Pandemic’s effects on online freelance work: distancing dividend or downscaling loss?

The pandemic is causing economic upheaval around the world, as shops and offices close and those able to do so switch to working remotely from their homes. There is one segment of workers that have always been working remotely: online workers, or software developers, graphic designers, data labelers, and others who earn some or all of their income from freelance projects and tasks obtained via online labour platforms. How does the pandemic affect their livelihoods? Two effects are imaginable:

  1. The distancing effect: demand for online work grows, as companies switch from on-site contractors to remote freelancers.
  2. The downscaling effect: demand for online work diminishes, as companies facing declining revenues reduce non-essential spending, including external contractors.

Which of the two effects dominates? To produce a preliminary answer, we looked at data from the Online Labour Index, our computational system that tracks demand on leading online labour platforms in real time.

 

Demand on leading online labour platforms, January to March (2018-2020), relative to the start of the year. Source: Online Labour Index.

Over the past several years, the Online Labour Index has shown a clear seasonal pattern: demand drops during the year-end holiday season, and then rises again to reach a plateau in February, which normally persists until May. However, as the figure above shows, this is not the case in 2020. By mid-March, when the World Health Organization declared that COVID-19 had become a pandemic, the Online Labour Index was in deep decline, in comparison to 2018 and 2019.

This finding indicates that the downscaling effect may be dominating over the distancing effect. While this is only a preliminary finding, it suggests clear implications for workers and policymakers. For workers who are losing their jobs and freelancing gigs, this finding suggests that going online to find project work may unfortunately not be a viable way to claw back lost income. For policy makers, it suggests that many self-employed people, including online workers, will probably need financial support to get through the crisis.

In follow-up analyses we plan to look at how different segments of online work are affected, in terms of geography and occupation.