Measuring impact of alternative work

Technological advances combined with shifts in the way Americans view work and employment have bolstered a narrative that would suggest nearly everyone is supplementing their income — or making their entire living — driving for Uber.

While millions of Americans are indeed working in nontraditional jobs, measuring the size and impact of the alternative or gig economy remains a challenge for economists.

Workers in temporary help services industries — defined by the U.S. Department of Labor’s Bureau of Labor Statistics as “establishments primarily engaged in supplying workers to clients’ businesses for limited periods of time to supplement the working force of the client” — made up 2 percent of the Colorado workforce in 2007. Over the following two years, when the country’s economy bottomed out during the Great Recession, that dropped to a low of 1.4 percent in 2009.

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Hiring workers on a temporary or contract basis provides employers with some payroll flexibility, which is particularly attractive during the early period of economic recovery following a recession.

“What we see when we look at the data is that [the percentage of workers in the temporary help services category relative to the overall workforce] definitely responds to business cycles,” Colorado Department of Labor senior economist Ryan Gedney said.

“You’ll see employment in temporary help services decline sharply — even more than overall industries — during a recession,” Gedney said. “But then [temporary help services] will be one of the strongest industries to rebound as you come out of a recession.”

As the economy recovered from the Great Recession, the percentage of temporary employees in the Colorado workforce bounced back to a high of 2.1 percent in 2014 and has hovered at 2 percent in the years since.

“As you’re coming out of a recession, business have to make decisions about whether to commit to a full-time, permanent employee and we don’t really know if [a recovery] is going to last,” Gedney said. “Hiring temp workers gives businesses some flexibility.”

Nontraditional employment also provides flexibility for workers who may need jobs where they can make their own schedules or work outside of normal business hours.

Workers will often string together a series of part-time or contract jobs.

“You may have a combination of temporary-type jobs where you end up working the equivalent of full-time hours,” Gedney said.

But while workers might be able to achieve a full-time salary by working several part-time jobs, they are often not eligible for benefits such as health insurance. Nontraditional workers are only half as likely as full-time employees to have employer-provided health insurance, according to the Bureau of Labor Statistics.

While Bureau of Labor Statistics data on temporary help service workers can be instructive, it is unable to fully capture the scope of the temporary and gig economy.

In order to better understand the nature of nontraditional work, the bureau developed a survey of a broader category of “contingent workers,” defined as people working in “jobs that are not expected to last, as well as alternative work arrangements, such as working as an independent contractor or through a temporary help agency.”

Nationwide data shows that the percentage of contingent workers in the overall workforce has steadily declined from just under 5 percent in 1995 to under 4 percent in 2017.

A Bureau of Labor Statistics survey found “over half of contingent workers would have preferred a permanent job in May 2017, while one-third preferred their contingent employment arrangement.

“Contingent workers earned less than their noncontingent counterparts,” according to the survey. “ … Among full-time workers, median weekly earnings for contingent workers ($685) were 77 percent of those of noncontingent workers ($886).”

Even with the bureau’s surveys of contingent workers, accurately measuring the temporary and gig economies remains difficult.

The Bureau of Labor Statistics “does not have a definition of the gig economy or gig workers. In fact, researchers use many different definitions when they talk about the gig economy,” according to a recent bureau blog post. “You may think of a gig as something your high school band played on a Saturday night. Or today you might consider your ride-share driver as performing a gig. Classifying workers as gig could get very confusing.”

The bureau does note that contingent workers tend to be younger and less educated than the average worker.

“Contingent workers were more than twice as likely as noncontingent workers to be under 25 years old,” according to a Bureau of Labor Statistics report. “… Contingent workers were about twice as likely as noncontingent workers to have less than a high school diploma and slightly more likely to hold at least a bachelor’s degree.”

In “The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015,” a  study from Harvard University and the National Bureau of Economic Research, researchers found “the online gig workforce is relatively small compared to other forms of alternative work arrangements, although it is growing very rapidly.”

The report found that only 0.5 percent of employees worked through app-based or an online intermediary such as Uber. 

“We talk a lot about gig workers, obviously because the popularity of Lyft and Uber and those kinds of app services,” he said. But that increased attention on these kinds of jobs does not necessarily mean a higher percentage of employees are working in this sector.

“It is kind of counterintuitive based on all the narrative we have had” about the increased prevalence of app-based service jobs, Gedney said.

“This decrease in contingent and alternative work seems to be at odds with the rise of the online gig economy, where platforms like Uber and Taskrabbit connect workers to customers,” according to a a 2018 Brookings Institute report called Independent workers and the modern labor market. “One possibility is that today’s BLS estimates are not fully capturing gig workers: if gig workers expect their jobs to last, they would not be considered to engage in contingent work.”

Despite the fuzzy statistics, it is undeniable that temporary jobs or gigs have become the new normal for some in the Colorado workforce.

As organizations such as the Bureau of Labor Statistics continues to develop better data to measure the scope and impact of the nontraditional job market, policy makers will be better equipped to create solutions to the issues — downward wage pressure, lack of access to benefits, uncertain career paths — that accompany this new reality.

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Read related stories in BizWest’s special report: Workforce Woes. Published in March 2019.

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