Do We Even Know If the Gig Economy Is Growing?

Do We Even Know If the Gig Economy Is Growing?

Timothy Taylor 29/01/2019 5

The concept of the "gig economy" clearly captures something real, but it can be hard to measure or define in the statistical sense that brings joy to my heart. For example, it clearly refers to those who drive for Uber and Lyft. But does it refer more broadly to all workers with "alternative work arrangements," who are hired for a short-term job with no serious expectation that it will become a longer-term employment connection? Does it cover people who obtain jobs through a temp agency and work for a series of employers, for example?

Conventional labor statistics don't draw these kinds of distinctions very clearly, so researchers have looked for clues in less traditional kinds of data. The results are less clear-cut than one might like.

For example, back in 2015 two prominent labor economists, Lawrence Katz and Alan Krueger, noted that the usual tool for the U.S. Bureau of Labor Statistics in looking at alternative and non-standards work arrangements is called the Contingent Work Survey (CWS). But this survey has only been carried out occasionally, and in fact had not been done since 2005. So Katz and Krueger tried to carry out a survey in Fall 2015, attaching the questions to a nationally representative survey regularly done by the RAND think-tanks called the American Life Panel.

The results were striking. As I noted at the time, they found:

[T]he percentage of workers engaged in alternative work arrangements – defined as temporary help agency workers, on-call workers, contract company workers, and independent contractors or freelancers – rose from 10.1 percent in February 2005 to 15.8 percent in late 2015. ... We further find that about 0.5 percent of workers indicate that they are working through an online intermediary, such as Uber or Task Rabbit ... Thus, the online gig workforce is relatively small compared to other forms of alternative work arrangements, although it is growing very rapidly  ... A striking implication of these estimates is that all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements.

Well, Katz and Krueger have now revisited the subject four years later, and their latest results suggest that the number of workers in alternative jobs actually has not been growing at all. The more recent paper is "Understanding Trends in Alternative Work Arrangements in the United States," published as a working paper from the National Bureau of Economic Research (#25425, January 2019, an ungated version is here).

The Bureau of Labor Statistics did get funding to do a follow-up of the official Contingent Workers Survey in May 2017. They write: "The ... findings were released in June 2018 and indicate, in seeming contrast to our earlier findings ... a slight decline in the incidence in alternative work arrangements from 10.7 percent in 2005 to 10.1 percent in 2017 ..."

What's going on here? Part of the answer seems to be that the labor market was improving from 2015 to 2017, and so more people moved into traditional jobs. Other differences have to do with the extent to which surveys were answered by workers directly, or by others in the family, and whether the 2015 survey for some reason ended up with an oversample of people holding multiple jobs. But bottom line, the current view is that the number of alternative workers may have risen during the Great Recession and its aftermath, but has since declined back to about where it was before the recession.

Anat Bracha and Mary A. Burke provide some additional perspective in "The Ups and Downs of the Gig Economy, 2015–2017," written as a working paper for the Federal Reserve Bank of Boston (#18-12, October 2018).

The particular focus on Bracha and Burke is on data from the Survey of Informal Work Participation (SIWP), which was carried out as part of something called the Survey of Consumer Expectations, which is done on a monthly basis by the Federal Reserve Bank of New York. They added questions about the extent of "paid informal work or side jobs," and whether "websites and/or mobile platforms were used in finding and/or performing such work." The survey was not really intended to include professional freelancers or temp workers, but as with any survey, it's not always obvious how respondents interpret the questions. They find:

Considering either our broader or narrower concept of informal work, we find that participation rates did not change significantly on net between 2015 and 2017, while our point estimates suggest that if anything, the participation rates declined during that period. ... Furthermore, conditional on participation in the gig economy, between 2015 and 2017 the average hours among informal workers showed unambiguous declines, and the aggregate amount of informal work as measured in FTEs also fell substantially, while average earnings among informal workers were effectively flat. Our composite measures of informal work would appear to contradict recent popular narratives depicting rapid growth in the independent workforce in response to structural changes in the organization of work. However, we also find some supporting evidence for the story of a rising gig economy ...[P]articipation rates increased across our surveys for selected technology-enabled jobs such as ridesharing and online tasks, and the average ridesharing hours increased dramatically among drivers, although in absolute terms these technology-enabled jobs still account for only a very small segment of the US population of household heads.

In more detailed analysis, they also find hints that the improving labor market from 2015-2017 was tending to  hold down the amount of informal work. But their bottom line is that while ride-sharing is way up, along with AirBnB and various non-labor income-earning opportunities, overall informal work is not on the rise.

Other authors have also found evidence that while participation in ride-sharing jobs is way up, the evidence for more employment in other parts of the gig economy is weak. For example, Katharine G. Abraham, John C. Haltiwanger, Kristin Sandusky James R. Spletzer presented "The Rise of the Gig Economy:Fact or Fiction?" at the annual meetings of the American Economic Association in early January 2019. They point out that some of the main possible data sources on gig economy work are not telling the same story: specifically, the surveys of workers form sources like the Current Population Survey aren't telling the same story as income tax data about self-employment. They write:

This paper provides an overview of what we know and don’t know about the hypothesized surge in the gig economy. There has been phenomenal growth, confirmed by at least three independent data sources, in the number of self-employed passenger drivers since 2013. The pace of this growth illustrates how quickly new technology can affect the labor market. Outside of this sector, however, the picture is considerably murkier. Furthermore, ... there has been a growing discrepancy between self-employment rates as measured in core household surveys such as the Current Population Survey (CPS) versus self-employment rates as measured in tax data. Over the past decade, the former show a slight decline whereas the latter show a notable increase. CPS data also have not captured the surge in passenger driver self-employment that is evident in other data. These facts suggest that, to understand the gig economy, the CPS and other core household surveys will need to be augmented by other types of data.

Bracha and Burke from the Boston Fed make a similar point about data on alternative work arrangements from self-employment reported on income taxes. They write:

According to a few different studies, the filing of tax forms indicating self-employment, such as the Schedule C, increased significantly in recent decades (Jackson, Looney, and Ramnath 2017, Katz and Krueger 2016, and Abraham et al. 2018), and one study found that the trends were driven by an increase in independent labor rather than business ownership (Jackson, Looney, and Ramnath 2017). Likewise, an analysis by Dourado and Koopman (2015) of 1099-MISC forms, which are used to report income received outside of traditional employment relationships, indicates an escalation in such filings from 2000 to 2015.

One of the prominent studies of what tax data can tell us on the extent of self-employment is "The Rise of Alternative Work Arrangements: Evidence andImplications for Tax Filing and Benefit Coverage," by Emilie Jackson, Adam Looney, and Shanthi Ramnath written as a working paper for the Office of Tax Analysis at the US Department of the Treasury (#114, January 2017). They note that the category of self-employment is quite broad. However, it is also rising fast, and many of the gains in self-employment seem to be among those who have zero in business expenses--that is, they are just providing labor. They write (footnotes omitted):

In 2014, 24.9 million individuals filed returns reporting the operation of a non-farm sole proprietorship and 16.8 million earned a profit (and paid self-employment tax) from those activities, representing a 34 percent and 32 percent increase, respectively, from their levels in 2001. The almost 17 million self-employed workers represented 12 percent of all tax filers with earnings. ... Self-employed individuals engage in a wide variety of economic activities ranging from operating businesses like restaurants, law offices, or partnerships; providing contract or consulting labor; earning platform-based or “gig economy” income; to house cleaning and babysitting services. Many earn income from both wages and self-employment. ... Looking at trends over time, we find that essentially all of the increase in self-employment is due to increases in sole proprietors who have little or no business-related deductions, and who therefore appear to almost exclusively provide labor services (i.e. the contractors or misclassified workers). In contrast, the share of filers that were small business owners was essentially unchanged.

It seems clear that more people are receiving income and tax from activities that are outside traditional jobs. But other than ride-sharing jobs, just how to characterize these jobs remains murky, and the question of what rules and regulations might apply to such income-earning activities remains murky, too. It feels to me as if a shift is happening in US labor markets, in which the expectation of a long-term bond between employers and employees has declined on both sides. But I don't yet feel that I understand the details of this shift.

A version of this article first appeared here.

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  • Paul Szkudlapski

    Millennials are not earning enough at their other job

  • Lee Pearson

    That was a pretty balanced and accurate assessment.

  • Joe Harris

    Modern day slavery......

  • Gemma Watson

    Provide a universal living wage paid for by selling personal data to companies like Facebook, Google and amazon, they already making big money selling your data, you should get paid for providing it!

  • Jack Knights

    Self employed people need to educate themselves in order to be successful.

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Timothy Taylor

Global Economy Guru

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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