There's been much debate about the rise of the so-called "gig economy," a state of work characterized by an abundance of temporary positions filled by independent contractors on a short-term basis. While the term is frequently used to refer to newer, tech-driven employment for on-demand services, contingent work has been around since well before the digital revolution. And that larger gig economy is experiencing rapid growth.Credit: Grant Reinero / Business News Daily
What is the gig economy?
A broad definition of "gig economy" from WhatIs.com encompasses long-standing offline positions that would accurately be described as gig work:
"An environment in which temporary positions are common and organizations contract with independent workers for short-term engagements."
The U.S. Bureau of Labor Statistics (BLS)'s preferred term, "contingent worker," aligns well with that definition of the gig economy, referring to temporary forms of employment that have existed long before the Ubers of the world.
In 1995, the BLS first published the Contingent Work Survey (CWS), which analyzed "contingent work" and "alternative employment arrangements" for the first time. This was before mobile applications like Uber had popularized the term "gig economy," and yet many of these alternative arrangements were often just as flexible or temporary as work obtained via Uber and the like. The bureau periodically released its analysis of this economic sector until 2005, when the agency lost funding to do so. However, the BLS announced it will be reissuing the supplement every two years, starting in 2017.
In the CWS, the bureau defined contingent workers as those "who do not have an explicit or implicit contract for long-term employment." Additionally, the BLS included the following as alternative employment arrangements: workers employed by a temporary help agency, workers employed by a contract company, on-call workers, freelancers and independent contractors.
Economists Lawrence F. Katz and Alan B. Krueger, research associates at the National Bureau of Economic Research, have sought to fill the CWS void with a working paper published in March 2016. Katz and Krueger generally uphold the BLS' definition in their study, known as the RAND-Princeton Contingent Work Survey (RPCWS). The major difference is that the economists also included a new category, consisting of "workers using an online intermediary," such as Uber.
Both of these definitions of the gig economy identify people who engage in contingent work or alternative employment arrangements as their primary jobs. Other studies use broader definitions, like a 2015 paper published by the U.S. Government Accountability Office that included both self-employed individuals not included in the BLS surveys and part-time workers. Still other studies have included those people who utilize contingent work and freelancing to supplement their income from regular employment, which is a decidedly broader definition. The various ways to define the gig economy have muddied the issue, but Katz and Krueger help to clear things up.
How big is the gig economy?
The gig economy's size does not appear overwhelming, but its growth is remarkably rapid. In 2005, the final year of the BLS CWS before it lost funding, the bureau estimated alternative employment arrangements accounted for 10.1 percent of U.S. employment, which the authors noted was essentially flat when compared with the data for 1995. By Katz and Krueger's estimates, the share of the workforce included in alternative employment arrangements had grown to 15.8 percent by 2015. That's an increase of 9.4 million workers. Over the same period, the U.S. economy netted only 9.1 million new jobs.
"A striking implication of these estimates is that all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements," Katz and Krueger wrote.
All four categories increased in size over that period as well, according to the economists. Independent contractors, the largest category of alternative employment arrangements, grew from 6.9 percent to 8.4 percent. On-call workers comprised 2.6 percent of the share, up from 1.7 percent in 2005. The percentage of workers in temporary-help agencies increased from 0.9 percent to 1.6 percent. Finally, workers at contract firms accounted for 3.3 percent, a huge increase from their share of 0.6 percent in 2005.
Online platforms like Uber, which are typically associated with the gig economy, account for only 0.5 percent of total employment in the U.S., the smallest part of the gig economy as a whole. The "uberization" of the economy is actually quite infinitesimal when compared to traditional contingent work and alternative employment. However, Katz and Krueger noted that the online intermediaries are growing at an impressive clip.
The authors cited increased demand for flexible hours, technological advancement and the Great Recession as potential factors driving the boom. What the economists could not infer from the data is how much of the gig economy's growth can be attributed to job losses in the traditional economy after the financial crisis of 2008. If the Great Recession was indeed a major motivator, the researchers noted, one would expect the number of alternative arrangements to dwindle over time as the effects of the recession are mitigated.
(Note: Some of the 2005 numbers above are slightly different from those listed in the BLS data, because Katz and Krueger adjusted the statistics of the alternative work category to make the old numbers more comparable with their findings. For more information, see the full paper here.)
Who works in the gig economy?
Taken together, the four largest industries in the gig economy — health care, education, construction, and professional and business services — make up over half of the gig economy. Katz and Krueger also found that the specific jobs done by people with alternative employment arrangements became significantly more diffuse between 2005 and 2015. That means that not only are there more workers in the gig economy, but there are a wider variety of jobs as well. Other notable categories of industry in the gig economy include computer and mathematical, community and social services, personal care, legal services, transportation and warehousing, information and communications, and public administration.
Further, Katz and Krueger found that the number of people identifying as "self-employed" in the gig economy dropped by about 10 percent, signaling that more of these contingent workers are on-call or working at temp agencies. Even though there are more independent contractors in the gig economy today than in 2005, their overall share of the contingent workforce has diminished.
The demographics also contradict a common narrative that the gig economy's growth is driven by millennials either looking for a sense of freedom or finding what work they can in a tough job market. Instead, workers between ages 55 and 74 are the major drivers of the gig economy's growth. Large growth was also found in workers ages 25 to 54.
"Alternative work is more common among older workers and more highly educated workers, and the workforce has become older and more educated over time," Katz and Krueger wrote.
Additionally, the number of women in alternative work arrangements more than doubled from 8.3 percent to 17 percent between 2005 and 2015. Katz and Krueger concluded that women are now more likely than men to be working in the gig economy.
So, when the gig economy is considered only in terms of modern, on-demand types of contingent work, it remains underwhelming. Despite the rapid growth of this sector, those online intermediaries remain a very small fraction of alternative employment arrangements. But the massive growth of the broader gig economy means the expansion of temporary work is real; whether that growth continues remains to be seen.