A Wide Range of Incomes, But Similar Financial Patterns
A detailed analysis of over 1000 transactions over a six-month period paints a sometimes predictable and sometimes unexpected story of precarity in the gig economy. We see extreme volatility in terms of income with ranges of $7,283.29 at the low end and $126,382.96 at the high end over the six-month period. There is also considerable volatility from month to month with income deviations of greater than 100% being more common than not. Those paying rent arrange their lives to limit their exposure to Toronto rental rates with an average rent paid of $989.34 and half of that when including the full participant cohort, including the four participants who pay no rent at all. Debt is an ongoing concern for many. Surges in income lead to investment in creative and professional practices with periods of low income being covered through the acquisition of new debt, usually in the form of credit cards or family loans. Personal saving and wealth creation is generally viewed as an abstract, long term goal.
Impact on Financial Institution Trust
The implications of these patterns are profound. Most profess a cautious to antagonistic relationship with financial institutions. Many believe that these institutions do not have their best interests at heart and avoid disclosing information whenever possible so that their own habits won’t be used against them.
Payment in cash or under the table transactions are common. Streams of income are poorly recorded or not recorded at all and expenses against that income are hard to disentangle. For financial institutions, many of the participants in this study appear as unsafe gambles when considering the extension of credit for loans, mortgages or to expand their creative businesses.
Income levels are not low, however, and when credit has been extended, participants show an ability to step out of the precarity of the gig economy and establish a sustainable creative practice. Two of the participants individually surpass (pro-rated over the full year) the average household income for the City of Toronto. In both cases, the participant described a period of relative struggle and the use of credit to buffer against periods of volatility in the early stages of their creative work.
One commented that, “It was tough going my first few years in Toronto. I didn’t know many people and people didn’t know me. I took work where I could get it and showed that I could be trusted and produce. I borrowed from my parents’ line of credit, which had low interest rates and I’m almost done paying that off and that gave me the room to invest and to be a bit more patient.”
Those pursuing grants or other forms of government and philanthropic support see similar patterns of uncertainty and volatility. Most funders need to see at least two years of successful practice before considering an applicant for support. Those without access to family wealth or other safety nets can rarely afford to commit full-time to their artistic practice during those initial years, and artists fall further behind others in their community that don’t need to step into the gig economy in times of need.
The old adage holds - talent is evenly distributed while opportunities are not. Advantages, therefore, compound over time. Those with access to resources gain further access to supports and accelerate the professionalization of their practice. Those most exposed to precarity must participate in the gig economy in times of scarcity taking valuable time away from their creative work. Gig work and cash work does little to improve the assessment of these individuals in the eyes of financial institutions or funding bodies.
Participants in the study were also committing considerable resources to dining out and transportation. In many cases, these expenses were related less to a desired lifestyle and more to the practical demands of establishing a creative practice. To control rents, many participants live with parents or roommates. Homes are often at a considerable distance from the downtown core where creative work is concentrated. Prior to COVID-19, meeting with others in the creative industries involved third spaces such as cafes or bars. There are costs associated with establishing the relationships necessary to build a sustainable practice. Some are better equipped to afford these costs than others.
Thirdly, there are few clear lines drawn between revenues and expenses related to different streams of activity. This leads to decisions being made around investing in a creative practice without a clear sense of the necessary revenues to justify the expense. This also leads to lower rates being charged as the desire to be doing the work is not balanced by clear awareness of what prices are necessary to justify the business model. Lower prices push down rates for everyone. If rising tides lift all boats, then a lack of planning in pricing lowers them back down again.
Finally, informal processes exist to distribute risk among community members and social circles. Rent, travel, transportation, and even health care are distributed among many through patterns of mutual aid and collaboration. However, few formal mechanisms exist to similarly share in the upside of creative success. This leads to close collaborations among tight social groups but fewer opportunities to share skills and opportunities across social networks without resorting to contracts. Contracts are expensive and rely on a general comfort with legal systems and processes. Some can navigate these systems. Many cannot. This discourages many from exchanging their talents for a portion of the potential benefits of a project. Equity positions may prove preferable to suppressed rates in some cases, particularly as the revenue upside of successful projects in the creative industries is significant.
Based on these broad trends we see four implications going forward.
- We need financial and funding instruments that support creators in the first critical years of establishing their practice. Put those without access to generational wealth on an even footing by offering grants and low-interest loans during a fixed period of career acceleration. These financial instruments can be paired with training and mentoring to ensure that growth is maximized during the finite period of support.
- We should encourage investment in spaces (virtual and real) for young creative entrepreneurs to convene that are not commercially driven and that are not clustered in the downtown. These sites can also serve as centres of exchange, collaboration, and mutual aid.
- Financial institutions need to invest in relationships with creators and support the development of solutions that allow for better decisions to be made about capital expenditures in service to creative ambitions and to rates to support their practice. Simple workshops and guidance from someone trusted can have significant impacts on how a creative business is run.
- We need experimentation in new ownership arrangements to encourage exchanges of talents in return for equity positions in works and institutions with growth potential. Those in the study view revenue through an extremely short-term lens. If sacrifices are to be made in service to a creative practice, then long-term equity positions should be one option to justify those sacrifices.
Our study was deep and narrow. There is much more to be learned about the practical implications of working in the gig economy. More and more young people are obligated to take part in non-traditional labour arrangements and our institutions have been slow to acknowledge and reflect the changing nature of work. Gig work exacerbates existing inequalities. To realize the full creative and financial potential of Toronto’s cultural entrepreneurs will require innovative approaches to supporting those that are too often turned away by traditional lenders.