Tuesday, February 16, 2016

How Many in the Gig Economy?

The "gig economy" essentially refers to workers who are available when someone wants to hire them, but who don't have any long-term guarantee of how many hours they will work or in some cases even how much they will earn. Those who work for temp agencies are part of the gig economy, and so are those who drive for a company like Uber. But one problem overhangs all discussions of the gig economy. The discussions often end up being about anecdotal cases, either of those who find the gig economy to be a useful and preferred arrangement, or others who feel pressured into the gig economy because they couldn't find a steadier ongoing job.  There's not broad agreement on how to define the gig economy, and partly as a result, there also isn't good systematic evidence on how many workers are in the gig economy or how those workers perceive their jobs.

The Secretary of the US Department of Labor, Thomas Perez, announced a couple of weeks ago that the DoL would be working with the US Census Bureau to add as set of survey questions about "contingent workers" to the May 2017 Current Population Survey. But while we're waiting for that survey to happen, and the results to be tabulated and released, what do we know now?

The US Government Accountability Office (GAO) published a report in April 2015 called "Contingent Workforce: Size, Characteristics, Earnings, and Benefits."  The GAO writes:

"The size of the contingent workforce can range from less than 5 percent to more than a third of the total employed labor force, depending on the definition of contingent work and the data source.  ... However, no clear consensus exists among labor experts as to whether contingent workers should include independent contractors, self-employed workers, and standard part-time workers, since many of these workers may have long-term employment stability. There is more agreement that workers who lack job security and those with work schedules that are variable, unpredictable, or both—such as agency temps, direct-hire temps, on-call workers, and day laborers—should be included. We refer to this group as the “core contingent” workforce. We estimate that this core contingent workforce comprised about 7.9 percent of employed workers in the 2010 GSS [General Social Survey] and also made up similar proportions of employed respondents in the roughly comparable 2005 CWS [Contingent Worker Survey] and 2006 GSS—5.6 percent and 7.1 percent, respectively."
The data surveyed by the GAO suggests that the contingent workers tend to be younger and less educated, with about a 15% chance of leaving the labor force or being unemployed one month later. Even after adjusting for other observable factors that affect wages (like experience and education), contingent workers earn about 10% less per hour. They are less likely to have benefits, and less likely to be satisfied with their jobs overall.

But notice that the definition of a "contingent worker" in this GAO study is not especially new. Job categories like "agency temps, direct-hire temps, on-call workers, and day laborers" have been around for awhile. The evidence they cite is only updated through 2010. Somehow, these categories and teh timing of the data don't quite seem to cover what it means to work for a company like Uber.

A more recent piece of evidence comes from "Changing Patterns in Informal Work Participation
in the United States 2013–2015," by Anat Bracha, Mary A. Burke, and Arman Khachiyan, which the the Federal Reserve Bank of Boston published as a Current Policy Perspectives in October 2015. These authors designed the Survey of Informal Work Participation, which was then included as part of the Federal Reserve Bank of New York’s Survey of Consumer Expectations in December 2013 and January 2015. They define "informal work" like this:
By informal work we refer to any income-generating activity that does not involve a contract between an employer and an employee (except possibly for contracts involving a single task). This definition includes activities that monetize possessions (such as selling used goods or renting out one’s property) as well as activities that monetize free time and skills (such as babysitting). Typical features of informal work are the following: (1) it involves a greater degree of scheduling freedom than a formal job would, (2) the worker is paid on a per-service or per-good basis, and (3) the work does not provide benefits such as health insurance or pension contributions. ... The number and types of paid informal work opportunities have expanded in recent years, in no small part due to the appearance of new technologies facilitating the so-called peer-to-peer economy. Well-known peer-to-peer businesses include Uber, a taxicab-like business that connects drivers with riders via mobile phones; Airbnb, which enables individuals to rent out their home for brief stays; Amazon Mechanical Turk, which offers the opportunity to do basic computing work from home on a fee-for-service basis; and Taskrabbit, which facilitates spot contracting for personal services."
Bracha, Burke, and Khachiyan are quick to point out that the US economy was in a different place int the two survey dates: for example, the unemployment rate was 6.7% at the time of their Survey 1 in December 2013 but had fallen to 5.7% by the time of their Survey 2 January 2015. Thus, drawing comparisons between the two surveys needs to be done cautiously. Also, although this survey is designed to be nationally representative, it is carried out online and pays the respondents $15, which could introduce some biases in terms of who is likely to answer. That said, here are some findings:

"In Survey 2 [the January 2015 survey], the share of survey-takers who reported participating in informal paid work increased significantly—from 40 percent to 52 percent among men and from 40 percent to 60 percent among women. Among both women and men, participation rates became more equal across education classes in Survey 2. Among women, this equalization reflected in part a large increase in participation among those with high school or less, while among men, the equalization embedded a large increase in participation among those with a graduate degree.
Among men, participation rates became more equal across groups classified based on
employment status. As of Survey 2, men from across the formal income distribution are roughly equally likely to participate in informal work, while among women, the negative association between formal income and informal participation remains in force. ... 
At the same time, however, informal participation increased between the surveys among highly educated and highly paid men, an outcome that likely reflects the fact that recent technological innovations have expanded the set of informal work opportunities and made it easier to engage in such work. Indeed, among both men and women and in both surveys, more than half of those who report engaging in informal work are performing internet-based tasks. In addition, one of the categories with the highest increase in participation between surveys was “online tasks,” which refers to activities such as rating pictures or copy-editing online. Female informal work participants in Survey 2 were more likely than those in Survey 1 to report both that informal earnings were their main source of income and that informal work helped at least somewhat to offset recent negative employment shocks. Taken together, our results suggest that some individuals continue to seek out informal work in order to offset negative economic shocks, while others engage in informal work—despite already being fairly well off—because it offers an easy way to earn extra cash.
They slice up the data in a number of ways, based on whether people have other full-time jobs, other part-time jobs, or no other jobs, as well as by education level. But as an overall summary, it's fair to say that men in the informal economy in this survey were working 10-15 hours per week and earning about $240 per month. Women in the informal economy in this survey were working in the range of 8-18 hours per month at these jobs, and earning in the range of $135-$185 per month. The most common activity for both men and women was "selling online." These results are quite heterogenous: those working in the informal sector include high-educated people who have full-time jobs,  low-educated people without a job, and everyone in between.

There's reason to believe that these kinds of informal jobs are going to increase in number. The Boston Fed researchers also point to some estimates by PricewaterhouseCoopers, who back in 2014 made predictions about sales growth in five "sharing economy" sectors, "peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing and music and video streaming. PwC estimates that these five sectors had $15 billion in sales in 2013, but are headed for $335 billion in sales by 2025.

One more source that offers some discussion of these issues is Sarah A. Donovan, David H. Bradley, and Jon O. Shimabukuro who wrote a report "What Does the Gig Economy Mean forWorkers?" published by the Congressional Research Service on February 5, 2016. They offer a nice specific definition of the gig economy:
The gig economy is the collection of markets that match providers to consumers on a gig (or job) basis in support of on-demand commerce. In the basic model, gig workers enter into formal agreements with on-demand companies to provide services to the company’s clients. Prospective clients request services through an Internet-based technological platform or smartphone application that allows them to search for providers or to specify jobs. Providers (i.e., gig workers) engaged by the on-demand company provide the requested services and are compensated for the jobs. Business models vary across companies that control tech-platforms and their associated brands. Some companies allow providers to set prices or select the jobs that they take on (or both), whereas others maintain control over price-setting and assignment decisions. Some operate in local markets (e.g., select cities) while others serve a global client base. Although driver services (e.g., Lyft, Uber) and personal and household services (e.g., TaskRabbit, Handy) are perhaps best known, the gig economy operates in many sectors, including business services (e.g., Freelancer, Upwork), delivery services (e.g., Instacart, Postmates), and medical care (e.g., Heal, Pager).
The authors also emphasize various ways that gig workers are different from freelance workers. On-demand firms that contract with gig workers control the brand name, place various requirements on how the job is done, and take a percentage of what is earned. As they write:
However, gig jobs may differ from traditional freelance jobs in a few ways. The established store-front and brand built by the tech-platform company reduces entry costs for providers and may bring in groups of workers with different demographic, skill, and career characteristics. Because gig workers do not need to invest in establishing a company and marketing to a consumer base, operating costs may be lower and allow workers’ participation to be more transitory in the gig market (i.e., they have greater flexibility around the number of hours worked and scheduling).

But while this definition of the gig economy is nice and specific, the report then runs into the problem that there is no systematic survey evidence on the "gig economy" defined in this way. As one example, the number of what the Census Bureau calls "Nonemployer Establishments," which are firms that don't employ anyone but earn at least $1,000 in a year and pay income tax, seems to be on the rise. But it is not at all clear what share of this increase is the "gig economy" as narrowly defined, or those in the "informal economy" or in the category of "contingent workers."

There's considerable discussion over whether the rise of the gig economy, or the informal economy more generally, represents a broad shift in the conditions of the labor force that should push us to broader labor market reforms about issues involving minimum wages, overtime pay, unemployment insurance, or other benefits for these kinds of workers. I discussed one such proposal in "New Rules for the Gig Economy?" (December 9, 2015). The problem at this stage is that it isn't yet clear, even roughly, how many workers are facing what kinds of problems. Full-time workers picking up some extra income in the gig economy are one thing. Part-time workers or those without other jobs who are earning most of their income in the gig economy pose other issues. With a broad array of new labor force relationships, it's  very hard to sort out the costs and benefits of different set of rules--especially given the ability of on-demand firms and workers to alter their labor force relationships in response to any new rules that are enacted.