Training Today’s Professional for Tomorrow’s Workplace

Exactly how big is the “gig economy”?

By Frank Conte

News organizations talk about the “gig economy” in a way that would lead one to believe this portion of the overall economy is big — and getting bigger. They present a picture that has millions of workers losing — or quitting — regular permanent jobs and working on a contract basis.

We are meant to believe that workplace dynamics make it most advantageous to many organizations to employ workers when they need them, rather than commit to permanently hiring and paying benefits. Meanwhile, there are many anecdotes about skilled workers no longer doing what they were trained for but instead, forced to drive for Uber or pour coffee at Starbucks.

My examination of statistics from the Bureau of Labor Statistics and other organizations indicates the “gig economy” may not be as large as some employment experts say it is. Nonetheless, for the millions of workers who want a permanent job and can’t get one — particularly older workers who have been laid off in favor of 20- and 30-somethings — the “gig economy” is enormous. So let’s take a closer look:

Until now, there have been two ways to look at the “gig economy”: as a liberating promise or a perilous enterprise. I looked into whether the promises and dangers of “gig” work were statistically overblown. In particular, I looked at platform-based alternative work such as Uber, Lyft, Mechanical Turk, and TaskRabbit.

To be sure, not everyone will turn into a contractor free to set his or her own hours and pay rates, with the freedom to choose among prospective clients. Nor will every current employee be transformed into just-in-time contractors at the mercy of ruthless firms.

The simple answer to how big the “gig economy” is or how large it will become is: we don’t know. That’s in part because economists and policymakers cannot agree on how to measure the platform-based employer-employee paradigm that has garnered much exposure but little data. It’s also because they can’t agree on the definition of what is, in fact, a “gig” job.

Here, then, is one statistic, provided by the Bureau of Labor Statistics: about 10 percent of American workers took a walk into alternative work arrangements. That said, there are a variety of other figures for contingent work offering a view of “gig” employment levels that can be much larger or much smaller than this.

Good data should drive good policymaking. But the drive for data is scattered. In addition to the BLS, another public entity, the Federal Reserve Bank, conducts its own survey. The private sector shores up the data collection with online surveys, including by the Upwork/Freelance Union. Meanwhile, JP Morgan Chase Institute studies revenue from 30 different online platforms. These measures result in widely varied estimates of “gig economy” participation ranging from four percent to over 35 percent, according to recode.net.

“Two powerful forces drive the ‘Gig Economy,’” said Mike Hruby, president of New Jobs for Massachusetts, in a phone interview with The PDC Post. “(These are the) adoption of project management techniques by industry and government and rapid change affecting individuals’ careers, incomes, and job security.” New Jobs is a Boxborough, Mass., non-profit that advocates for rapid job growth. “Management has learned to accomplish more in less time and at lower expense by organizing work into projects having clear goals, focused teams, and hard deadlines,” added Mr. Hruby.

But not everyone agrees the “gig economy” is working well.

“My experiences in the ‘gig economy’ raise troubling issues about what it means to be an employee today and what rights a worker, on an assignment-by-assignment basis, are entitled to,” Fast Company senior writer Sarah Kessler warned in a recent article. Fast Company is a media company focused on business innovation. “The laws regarding what constitutes an employee have not yet caught up to the idea that jobs are now being doled out by iPhone push notification.”

But this waxing and waning of the new labor landscape is mostly anecdotal and good copy for the media’s love-hate affair with app-driven innovation.

What is known is that a small part of the current work force enjoys the detachment of their labor, the be-your-own boss aura, and the freedom to set one’s hours. True, there are more than a few workers who see “gig” work not as an opportunity, but unhappily, as a permanent situation, with little prospect for long-term employment. For them, government should step in to set the rules of just who is a contractor and who is an employee. But government action always risks over-reaching and crushing opportunity.

The lack of common measurement tools is one reason it is tough to measure the “gig economy.” From which sources do you pull government data — the Current Population Survey (CPS), which is the one you hear from each first Friday of the month? Or do you pull it from administrative tax data from the Internal Revenue Service?

Salaried or wage employees are easy to identify whether they are full- or part-time. But even they are known to moonlight, with income from second jobs that shows up on the IRS’s Schedule C form. Workers often moonlight because their regular jobs don’t pay enough. Meanwhile, some people might not report income from “gig” work because they earn less than reporting requirements.

For example, if a student musician is paid $433 or less for a one-off studio session, this might not get reported because it doesn’t meet the reporting threshold.

The point is, researchers find it difficult to disaggregate and isolate true-blue “gig” workers, or what the Bureau of Labor Statistics calls “contingent workers.” That is to say, it’s hard to measure the number of workers who know their work is strictly at-will or temporary and where a traditional job is unlikely to be offered. Supplementing one’s income — working with temp agencies or having multiple jobs — tosses the salad of statistics for economists.

When the BLS did some catching up last year, upgrading its Contingent Worker Survey, it rocked some of the accepted studies about the size of the “gig economy.” When the agency included questions about mobile apps it found that from that perspective the “gig economy” isn’t as big as previously documented.

That prompted two respected labor economists – Laurence Katz of Harvard University and Alan Krueger of Princeton University — to revise their earlier findings. Upon closer review of the data, they found that “gig” jobs played a larger role in the economy during the recession. Once the economy recovered, the expected growth of the employment ranks took hold, and so they had overestimated the core percentage of “gig” workers. Bottom line: it appears the composition of the US workforce may not have substantively changed for many years.

The misleading results weren’t the fault of Ivy League professors, who valiantly tried to fill in data gaps with their own household survey. The BLS process was flawed and that’s because of the way workers engage in the “gig economy” confounds classification. One problem is “proxy respondents,” where one household member surveyed by phone failed to provide additional information about other household members and their alternative work status. With the assistance of the RAND Corporation, the professors relied only on responses from the worker being surveyed. Another issue: some people surveyed failed to indicate they held multiple jobs.

Researchers should have been tipped off by the decline in the number of workers who declared themselves self-employed as defined by the CPS. According to Katz and Krueger, that category declined from a 7.5 percent share of the total workforce in 2000 to 6.3 percent in 2016.

One solution to the problem might be to try to get more information out of respondents by highlighting the attributes of the jobs they hold.

In the final analysis, the impact of the “gig economy” on the larger economy may not be as significant as some have hyped it to be. Meanwhile, the flexibility offered by “gig” jobs to firms and workers may be useful even if the overall impact on economic productivity doesn’t justify the enthusiasm some express for platform technologies. And, of course, many “gig” workers, bottom line, would strongly prefer to have traditional permanent work. But like most amenities of the modern age, “gig” employment, however measured, is better to have around than not.

 


Frank Conte, a writer, editor and web consultant who managed the Beacon Hill Institute’s State Competitiveness Project and other economic projects, can be reached at fconte@eastboston.com.

 

References:

Katharine G. Abraham, John C. Haltiwanger, Kristin Sandusky, James R. Spletzer. “Measuring the Gig Economy: Current Knowledge and Open Issues.” NBER Working Paper No. 24950. August 2018.

Steven Greenhut. “California’s Work Rules Sabotage the Gig Economy: New Luddites have used the courts and the legislative process to throw that figurative wrench in the machine.” December 28, 2018.

Steven Hill. “How BIG is the GIG (Economy)? No one knows the true size of the on-demand economy. That’s a major problem for US workers.” wtfeconomy.com. September 9, 2015.

Lawrence F. Katz, Alan B. Krueger. ”Understanding Trends in Alternative Work Arrangements in the United States.” National Bureau of Economic Research Working Paper 25425. January 2019.

Eric Morath. “Was the Gig Economy Overblown?Wall Street Journal. June 7, 2018.

Josh Zumbrun. “How Estimates of the Gig Economy Went Wrong.” Wall Street Journal. January 7, 2009.

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