This is a guest post by Lawrence Mishel, distinguished fellow at the Economic Policy Institute.
Over the last few years, a persistent wave of media stories has used the emergence of gig jobs to illustrate the expansion of “freelancing,” often describing a rapidly “changing nature of work” that will eventually result in a large share of people — perhaps as much as 30 to 40 percent of the population — earning their living as freelancers. The rapid expansion of Uber and other ridesharing services seems to lend some visible credibility to these stories.
But let’s face the facts: We are not all becoming freelancers. Not even close.
The media hype often comes from tech executives who believe they are the center of a world they reinvent, and is echoed by their tech media megaphone. In fact, at any conference on the future of work, the gig economy and self-employment should merit a workshop, not a plenary.
My recent research on Uber drivers and their pay helps to illustrate the larger pattern of gig work and self-employment. For the purposes of my research, by ‘gig’ work I mean those providing personal services to consumers via a digital platform or app. Uber is by far the largest gig employer. The majority of Uber drivers join Uber to supplement their main incomes, with fifty seven percent driving less than ten hours each week. Uber even advertises itself as a ‘side hustle’ in trying to attract new drivers.
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The average annual number of Uber drivers in 2016 was 833,000, which amounts to 0.56 percent of all employment, a remarkable number of driver-participants. But Uber drivers work an average of three months, meaning it takes four Uber drivers to be the equivalent of one person employed year-round. Taking this into account, Uber driving amounts to just 0.14 percent of all employment, when driving and employment are both measured as full-year workers.
Note, however, that the average Uber driver drove seventeen hours a week. Taking both part-time hours and part-year work into account yields Uber drivers as 0.07 percent of full-time, full-year equivalent employment. So, focusing on the number of Uber driving participants yields an overall scale for Uber that is eight times larger than the true ‘economic weight’ of Uber.
This can also provide insight into the total gig economy. If Uber provided just 25 percent of all gig work then the entire gig economy would represent about 0.3 percent of total employment. Gigs are hardly driving the economy or the nature of work.
This became patently clear when the Bureau of Labor Statistics (BLS) released the golden standard of data – the Contingent Work Survey (CWS) – showing that independent contractors comprised just seven percent of employment in 2017, the same share as in the earlier surveys in 1995 and 2005.
This confirms that city leaders concerned about neighborhood stability, strong families and employment-related tax revenue should keep their “eyes on the ball” with regards to wages, benefits and job security in full-time work. Self-employed workers have issues, but the excessive focus on them to the exclusion of other workers is unwarranted.
The unchanged proportion of independent contracting should not have been that much of a surprise. A review of a wide variety of data on gig work and self-employment all yield a similar set of conclusions. Specifically, research on Uber drivers, independent work, all online demand platform work, non-employer establishments, Social Security earnings data and independent contractors from my organization and others all conclude that:
- The number of people involved in these types of work activity has increased, measured as headcount of participants or as a share of employment;
- The increase is primarily among people who want to earn supplementary income and only work for a short number of hours. The increase in the various self-employment activities has not occurred in people’s “main job” or as their main source of income; and
- The economic scale of these activities has not changed much when measured as a share of economy-wide total hours worked, earnings or compensation. While headcount measures of self-employment activity do show a large increase, the overall economic impact of this activity is relatively small in its current scale and in its growth.
Concern about the deteriorating quality of jobs should not be solely focused on gig work or self-employment but include the experiences of the vast majority of workers in W-2 jobs that have seen their wages suppressed, their benefits eroded and their job insecurities increased. For instance, the new BLS survey showed that only about half the workers in traditional work arrangements — not those in alternative work such as independent contracting or temporary jobs — received employer-provided health insurance (53%) or were included in employer-provided retirement plans (46%).
The increase in people supplementing their incomes through freelance or gig opportunities should not lead anyone — including city leaders — to conclude that the nature of work is rapidly shifting to freelancing. Any inquiry into the nature or future of work should be centered on how people earn their living, and people’s main job — not their side hustle — is of primary interest.
About the Author: Lawrence Mishel is a distinguished fellow at EPI after serving as president from 2002–2017. Mishel first joined EPI in 1987 as research director. In the more than three decades he has been with EPI, Mishel has helped build it into the nation’s premier research organization focused on U.S. living standards and labor markets.