Some Real Data Regarding the Gig Economy-and What It Tells Us About the Future of the U.S. Economy

It feels like the “gig economy” (also referred to euphemistically as the “sharing economy”) has taken over.  Uber, Grubhub, TaskRabbit, wherever you look, it seems like employees are being replaced by independent contractors or temporary workers who are being exploited by internet-based companies.  This perception is stoked by predictions in the tech industry, such as Intuit’s recent claim that by 2020, 43 percent of workers will be employed in the on-demand labor market.  (Of course, Intuit markets its products to “on-demand employers,” so such predictions should be taken with a grain of salt.)

A tectonic shift of this nature would upend the way that we think about work and wages.    Among other things, independent contractors are not subject to many wage and hour requirements, such as overtime and the minimum wage.  And temp workers often struggle to piece together a livable income from multiple sources of employment.

But how many workers are actually transitioning to the gig economy?  Until recently, no one really knew.  The Bureau of Labor Statistics, normally a good source for such information, had not addressed this issue since 2005.  (BLS has promised to publish a survey regarding this issue in 2017.  See beta.bls.gov/labs/blogs/2016/03/03/why-this-counts-measuring-gig-work/)  Fortunately, in the meantime, Lawrence Katz and Alan Krueger have written a concise and clear paper called “The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015.”  It is available online at krueger.princeton.edu/sites/default/files/akrueger/files/katz_krueger_cws_-_march_29_20165.pdf.

Katz and Krueger focus their inquiry on workers in “alternative work arrangements.”  They define that term as including independent contractors, temp-agency workers, on-call workers, and contract workers.  Over the past decade, such workers have grown from 10.1 percent of the workforce to 15.8 percent.  (The total number of workers employed in the United States, in November 2015 was 149.4 million individuals.  So we are talking about roughly 25 million workers in all.)

Perhaps the most astonishing conclusion of the survey is that all of the net employment growth in the U.S. economy between 2005 and 2015 has occurred in alternative work arrangements.  During that time period, the U.S. economy added a total of 9.1 million jobs (increasing from 140.4 million to 149.4 million jobs).    The number of workers in alternative work arrangements during the same time period increased from 14.2 million to 23.6 million, or by 9.4 million.

One way of reading this data is that the number of workers in standard work arrangements (i.e., full-time employees) actually shrank between 2005 and 2015.  If in fact all of the job growth over the past decade has been in alternative work arrangements-that is, in temporary or part time or independent contractor jobs, that conclusion would certainly support those who argue that any recovery from the Great Recession has been weak and unequal.

Some other findings are also noteworthy.  For example, the percentage of women who are employed in alternative work arrangements has more than doubled:  In 2005, it was 8.3.  In 2015, it was 17.0.  This means that women are more likely to be employed in such arrangements than men.

Also noteworthy is the fact that the sharpest increase in alternative work is among older workers, or those between 55 and 75 years old.  Surprisingly, there was no increase in the percentage of 16 to 24 year olds employed in alternative work arrangements.  This raises long-term concerns about some of the most vulnerable workers who would benefit most from more traditional, longer-term employment.

With respect to the wages of those in alternative work arrangements, Katz and Krueger found that alternative work is growing mainly among workers with higher wages.  This trend may reflect the fact that companies can save more money by contracting out the services performed by their higher paid employees.  It may also reflect the fact that many lower wage jobs, such as in the service industry, are more difficult to contract out.  (For example, it would be challenging for Starbucks or Ross to contract out their salespeople.)

Returning to the gig economy, Katz and Krueger found that as of 2015, only .5 percent of all workers in the United States were employed by an online “intermediary” such as Uber.  Katz and Krueger concede that that figure may have been skewed by the nature of the study.  However, it is consistent with other studies seeking to answer the same question.

Katz and Krueger posit several possible explanations for these trends.  First, technology is making it easier to hire contract workers who can work remotely.  Second, competitive pressures continue to force companies to consider ways to reduce their labor costs.  Last, as mentioned above, the jobs available since the Great Recession have tended to be alternative work arrangements.  Thus, American workers have little choice if they want to be employed.

What can we draw from all of this?  The number of workers who provide direct services through internet companies is apparently still relatively small.  But the number of worker who have alternative work arrangements is growing at a rapid rate.  That trend will undoubtedly continue in the future.

If you have questions about your work arrangements, or whether you are properly classified as an independent contractor, please feel free to contact  Hunter Pyle Law for a free consultation.  We can be reached at 510.444.4400, or at inquire@hunterpylelaw.com.