes monthly wages into three tiers: workers earning less than $1,250 a month, workers earning between $1,251-$3,333 a month, and workers earning more than $3,333 a month. These data offer interesting insights into how much LA workers are earning.

As of 2014, Los Angeles County had a total of 4,119,592 workers. The percentage of workers earning more than $3,333 a month has been steadily increasing since 2002 from 27% of all workers to 39% in 2014.  Further, more than 61% of workers in Los Angeles County are earning less than $3,333 a month, and nearly 27% of all workers are earning less than $1,250 a month, which calculates to less than $15,000 a year. That means one in four workers are dangerously close to - or fall below - the 2018 Federal Department of Health and Human Services poverty guideline for individuals of $12,140 a year.

Where are the top earners?

The highest concentration of workers earning more than $3,333 a month is along the coast in Santa Monica, Manhattan Beach, Redondo Beach and Venice, as well as neighborhoods in West Los Angeles such as West Hollywood, Brentwood, and Beverly Hills. These communities also have the highest concentration of workers with a college degree and the majority of workers self-identify as white.

In contrast, large swaths of South Los Angeles, Southeast Los Angeles and the Northern San Fernando Valley have a higher concentration of workers earning less than $3,333 a month. These communities also have fewer workers with a college degree and are more diverse with large Black and Latino populations.

Will the Minimum Wage Increase Help the Lower Earners?

Californians earning the state’s minimum wage received a raise to $11 an hour effective January 1st, 2018. Workers will continue to earn a $1 increase each year until they reach $15 in 2022.* At $15 an hour, working full-time 40 hours a week, workers will earn approximately $2,400 each month or $28,880 annually, before taxes . Although this is a significant increase, it is not nearly enough to qualify as a living wage if a worker has a child. According to MIT’s living wage calculator, a single adult in Los Angeles has typical annual expenses that require earning at least $28,157 before taxes to make ends meet, but would need to make more than $60,830 if they have a child. Workers earning exactly $3,333 a month would earn an annual salary of $39,996 before taxes, which is still not enough to support a household with one or more children.

 *According to the State of California Department of Industrial Relations, the minimum wage will increase to $15 by 2022 for employers employing 26 or more employees. This increase will be delayed one year for employers employing 25 or fewer employees.


Source: MIT Living Wage Calculator
Annual Expenses 1 Adult 1 Adult 1 Child 1 Adult 2 Children
Food $3,564 $5,245 $7,893
Child Care $0 $8,260 $13,911
Medical $2,150 $6,828 $6,547
Housing $11,856 $18,540 $18,540
Transportation $3,860 $7,975 $8,373
Other $2,803 $4,533 $4,999
Required annual income after taxes $24,233 $51,381 $60,263
Annual taxes $3,924 $9,450 $11,520
Required annual income before taxes $28,157 $60,830 $71,783

The Gig Economy

Many Angelenos are foregoing a typical 9 to 5 job for a “gig” -- a term for freelance independent contract work that connects workers to jobs through a digital platform. The most common gigs are driving for ridesharing services such as Uber or Lyft, performing small jobs such as cleaning and repairs through Taskrabbit, or renting a room or space via Airbnb. Freelance work offers workers the flexibility of managing their own time at the expense of little to no benefits or job security.

The lure of flexibility and the ease of using these digital platforms has triggered a major spike in the number of freelance workers in Los Angeles. The Brooking Institution analyzed payroll data for the Los Angeles Metropolitan Area, which includes Los Angeles, Anaheim and Long Beach, and found freelance employment increased by 136% from 2012-2014. According to a recent report by Alan Krueger, Bendheim Professor of Economics and Public Affairs at Princeton University, and Jonathan Hall, Head of Policy Research at Uber, Uber has more than 20,000 drivers in Los Angeles, more than any other City in America. The same report analyzed an October 2014 snapshot of median earnings for Los Angeles area UberX drivers.  According to the report, 59% of Los Angeles drivers drive between 1-15 hours and earn a median hourly earning of $16.37, while only 8% of drivers are working between 35-40 hours and earn a median hourly earning of $17.07.

Recent reports from freelance workers in the gig economy have identified cycles of dependence, lower pay and increased competition. The Guardian documented the experiences of several Los Angeles Uber drivers that are homeless and live out of the same cars they use for work. Many of these drivers were locked into lease agreements with Uber that could add up to more than $1,000 a month for a 4-door sedan and insurance, add in maintenance and gasoline and a significant portion of an Uber driver’s earnings were spent on their vehicle. A few months after these reports were uncovered by the Guardian, the Wall Street Journal and other media outlets, Uber announced it would no longer lease vehicles and would focus on driver retention.

Uber Driver
Uber Driver | Noel Tuck

Opportunities to Grow

The cost of living in Los Angeles is high, and wages are failing to keep up causing many workers to struggle to get by. Our region must continue to invest in job training and higher education to increase the number of workers in the region’s highest-paid industries such as engineering, technology, healthcare and science.

Los Angeles Trade Technical College (LATTC), one of ten Los Angeles Community Colleges, has become a trailblazer under the leadership of President Larry Frank in providing a variety of innovative career pathways to its students. LATTC has more than 9 different pathways with 97 programs of study including advanced transportation and manufacturing, applied science, health and related sciences, and design and media arts. In addition to an education in a burgeoning field, LATTC partners with local employers and industries to provide students with internships and work experience to gain the valuable skills they will need to be competitive in the job market.

The Los Angeles College Promise is an investment that ensures graduating high school seniors have the opportunity to begin their path toward a college degree or workforce certificate with a year of free tuition at a Los Angeles Community College, priority enrollment in required math and english courses and professional guidance on financial aid and educational planning. The program is a partnership between the Los Angeles Community College District, Los Angeles Unified School District, the Los Angeles Chamber of Commerce and Los Angeles Mayor Eric Garcetti.

Millions of Angelenos are working hard everyday to meet their needs and reach their goals. Investing in our workers through education and job training for the jobs of tomorrow will make Los Angeles stronger, wealthier and more resilient.

 
Works Cited

Bhuiyan, Johana. “Uber Is Closing down Its Car-Leasing Program Because It Was Losing More Money than Expected.” Recode, Recode, 27 Sept. 2017, www.recode.net/2017/9/27/16375072/uber-xchange-car-leasing-losses.

Bureau, US Census. “Data.” Poverty Thresholds, U.S. Census Bureau, 11 Aug. 2017, www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html.

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