The gig economy during an epidemic: coupling disease transmission with labour market dynamics

TL;DR

This paper models how epidemics like COVID-19 influence labour markets, showing increased gig work, shifts from formal employment, and long-term unemployment, while evaluating policy impacts on health and employment stability.

Contribution

It introduces a coupled disease transmission and labour market model to analyze epidemic effects on gig and formal employment dynamics.

Findings

Epidemics boost gig economy employment at formal sector's expense.

Long-term unemployment increases due to endemic disease.

Policy measures can mitigate health impacts but may affect employment.

Abstract

The gig economy has grown significantly in recent years, driven by the emergence of various facilitating platforms. Triggering substantial shifts to labour markets across the world, the COVID-19 pandemic has accelerated this growth. To understand the crucial role of such an epidemic on the dynamics of labour markets of both formal and gig economies, we develop and investigate a model that couples disease transmission and a search and match framework of unemployment. We find that epidemics increase gig economy employment at the expense of formal economy employment, and can increase the total long term unemployment. In the short run, large sharp fluctuations in labour market tightness and unemployment can occur, while in the long run, employment is reduced under an endemic disease equilibrium. We analyze a public policies that increase unemployment benefits or provide benefits to gig workers to mitigate these effects, and evaluate their trade-offs in mitigating disease burden and labour market disruptions.