Monday, April 6, 2020

Are Alternative Work Arrangements a Positive Option?

When I think of my children--now young adults--getting a "job," what I am hoping for is  an arrangement between an employer and an employee that pays a wage or a salary, has a reasonably predictable work schedule, and that often has an implicit or explicit contract for a continuing employment relationship.

In an "alternative" work arrangement, at least some of these conditions don't hold. For example, the work may be paid by the job, or based on revenue earned by the worker, not on a wage or salary basis. The work schedule may be unpredictable. There is no strong expectation on either side that the employment relationship will continue into the future, which then influences decisions made on both sides about issues like whether the employer finds it worthwhile to offer training or benefits, the likelihood of future raises, and so on.

Of course, jobs often don't fall neatly into just two boxes, one "traditional" and one "alternative." But in thinking about these alternative job arrangements, a key question is whether workers choose these jobs, perhaps because they like the flexibility? Or do workers end up in alternative job arrangements when they would have preferred a more traditional ongoing job relationship, but were unable to find one?

 Alexandre Mas and Amanda Pallais dig into these issues in "Alternative Work Arrangements" (December 2019, Princeton University Industrial Relations Section, Working Paper #634). From a different angle, so do Tito Boeri, Giulia Giupponi, Alan B. Krueger, and Stephen Machin in "Solo Self-Employment and Alternative Work Arrangements: A Cross-Country Perspective on the Changing Composition of Jobs" (Winter 2020, Journal of Economic Perspectives, 34: 1, pp. 170-95).

Despite considerable public discussion about alternative jobs and the "gig economy," we don't actually have good evidence on whether the number of alternative jobs is rising. For some background, "Do We Even Know if the Gig Economy is Growing?" (January 29, 2019).

In these more recent essays, Mas and Pallais point out that US data don't show that the prevalence of irregular or flexible scheduling, or working from home, has risen much in the last couple of decades. They write: "The number of electronically-mediated gig jobs has grown substantially, but these jobs remain a very small share of overall employment, and independent contracting and self-employment have grown, at most, modestly. While our broad definition of alternative work arrangements represent a large share of the U.S. labor market, the traditional job is still very much a relevant feature of the labor market, and there is little evidence that it is on a substantial decline." Boeri, Giupponi, Krueger, and Machin look at data from a number of high-income countries to find that rates of self-employment don't seem to be rising; however, they also find that look if you divide up at self-employment into solo self-employed or self-employed with employees, the fraction of solo self-employed is a rising share. "Moreover, solo self-employment is largely associated with underemployment: that is, these workers would like to work more hours, and they earn less on an hourly basis than their counterparts with employees. The solo self-employed are also more liquidity constrained and more vulnerable to idiosyncratic shocks than the self-employed with workers."

In my own mind, the key question about job "flexibility" is who controls it. If I'm the worker, and I have flexibility to telecommute some days or to vary my hours in the context of an ongoing employment relationship, that sounds good to me. But if I'm the worker, and the employer is telling me that my time schedule is shifting on a weekly or even a daily basis, or that I am required to work from home some days, that's much less attractive to me. The issue becomes especially messy because "flexibility" may start off as something where workers feel as if they have the power to vary their hours or to telecommute on some days, but it may then rapidly evolve into something where workers feel as if they are under implicit or explicit pressure to take on jobs at times or on days that would not otherwise be desirable.

In this spirit, Mas and Pallais write that most of the workers who have job "flexibility" experience it as involving less work-life balance:
While flexibility in work schedule and location have often been touted as a means of achieving work-life balance, we do not find evidence that these practices lead to reductions in job stress or family life interruptions. In fact, the opposite is generally true. Workers who report more flexibility tend to also have worse outcomes in these dimensions, as well as higher shares of long work days and late night work. Perhaps surprisingly given the emphasis of the benefits of flexible arrangements on work-life balance, there is no evidence that women are more likely to be in jobs with more scheduling or work location flexibility. The ability to work part-time appears to be one of the primary job characteristics that workers, especially women, use to achieve work-life balance.
There are really two kinds of "flexible" labor market arrangements. One is workers with relatively  high levels of education and skills, who in theory have lots of flexibility, but in practice often feel pressure to be on call for the job 24/7. Another kind of "flexible" applies to low-skill workers whose schedules are being toggled and joggled at what often feels like the whim of an employer. These are often solo self-employed workers who often would prefer more stability in their work lives.

It may seem obvious that flexible work should be rising: after all, the technology that makes it easier to work from remote locations or that lets a firm coordinate "gig" jobs is getting cheaper and better all the time. But other factors are pushing back against the spread of these alternative jobs.  Mas and Pallais write:
We highlight several factors constraining the growth in gig work, flexible scheduling, and telework. Gig work (including independent contracting and freelancing) as a primary form of employment is likely held back by widely held preferences against irregular schedules and uncertain earnings. The primary benefits of electronically-mediated gig work are its potential to smooth fluctuations in earnings and to enable moonlighting. Regulatory pressure to reclassify independent contractors as regular employees may also limit future growth in these types of alternative arrangements. Temporary staffing has not grown, possibly because it primarily serves to smooth employment around temporary vacancies or meet transitory demand shocks, needs that may not have changed much over time. Flexible work practices may also be constrained by high marginal costs of implementation for two reasons. First, implementing these practices is infeasible in many jobs. Second, team production and coordination may require workers to be in proximity to each other. ... 
Worker preferences for alternative work arrangements may be driven, in part, by how these arrangements impact workers’ careers. Bloom et al. (2015) found that workers randomized to work from home had lower promotion rates conditional on performance. Teleworking employees may have less understanding of office dynamics and so be less prepared for promotions. Alternatively, being away from the office may negatively influence managers’ evaluation of worker performance. In experimental work in psychology, Elsbach et al. (2010) find that “observers interpret passive face time as an indicator of specific traits (e.g., responsibility, dependability, commitment, and dedication), and that the context of passive face time (i.e., whether it occurs during vs outside of normal work hours) is critical to the particular traits that judges assigned to those displaying passive face time.” Kossek and Van Dyne (2008) find possible deleterious effects on careers may be one reason workers do not value flexibility more.
A reasonable takeaway from this literature is that lots of workers would like to have jobs where the hours are more regular, where you know in advance what your hours will be and where you can truly unhook from the job in between those hours. For high-skill workers, the greater flexibility is bought at the price of never being truly off the clock. For lower-skill workers, having an employer pay low wages and then also jack around your hours feels like adding insult to injury.

For high-skill workers, Mas and Pallais point out that this desire for limits on hours is part of what causes more women to end up in part-time jobs. They write: "The literature consistently finds that women take jobs with fewer hours, and lower hour jobs are associated with better work-life balance in all of the dimensions we considered  as well as lower wages.  It appears that women are mostly working shorter hours by choice. In the 2016 CPS, 80 percent  of women in part-time employment report working under 35 hours per week voluntarily." To put this point another way, my suspicion is that many of these women would also be happy with a full-time job that had scheduled hours and hard time limit each week, but they are hesitant about signing up to be perpetually on-cal. 

At the lower skill levels, governments have been experimenting with giving workers more assurance over their hours. As the Boeri et al. team write: "At the federal level in the U.S., there aren’t regulations on time and days of work. However, in many European countries, work is restricted on Sundays, evenings, and during summer months. ... At the state and local level, a number of new laws, starting with San Francisco’s Retail Employee’s Bill of Rights in 2015, provide workers more advanced schedule notice. The rule requires large retailers to post workers’ schedules two weeks in advance and pay additional wages if schedules are changed. Since then, Oregon, New York City, Washington D.C., Chicago, Philadelphia, and Seattle among others have passed similar ordinances which mainly affect large employers in retail, hospitality, and food service."

There is also the question of whether it's possible for alternative, flexible, and gig workers to be eligible for benefits like health insurance, retirement accounts, sick leave, and so on. Results from Boeri et al. suggest that many of these workers would be willing to take lower wages in exchange for such benefits, but setting up such a system isn't trivial.  For example, should such a system be voluntary or mandatory for workers? Should it be run through employers or through outside companies--and if through outside companies, how does it get set up? How would these different choices affect wages. 

Overall, it seems to me that even before the coronavirus pandemic, there was a growing concern over whether the extent of "flexibility" in the labor market was turning out well for workers, and whether there should be some pushback toward encouraging the more traditional model of employer-employee relationships. Many of those who have been able to keep their jobs are getting a major dose of job "flexibility," like it or not. I suspect that among the lasting effects of the pandemic will be some shifts in attitudes in how many people feel about the availability of work-related benefits (health care, sick leave) and how happy they feel about providing flexibility on demand.