Uber drivers and part-time hoteliers are barely a ripple in the sea change that is transforming the way Americans work in the age of the “gig economy.”
Wherever you hear about employees being replaced by contract workers, administrative tasks being done by temps, or in-house experts giving way to short-term consultants, that’s where the gig economy is taking hold. By one measure, 100 percent of the job growth of the past decade involved these sorts of alternative work arrangements.
Gigs have their benefits, not the least flexibility: Workers aren’t stuck in place from 9 to 5; businesses can ramp up and taper off as needed. But there are risks, too. In particular, gig workers often find themselves bereft of basic protections, including unemployment insurance and the minimum wage.
Tracking the rise of the gig economy hasn’t been easy, due to a dearth of good data and the difficulty of seeing past high-profile companies like Uber. But thanks to some creative analysis, a fuller picture has slowly become clear.
First, a workable definition. Gigs are short-term assignments in which pay is generally determined by task or output, rather than hours worked. That makes room for freelance consultants, physical therapists, graphic designers, and temp workers alike — all of them joined by the absence of predictable work, regular wages, and a consistent boss.
About 15 percent of the US workforce meets this definition, according to research from economists Lawrence Katz at Harvard University and Alan Krueger at Princeton University.
That’s a lot higher than it used to be. Katz and Krueger found that, since 2005, the US economy has created 9.4 million new gigs — and nothing else. In other words, if you take away these kinds of informal jobs, the United States would have experienced zero net job growth over the past decade.
That may sound hard to believe, and further research may show otherwise, but for now it looks like gig work is the wave of the present.
We’re not talking about a surge of independent lawyers and freelance architects, either. The biggest increase was among workers provided through contract firms — think at-home health care workers or tutors. That sector grow over 400 percent between 2005 and 2015.
And while Uber and its app-based brethren get all the attention, they account for something like 0.5 percent of the total US workforce. A McKinsey study found that only 15 percent of all gig workers had ever used a digital platform for finding work or selling wares. That includes Uber, Airbnb, eBay, — you name it. For now, at least, the real gig revolution is happening offline.
Gigs give businesses flexibility
Common as it is to associate gigs with flexible work — pick your hours, choose your clients — often the greatest benefits accrue on the business side.
Imagine you own an online costume shop. Odds are your business spikes every Halloween, increasing your need for website support, invoice management, and the physical work of packing and shipping. Once high season is over, though, you may not need so many employees. So instead of hiring full-timers, maybe instead you offer seasonal gigs for IT workers, back-office employees, and packing specialists — all of them cribbed from temp agencies and labor-for-contract firms.
The same just-in-time logic applies to business that need to ramp up when demand increases and shed staff when it lags. Relying on gig workers is one way to do that.
There’s nothing new about this need for demand-sensitive flexibility, so why has the gig economy taken off in the past 10 years?
A couple of possibilities. It could be that the recession left workers with few full-time options and little choice but to accept gig-type positions. Or maybe the rise of health care costs has given companies new reason to drop employees from the rolls. Or this may be a story about technology. With new tools to measure productivity on a day-by-day, minute-by-minute basis, it’s become easier for companies to identify underperforming gig workers and keep them on track (or replace them.)
The future of gigs
Some workers love their gig-based lives. McKinsey found sky-high job satisfaction among what they call “free agents” — those who have actively chosen to ride the gig economy rather than search for more traditional employment.
Other gig workers feel differently, especially those who just got stuck there. Maybe they’re tutors for hire who’d rather be teachers, or on-call caterers who’d prefer restaurant work. For them, a traditional job might be a step up, providing a set of guarantees workers rarely get in the gig economy.
When companies choose gig workers over regular employees, they don’t necessarily have to provide all the protections that workers have fought for over the years. As an example, when you’re hiring gig workers to do a particular task, you might end up paying them less than minimum wage — if the task takes a lot longer than expected. Then afterward, if the workers struggle to find a follow-up gig, and they aren’t eligible for unemployment insurance, because they were never really employees.
In egregious cases, employers reclassify regular employees as gig workers to avoid paying benefits.
Last year, the Labor Department tried to rein in this practice with a memo setting tighter standards for when employees could be treated as independent contractors. Many of the lawsuits against Uber point in the same direction.
Think of this as an effort to put the gig genie back in the bottle and restore the old contract between workers and business: You provide the labor, we help pay for benefits and labor market protections. But this genie may not want to go back — perhaps rightly.
Kreuger, the Princeton professor, has embraced an alternative approach that would respect the flexibility gains attached to gig work while restoring some — but not all — of the classic worker protections: collective bargaining but no minimum wage, tax withholding but no unemployment insurance.
In the end, there may not be a single, uniform solution. Instead, the fate of the gig economy will be decided in city halls, state houses, and courtrooms as lawmakers and lobbyists argue over the virtues of flexibility, the risks of regulation, and whether 20th century labor standards are still the best way to shield workers from the vicissitudes of 21st economic life.
What seems increasingly clear, though, is that today’s gig economy can’t last — not as is, anyway. Little by little, Uber drivers are winning the right to unemployment insurance and cities are limiting Airbnb rentals to maintain a vibrant housing market.
There seems to be a growing consensus that gigs — like other jobs — should fall under laws designed to protect workers’ rights.