November 3, 2015
The Gig Economy Is Alive and Growing
by Neil Howe
Although some dismiss the gig economy as a fad, a hard look at the numbers shows it's both large and growing, with profound implications.
The “gig economy” has dominated headlines: The Obama administration is cracking down on companies that misclassify their workers, while presidential hopeful Hillary Clinton has advocated for strong employee protections regardless of job status. Yet, oddly, no one seems certain about the size and direction of the gig economy. Some say that more Americans than ever are working in temporary, ad-hoc jobs, while others claim that “gig economy” is a mere buzzword.
A close look at the data, however, indicates that the gig economy is indeed large and growing. Pushing this growth are Generation Xers, who typically prefer more flexible work arrangements, and Millennials, who often have no other choice. The gig economy is rapidly changing the country’s economic landscape-for better or worse.
Experts often define the “gig economy” by equating it with so-called contingent employment. At its broadest, the Government Accountability Office (GAO) defines contingent workers as “all individuals who maintain work arrangements without traditional employers or regular, full-time schedules.” Under this definition, anything from freelance work to a formal part-time job is considered contingent. At its narrowest, the Bureau of Labor Statistics (BLS) classifies contingent work simply as any position not expected to last longer than one year.
Media stories minimizing the size and growth of the gig economy typically cite the narrower BLS numbers. The last time the BLS conducted a total inventory of contingent workers (according to its own definition) was 10 years ago, when it published its 2005 Contingent Work Supplement (CWS). This report determined that in 2005, just 1.8% to 4.1% of the total workforce could be considered contingent.
While this inventory is now way out of date (Congress has refused to finance an update), the BLS does release monthly data on one conspicuous component of the gig economy: self-identified “self-employed” workers. Because this data series is very current, and because it shows a gradual decline over the past several decades, it is often cited by skeptics as proof that the so-called rise of the gig economy is overblown. After examining several BLS measures, Wall Street Journal reporters Josh Zumbrun and Anna Louie Sussman conclude that there has been no growth whatsoever in gig-economy employment.
But these BLS estimates leave out a sizable chunk of the true gig economy.Consider this: An agency temp, an on-call staffer and even a standard part-time employee all find themselves in an irregular work environment-and yet many are ignored by the BLS definition.
What, then, would the gig economy look like if we included all contingent workers? By looking at historical CWS data, the GAO found that a whopping 30.6% of laborers were contingent in 2005, up slightly from 1999. Further, by analyzing more recent General Social Survey (GSS) data, the GAO determined that this share grew to 40.4% as of 2010. (To be sure, some of this growth may be because of differences in the sample populations surveyed.) If anything, this hefty share underestimates the gig economy. Virtually no full-time workers would self-identify as contingent workers, but at least some alternatively employed individuals-such as a full-time Uber driver—consider themselves regular full-time workers.
The basic picture outlined by the GAO report is gaining acceptance. According to economic journalist Justin Fox, “It is fair to say that somewhere between 30% and 40% of American workers labor in something other than conventional full-time jobs.” Fast Company agrees: “The sector of workers who don’t have traditional full-time jobs-whether by choice or not-is a sizable and growing portion of the workforce.” A more recent survey commissioned in 2014 by the Freelancers Union finds that 53 million Americans, or 34% of the workforce, are essentially freelancers.
Moreover, the gig economy is not only large-but also growing. While it’s true that monthly BLS data show a decline in self-employment, other categories of gig work have surged. For example, the same data show that the part-time share of the workforce has risen by about 2 percentage points since the Great Recession. Similarly, we can surmise that independent contractors make up an increasing share of the workforce: According to research by the American Action Forum, the country added more than 2 million independent contracting jobs between 2010 and 2014, accounting for nearly 30% of all jobs added during that period. After looking at types of work by industry, economist Gerald Friedman estimates that fully 85% of net new jobs added since 2005 have been irregular.
Gig employment is by no means a new reality. In fact, for most of American history, irregular work was the norm: In 1900, a staggering 41% of U.S. workers were farmers (the original “gig”), and many of the rest made a living as small-town self-employed business owners. To be sure, over the postwar era, such owner-producers made up an ever-dwindling share of the total. By 2000, fewer than 2% of workers were farmers, and big-box retail chains had marginalized mom-and-pop stores virtually to extinction. However, in the last decade or so, we’ve seen the pendulum start to swing back. In agriculture and retail, much of the growth has been at the bottom of the market, from the small-scale organic farmers surging in popularity to the do-it-yourselfers selling “artisanal” products with great success (see: “The New Frugality“).
Meanwhile, since the 1980s, generational forces have been tilting the economy toward more gig-like work arrangements. Boomer young adults were the first to separate from the conventional 9-to-5 jobs that G.I.s and Silent enjoyed, preferring to “get by” rather than sell out. Xers took this attitude even further and continue to work piecemeal jobs by choice at a much higher rate than other generations (see: “More American Workers Are Temping and Part-Timing“). Additionally, the rise of the sharing economy afforded Xers the chance to work as little or as much as they wanted depending on their personal obligations and financial needs (see: “The Sharing Economy Grows Up“).
Millennials, by choice or not, have similarly flocked to piecemeal, part-time gigs. Though some Millennials are undoubtedly the tech-savvy coders and entrepreneurs forgoing 9-to-5 jobs in favor of flashy startups, a much larger share would prefer the comfort of a full-time position. This generation joins their elders in this contingent labor force, though as “perma-temps” stuck in underemployment rather than part-time workers by choice.
The growth of gig work promises to have a profound impact on the economy at large. On the one hand, employers have less reason than ever to invest in their talent, and workers are no longer certain where their next paycheck is coming from. But on the other hand, this paradigm could create a flexible, streamlined economy in which wages adjust rapidly, leading to shorter and shallower recessions. If one thing is for sure, it’s that the gig economy is real-and it’s here to stay.