Challenging the Gig Economy Role in Future of Work

By: Jeff Nolan | July 12, 2018 | Marketplaces

The Bureau of Labor Statistics (BLS) recently released the much anticipated 2017 Contingent Worker Supplement (CWS), the first update since 2005. The conclusions in the report run counter to the gig economy unleashes job creation narrative that Silicon Valley has promoted for over a decade. The BLS found that employment closely associated with the “gig economy” fell as a percentage of total employment since 2005, when it was last studied.

Headlines have since focused on how the future of work was not actually being found in the gig economy and, by extension, the future of work actually looks a lot more like the history of work than the future.

A 2016 study by Princeton economists, Katz and Krueger, that estimated that 15.8% of all workers, representing all job creation since 2005, were employed in the gig economy. Mary Meeker, the queen of 294 slide PowerPoint decks, recently predicted that 7 million people would be employed in gig jobs, representing a significant source of overall job growth. The CWS, however, concluded that employment under these arrangements actually fell over the period studied. How can this be, and are economists and Silicon Valley futurists misreading the impact of the gig economy?

This is important because some of the most valuable companies in Silicon Valley have been built on an employer-employee relationship that falls squarely in the contingent and alternate work definition. This has been promoted as good for, good for workers, the economy as a whole and is reflective of generational and lifestyle changes that value flexibility and control over work arrangements.

Here is why the recently released BLS report is accurate but also misleading, and why looking at a headline alone is enough to draw the wrong conclusion.

CWS focuses on people’s main jobs

The CWS looks at contingent work, which is temporary or short-term, along with alternate arrangements. This speaks directly to the relationships between employer and employee. The latter is closely associated with the gig economy; people who effectively show up to work each day but are not employed by the company. We used to call them contractors, but that has since expanded to include Lyft drivers, TaskRabbit, and the like.
 
There is another interesting survey from the Federal Reserve called the Survey of Household Economics and Decisionmaking (SHED… gotta have an acronym) that looks specifically at work done on a supplemental basis and this one lays bare a fact about the gig economy.. These surveys find that roughly half of the workers in “alternate arrangements” do so to supplement income from another job.

Pundits who look at the CWS as an invalidation of the gig economy’s economic impact fail to recognize that the CWS didn’t study people who are using alternate arrangements situationally or as a second job. It is not uncommon to meet an Uber driver who is using their time driving an Uber outside of their primary job and doing so to pay for family expenses, education, or simply make up for stagnant wages. SHED asks this and found that “three in ten adults work in the ‘gig economy,’ though generally as a supplemental source of income.” Uber’s own statistics reveal that driver abandonment of the service in the first 6 months is 63% for males and 76% for female drivers.

Wage and salaries growth in the US economy has been a persistent issue over the period studied in the CWS. Core inflation in the US has been relatively flat in that same period, however that figure excludes volatile components such as energy and food. Education and healthcare expenses continue to outpace inflation rates by wide margins, further adding to the pressure that the average worker in a secondary alternate arrangement feels.

 

Gig Economy Wages and Salaries Growth

 

Compare the right studies

While tempting to look at the 2017 CWS against the Katz and Krueger 2015 study, to do so is in error. The Princeton study relied on a different survey mechanism – sampling – and asked different questions. The 2017 and 2005 CWS are more closely correlated for comparative purposes.

The fact that the percentage of total employment for alternate and contingent work stayed within a percentage point over 13 years is itself meaningful. Total employment over that period grew by 16 million jobs so, by definition, the number in gig jobs also grew.

The total employment number does not take into account outflows (people who retire, die, etc.) and it is well established that American workers are working beyond traditional retirement age. Therefore, gig work contribution to the total employment picture is likely amplified beyond the 10.1% statistic.

The role of online platform work is a reverse proxy for overall economic health

The CWS offers little insight into how many workers rely on online platforms for contingent work. There has been research focused on online platforms (e.g. TaskRabbit) and that research has found that there is high turnover because the people participating in these platforms are typically doing so as a supplemental form of income.

The traditional economic thinking relies on a basic assumption that people need work and chose to do so in a stable, full-time fashion. When the economy is healthy, unemployment is low and wages are growing. When the economy is weak, or stagnant as we have been for a decade, traditional work opportunities are valued even if at the expense of wages, if nothing else but for access to benefits.

The gig economy benefits from this insofar as the supplemental income dimension. People take on gig work in addition to their primary income. However, in times of economic growth, wages and jobs, we can expect gig growth to accelerate precisely because confidence in economic prospects may seem less risky.

The last 13 years is just a starting point

The CWS is a starting point for a broader understanding of how contingent and alternate work is impacting the economy. The government has only recently been studying this dimension of work and as the points raised above highlight, the CWS is very narrow in scope and the most glaring weakness is the fact that it studies main income exclusively.

This is hardly reflective of the dynamics of the gig economy and it would be in error to read too much into the CWS as it relates to online platforms, which are most closely associated with the gig economy.

The future of work is always coming at us, and often in unpredictable forms. Economic security and access to healthcare benefits are primary drivers in employer-employee relationships. As such, it is impossible to study contingent and alternative work arrangements exclusively in the context of main income sources. The 2017 CWS is welcome because it offers a comparative study against the 2005 study, which was the last BLS study on this before Congress defunded it.

In the words of the estimable Winston Churchill:

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

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