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Keep Digging to Find the Gig Economy

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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Contingent workers account for 40.4 percent of the U.S. workforce, the Government Accountability Office reported in April. It’s a data point that boosters of the “gig economy” have thrown around a lot since, and that I’ve beaten up on a couple of times already. The percentage isn’t wrong -- it’s derived from the 2010 General Social Survey conducted by the highly respected organization formerly known as the National Opinion Research Center (it now goes by “NORC at the University of Chicago”). It’s just that it:

  1. Uses the most expansive definition of “contingent” possible.
  2. Relies on a survey from five years ago, when the labor market was in terrible shape.
  3. Is usually presented without proper historical context.

That last one is the biggest problem. Sure, 40.4 percent sounds like a lot, but how does it compare with the past? The GAO reports the result from the 2006 GSS -- 35.3 percent -- but the rise from then to 2010 seems to be due mainly to the increase in part-time work that always happens during recessions. There is also an earlier data series on contingent and alternative work arrangements compiled by the Bureau of Labor Statistics from 1995 to 2005, but it isn’t fully comparable. Sigh.

Never fear. Will Rinehart and Ben Gitis of the American Action Forum, the “21st century center-right policy institute” headed by former Congressional Budget Office chief Douglas Holtz-Eakin, have come to the rescue. During the summer they went through GSS surveys from 2002 through 2014. The result: 

The main difference between Rinehart and Gitis’s most expansive “Gig 3” measure and the one published by the GAO is that the former don’t include standard part-time workers. Also, in case you’re wondering, “contract company workers” are people who work for companies that provide services to other companies under contract (think Aramark in food services, or Infosys in information technology).

All three measures of the gig workforce have grown since 2002. So that’s something. Look at the similar if much more extensive surveys that the BLS conducted from 1995 to 2005 (the measure of contingent and alternative work arrangements in the chart below is equivalent in spirit if not in exact numbers to Rinehart and Gitis’s “Gig 3”), though, and the trend during that period was down.

When the economy is good, contingent work declines in importance. When it’s bad, it rises. The cyclical component is even more pronounced for part-time work, which is why it can be helpful to leave that out when trying to track trends over time. 

Overall, the inescapable conclusion from all this data is that the size of the gig or contingent or independent or alternative workforce has stayed constant or maybe risen ever so slightly (as a share of overall employment) since 1995. That’s the general lesson of almost all the data I’ve looked at, with some exceptions that I’ll get to in a minute.

I keep bringing this up because it is so at odds with the widespread perception of an explosively growing gig economy. Every time I write about this topic, in fact, I get swamped with more public relations pitches wanting to hook me up with CEOs of startups targeting the explosively growing gig economy. Can these people not read?

One takeaway is that a lot of gig economy startups are going to fail. They have overestimated the pace of labor market change, and the vast markets they envision aren’t going to materialize -- at least not soon enough for them. As Sarah Kessler wrote for Fast Company a couple of weeks ago, this kind of shakeout has already occurred among “sharing economy” ventures that thought we’d all soon be passing around power drills from neighbor to neighbor instead of buying them.

Still, I don’t think all of this gig economy stuff is nonsense. That’s one reason why I want its proponents to get their facts straight. So what’s going on?

  • There is one kind of gig work that isn’t showing up in surveys but is apparent in tax data. That is, more and more Americans are running what the Census Bureau dubs “nonemployer businesses” -- up from 12 percent of the workforce in the late 1990s to 16 percent in 2013 -- even while self-employment as measured by the BLS has been flat. My guess, and that of some economists studying the phenomenon, is that a lot of these are people who do gig work on the side but don’t consider it a job -- they may already have full-time jobs, or be in school -- and thus don’t report it as such when a surveyor comes calling. This appears to be a big enough group to turn the gig economy flatline since 1995 into a clearly rising trend, albeit not exactly an explosion.
  • There have been explosive rises in gig or independent work in a few types of jobs. An obvious one is taxi and limousine service -- Rinehart and Gitis report that the number of nonemployer businesses in the category more than doubled from 2004 to 2013, with the pace of increase rising since Uber was founded in 2009. Economist Ian Hathaway found even steeper gains since 2009 when he looked just at San Francisco, where Uber is based. Driving taxis and limos has long been a field thick with independent contractors. What Uber and its competitors appear to be doing is expanding overall employment in the industry. A different trajectory is the one seen in publishing, where cutbacks in full-time work have led to a rise in freelance and contingent jobs. On the other hand, fields such as farming and construction have been seeing declines in the number of independent workers, thus damping the overall numbers.
  • The data we have is all backward looking. We could well be in for an explosion of gig work, even if it hasn’t happened yet. The rise of online contingent-work platforms such as Uber and Upwork certainly make such work easier to arrange than it used to be.
  • At least a third of the U.S. civilian workforce labors in something other than full-time jobs for employers. That’s more than 50 million people. Yet the country’s retirement-savings, health-insurance and other employee-benefit systems have long been built around full-time jobs for large organizations. This was crazy in 1995; it’s even crazier now, with smaller households and a lower employment-to-population ratio meaning that more of these non-traditional workers are solely responsible for supporting themselves and their families. The Affordable Care Act, whatever else you may think of it, has been the biggest attempt yet to address this mismatch. And it seems to be working -- among the independent professionals surveyed every year by the firm MBO Partners, the percentage with health insurance rose from 64 percent in 2013 to 82 percent in 2015. If the gig economy enthusiasts can simply bring more attention and services to this segment of the workforce, that will be a significant victory in itself.
  1. About 1,500 people are surveyed for each GSS; the BLS’s questions were asked as part of the Census Bureau’s Current Population Survey, which covers about 60,000 households each month.

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

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

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