Answer to gig economy question depends on baseline

The US Bureau of Labor Statistics reported on Thursday that contingent and alternative work was occurring at about the same rate in May 2017 that it did in February 2001. Even more surprisingly, some categories of this type of work were actually occurring less frequently in 2017 than in 2005. Media coverage of the report noted the lack of growth in these categories of work and the surprise among those who expected confirmation of a growing gig economy. One take that has been missing, however, is the possibility that other changes to the labor market mean we should expect much less contingent and nonstandard work. Two indicators that nonstandard work has been falling come from regularly monthly data showing the long-term decline in self-employment and multiple job holding. Relative to this alternative baseline, the BLS report shows a labor market that has been changing in dangerous ways.

Definitions

“Contingent” work is comprised of jobs that are not expected to last, even if there is no change to the economy. In a related concept, “alternative” work arrangements include independent contracting, on-call work, and working for a temp agency or contract company while assigned to one client’s place of business. The structure of these jobs varies but they all have a nonstandard employment relationship; independent contractors may provide their labor with less intermediation than the standard worker while contract company and temp agency employees operate through more labor market intermediaries. While only some alternative work arrangements are contingent, all of these categories might be associated with a less-smooth income stream.

Importantly, despite the popularity of treating “contingent”, “alternative”, and “gig” work as synonymous, BLS defines gig work very narrowly as only those jobs that include work found and paid for through a website or mobile app. BLS has not yet released any estimate of gig work, but plans to do so by September 30, in a Monthly Labor Review article. The gig work questions ask people whether they have done ANY gig work, whereas the contingent and alternative work questions focus on the main job.

Interpreting the survey results relative to an alternative baseline

With lots of discussion about Uber drivers, shortened job tenure, and the fissured workplace, analysts were expecting to see a growing share of US workers employed in contingent and alternative work arrangements. However, this expectation seems to forget major demographic changes since 2005. The overall employment rate has fallen since 2001, particularly among young people and students, who are traditionally disproportionately “contingent” workers. Simultaneously, people are now much more likely to have a college degree. Since contingent workers tend to be younger, and those with college degrees tend to have more stable employment, a baseline assumption about the labor force, based on demographics alone, would suggest that nonstandard work arrangements become less common, not more common.

Two indicators that show this changing baseline are the incidence of unincorporated self-employed workers and the rate of multiple jobholding. Both measures are proxies of contingent and alternative work and have fallen by a third or more since the first contingent worker supplement was conducted in February 1995.

Fewer unincorporated self-employed

It’s important to remember that the analysis released by BLS on Thursday came from a one-time supplement to a survey that is conducted every month. If, during the week before one of the monthly interviews, someone drove for Uber, provided labor through Task Rabbit, or worked one of many non-gig independent contractor jobs, as either their first or second job, they will show up as “self-employed, unincorporated.” As expected by demographics, the share of the population that is classified this way has fallen since 1995 for both those age 25 to 54 and for those age 55 or older (figure 1).

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In 1995, 7.3 percent of the age 25 to 54 population was unincorporated self employed, compared to 6.3 percent in 2001, 6.2 percent in 2005, and 4.8 percent in the year ending May 2018. The share of those over age 55 who are self employed and unincorporated has also fallen, from 5.1 percent in 2005 to 4.3 percent over the past year.

Since my calculation above includes those who are self employed as their second job, it helps to rule out the possibility that the contingent and alternative workforce numbers are misleadingly low because they do not capture the second job. Additionally, using a moving annual average of the data helps to smooth out the volatility that is possible when looking at any single month of CPS data.

Falling multiple jobholder rate

A second indicator supporting a lower baseline for comparison of recent BLS estimates comes from the fall in the share of workers with more than one job (figure 2).

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The share of employed with more than one job has fallen from 6.6 percent in 1995 to 5.3 percent in 2005 and to 4.7 percent in the year ending May 2018. Among women, the trend is less pronounced, with 6.4 percent of female jobholders reporting more than one job in 1995, compared to 5.7 percent in 2005, 5.6 percent in 2017, and 5.4 percent over the past year. Since some explanation of the lower-than-expected BLS estimates has focused on concerns over measurement, and specifically that second jobs are not captured, it is worth pointing out how much less common second jobs now are in the CPS, compared to the period when the earlier survey supplements were conducted.

Policy should focus on people not work

When adjusting for increased education, an aging workforce, and changes to overall employment rates, incidence of contingent and alternative work actually seems to have grown relative to its 2001 rate. In age and education, those who are currently working are more demographically similar to those who traditionally hold standard jobs, with the potential exception of some independent contractor jobs. When compared to a baseline where, all else equal, contingent and alternative work should actually have fallen over the past 12 years, it is concerning to see this type of work retain its share of the labor market.

One explanation for the relative persistence of nonstandard work is that many of the jobs that used to be temporary or unstable have been either outsourced, automated, or lost to the housing bubble, while jobs that used to be stable and standard are being destabilized. The influence that companies in places like Silicon Valley have over labor policy has grown, and these companies seem to be using their influence to try to make otherwise unprofitable ventures profitable, at the expense of workers. Partially as a result of corporate influence, and in the context of other changes in the US labor market, the main difference between the 2001 and 2017 contingent worker supplement results may be that the less stable jobs of today take a lot more student debt to get.

Perhaps more importantly, though, it is off-target to focus on the share of the economy currently claimed by contingent and alternative work. Financial statements already show that many of the new labor market intermediaries are not profitable. The focus should instead be on policy that tries to protect and improve job quality and to prevent gaps in unemployment insurance from needlessly putting people in poverty during the next economic downturn. The ACA, as one relevant policy example, may have been blessed by the 2017 survey data: health insurance among contingent and alternative workers is now much more common.

 

 

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