Bloomberg Businessweek

July 23, 2018, 12:00 AM EDT

Maybe the Gig Economy Never Was What It Used to Be

By Justin Fox

The term “gig economy” came into use during the Great Recession to describe a work world dominated by “free-floating projects, consultancies, and part-time bits,” as journalist Tina Brown put it in 2009. It gained currency as Uber Technologies Inc., TaskRabbit Inc. (acquired by the IKEA Group Corp. last year) and other companies began to broker short stints of work via smartphone app. The perceived rise of such freelance, independent work has spurred much discussion of whether labor laws and employee benefits needed to be restructured in order to reflect the new reality of gig work. But the discussion has sometimes gotten ahead of on-the-ground reality.

Is the gig economy actually growing?

It isn’t, according to the most extensive survey of nontraditional work in the U.S., by the Bureau of Labor Statistics. The survey, conducted in the 1990s and early 2000s, then dropped for lack of funding after 2005, was resurrected in 2017. The results, released in June 2018, showed a lower percentage of American workers in alternative work arrangements than in 2005. The survey did show big gains in alternative work since 2005 in transportation (think Lyft and Uber drivers) and information (software and media), but they were more than canceled out by declines in other sectors.

Do other measures paint a different picture?

Yes and no. Some private surveys indicate that much of this work is done by people who already have full- or part-time jobs. Such “side gigs” are unlikely to be reflected in BLS surveys. They do, however, show up in the Census Bureau’s annual count of nonemployer businesses, which is based on tax data. The Census Bureau also found that the biggest gains came in the transit and ground passenger transportation subsector, where the number of nonemployer establishments rose 50.4 percent from 2015 to 2016. Still, the overall economic impact is as yet quite limited. In inflation-adjusted terms, the total revenue for nonemployer businesses added up to less in 2016 than in 2005.

Is the gig economy new?

Your great-great-great-grandparents might not have thought so. Before the Industrial Revolution of the 19th century, most work in the U.S. was what today we’d call gig or independent or freelance work. Even as recently as the late 1940s, more than 11 percent of U.S. workers were unincorporated self-employed, compared with less than 6 percent now (the share of incorporated self-employed, who have only been tracked since 2000, has risen modestly since then but not by enough to stem the overall decline). Self-employment and freelance work do seem to have gained share in certain occupations, some of them white-collar ones where they used to be rare, but at the same time sectors that long made heavy use of freelance or temporary workers – such as agriculture – are much smaller than they used to be.

Is the U.S. leading the way in the gig economy?

Not really. There aren’t any perfect comparative measures, but self-employment’s share of total employment is lower for the U.S. than any other affluent country, according to the Organization for Economic Cooperation and Development. In general, poorer countries have higher self-employment rates than richer ones, and the U.S. is on the rich side, which explains much of the disparity. It’s also plausible, though, that other wealthy countries’ stronger safety nets – especially in health care – make independent work more attractive, while their protections against layoffs leave employers warier of full-time, permanent hires. These differences also appear to be reflected in statistics on temporary work, which is much more common in the European Union and some other affluent economies than in the U.S.

5. Why has this been such a hot topic, then?

Earlier in the current economic expansion several surveys did show gig work gaining ground. Much of this has turned out to be cyclical: As demand for workers rises, employers become more willing to offer full-time work and workers less willing to settle for freelance gigs. Still, Americans aren’t imagining that many jobs have become less secure and less attractive over the past few decades. Real earnings stagnated from about 2000 to 2015, millions of prime-age men have dropped out of the labor force, health insurance has gotten more expensive, and pensions have become rare (in the private sector, at least).

6. Isn’t there a tech revolution happening here?

There certainly could be. The internet and smartphones really have provided new ways of allocating and managing work. These tools have transformed a few occupations already in the U.S. and may transform more in the future. They just haven’t transformed the country’s economy yet.

7. So do labor laws need updating or not?

More than one-third of employed Americans are working in something other than full-time, permanent jobs for other people. This share may not have grown much in recent decades, but it still represents tens of millions of people who are in many cases ill-served by retirement and health-care systems and worker-protection laws designed mainly for full-time employees. In the past, many of these workers were in low-status agricultural and domestic jobs and couldn’t muster much political clout. As the gig economy becomes more of a white-collar phenomenon, this seems to be changing, with Democrats in Congress now pushing legislative changes to encourage more-portable workplace benefits and discourage employers from classifying workers as independent contractors.

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