A gig, in its original meaning.

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Gig Economy Hasn't Taken Over

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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In April, the Governmental Accountability Office told the world that 40.4 percent of U.S. workers are self-employed, part-timers, temps or freelancers, up from 30.6 percent the last time the GAO made such an estimate, in 2006. This statistic is now often cited as evidence that a rapidly growing “gig economy” of independent workers doing multiple tasks is shoving aside traditional full-time employment.

Meanwhile, the employment numbers the Bureau of Labor Statistics churns out every month have shown no discernible growth in the percentage of workers who are self-employed and an actual decline in the percentage with multiple jobs. There was a big increase in part-time work during the recession, but that now seems headed back toward earlier levels. This has led observers such as Josh Zumbrun and Anna Louie Sussman of the Wall Street Journal and Adam Ozimek of Moody’s Analytics to conclude that, as Ozimek put it, “the ‘gig economy’…remains a phenomenon on the fringes of the labor market.”

So which is it?

The GAO statistic is problematic. I’ve written about it at length already, but the short version is this: The 40.4 percent number is from 2010 and isn’t comparable to the 30.6 percent number, which is from 2005. They came from different surveys that asked different questions, and the newer survey was smaller and less reliable. The 40.4 percent is comparable to a 35.3 percent survey result from 2006. As already noted, though, there was a sharp rise in the percentage of part-time workers during those years because of the recession. That percentage has fallen a lot since. So it is simply incorrect to say that the contingents’ share of the U.S. workforce has risen from 30.6 percent a decade ago to 40.4 percent today. Stop doing it, people!

It is fair to say that somewhere between 30 percent and 40 percent of American workers labor in something other than conventional full-time jobs. A 2014 survey conducted for the Freelancers Union and the company now known as Upwork, using yet another set of definitions, came up with an estimate that 34 percent of the workforce now consists of “freelancers.”

What is harder to say is whether this percentage is growing much. Long ago, as Stephen Mihm pointed out on Bloomberg View, most jobs were gigs. Contingent work is far less prevalent now than it was in, say, 1910. Tracking developments during the past few decades, meanwhile, is surprisingly hard. The monthly BLS employment surveys simply don’t ask the right questions to suss out many of the changes that might be going on in job arrangements. From 1995 to 2005 the BLS did surveys of “contingent and alternative work arrangements” every few years. These surveys showed the contingent/alternative/part-time share of the workforce declining from 32.2 percent in 1995 to 30.6 percent (yes, that’s where the number came from) in 2005. The BLS hasn’t done the survey since because it hasn’t been able to get funding.

The contingent/alternative worker percentage did rise from 2001 to 2005, though, with independent contractors leading the way. Last year, economist Gerald Friedman of the University of Massachusetts Amherst added up the gains among independent contractors and three other categories grouped together as “alternative work arrangements,”  and found that they accounted for 55 percent of all new jobs during those years. Adjusting for the even slower overall employment growth from 2005 to 2013, he then estimated that 85 percent of jobs added during that stretch were alternative ones. That’s a guesstimate; in an e-mail Friedman said the real number is “probably somewhere between” 55 percent and 85 percent. Still, either percentage is, in this stew of inconclusive data, a pretty danged dramatic result.

An important thing to be aware of, though, is that it’s dramatic mainly because of the denominator, not the numerator. That is, there haven’t been huge absolute gains in alternative work -- from 2001 to 2005 the four categories added 2.3 million jobs, out of a total workforce of 137.7 million in 2005. But that total workforce only grew by 4.3 million, and job growth from 2005 to 2013 was even weaker. That is, the increases in total employment were so tiny that even modest gains in alternative or contingent work stood out. The biggest U.S. job market story of the past 15 years is that the job market has been terrible. Whatever shift into contingent work that there’s been is just a side-show to that.

Some of that shift is also probably cyclical. In the late 1990s, with the economy booming, the percentage of people with alternative or contingent work arrangements declined. Now the U.S. economy is, finally, experiencing sustained job growth at a pace similar to that of the 1990s. We know that the percentage of part-time workers has been dropping during the recovery. Maybe other contingent-work categories are declining as well.

Then again, maybe they aren’t. There are several incomplete-but-useful measures of alternative work from government and private sources that show moderate overall gains in recent years. Economist Ian Hathaway recently dug into one of them, the Census Bureau's annual tally of “nonemployer businesses,”  and found some dramatic changes in a couple of  industries in San Francisco, where many of the most prominent gig-economy companies are headquartered. There was an 81 percent rise in the number of nonemployer taxi and limousine businesses in the city from 2010 to 2013, Hathaway reported in the Harvard Business Review, and a 37 percent gain in nonemployer businesses in the traveler-accommodation industry. Conventional employment in those industries didn’t grow nearly as fast, and Hathaway figures that an obvious explanation for the disparity is that Uber opened for business in San Francisco in 2010, and AirBnB in 2009. See, there really is a gig economy!

Now, these big percentage increases Hathaway found represent only a few thousand jobs. Ozimek is right to say that this is still “a phenomenon on the fringes of the labor market.” But the fringes are where interesting stuff usually begins. I wouldn't dismiss the people who predict gigantic changes in the nature of employment during the next few decades. Just be wary of anyone throwing around statistics seeming to indicate that the huge changes are already upon us.

  1. The other categories were on-call workers, temporary help agency workers and workers provided by contract firms.

  2. That’s the number from the 2005 survey, which is a little different from what you’ll find in the BLS employment time series.

  3. You can find some of them here.

  4. Sole proprietorships, partnerships or corporations that have no employees but report $1,000 or more in annual receipts.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net