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If you look around, the gig economy is everywhere. Most of us know colleagues, friends or friends of friends who have a side gig in addition to their full-time job. Some of our colleagues are consultants, advisors, or independent contractors. We find projects and clients online on platforms like Upwork, Catalant, and TopTal. We see DoorDash deliverers, Instacart shoppers and Uber and Lyft drivers in our communities.
Economists Lawrence Katz at Harvard and Alan Krueger at Princeton conducted a 2016 survey and confirmed that the gig economy was indeed booming. They found that 15.8% of the U.S. workforce is engaged in alternative work arrangements, up from 10.8% in 2005.
Then the BLS released results of its 2017 survey of independent workers (the Contingent Worker Survey, or CWS) which concluded the opposite—that there had been a slight decline in independent work since their last survey in 2005. The BLS found that the percent of the U.S. workforce engaged in “alternative work arrangements” fell to 10.5% versus 10.8% in 2005.
After the BLS released their results, Katz and Krueger modified and re-weighted their data to be comparable to the BLS sample and methodology and, by doing so, achieved essentially the same results. It’s not surprising that when Katz and Krueger adjust their data to match the BLS, their results match up as well.
What is surprising is that they bothered to adjust their data at all, given the significant shortcomings of the CWS survey data and methodology that lead the BLS to underestimate the prevalence of alternative work arrangements and undercount independent workers:
- The BLS survey only asks about the respondent’s “main job,” yet, other surveys find independent work in the gig economy is part-time, occasionally, or to supplement a full-time job. Katz and Krueger conclude that the BLS approach to identifying workers with multiple job holdings “fails to capture much secondary work activity leading to an understatement of the multiple job holding rate” compared to their survey.
- The BLS survey also only asks about work during a one-week period, which undercounts people who do not steadily work independently every week. The Freelancers Union and Upwork survey of independent workers found that 42% of independent workers freelance less than weekly, and that the BLS fails to capture those workers in its survey.
- In the BLS survey, about half of the responses are self-reported and about half are from “proxy” respondents who answer questions about other members of their household. The BLS allows proxy respondents because it “would be quite expensive . . . to obtain responses from all household members.” Proxy respondents may be cheaper, but they are also less accurate because they’re less likely to report alternative work arrangements for others. This results in underestimating the prevalence of such arrangements. Katz and Krueger conclude that going forward “BLS should consider only using self-responses for CWS because proxy respondents may not be knowledgeable.”
- The BLS questions are poorly worded and unclear. Results of a Gallup survey designed to probe alternative work arrangements found that the BLS ends up miscoding a significant number of respondents as employees, and that their questions fail to capture supplemental or side gigs that make up the majority of alternative work. The authors conclude that the BLS questions “may have missed a significant shift towards self-employment or non-employee work.”
Similarly, the BLS created four new questions for the latest CWS that were designed to capture the changes in platform-mediated work such as Uber. Despite significant pre-survey testing (online, laboratory, and cognitive) of the new questions, the BLS determined that “these questions did not work as intended” during the survey, and had to recode the majority of responses.
After adjusting their data, Katz and Krueger suggest that most of the 5% difference between their survey results and the BLS can be attributed to methodological differences, particularly the variation in sampling methods of workers who are multiple jobholders (2.1%), and differences in survey methods particularly the BLS’s use of proxy respondents who underestimate the prevalence of alternative work (1.5%).
The BLS results are an outlier among other surveys and tax data that conclude the gig economy is big and getting bigger. For instance, a Federal Reserve’s 2017 Survey found that 31% of adults engaged in some form of gig work in the previous month. A McKinsey Global Institute survey of independent workers found that 20-30% of the of the working-age population engages in some form of independent work. MBO Partners’ 2018 annual survey of the independent workforce found that there are currently 42 million independent workers (about 26% of the workforce), up from 16 million in 2010 and The Freelancers Union and Upwork 2018 annual survey found that 56.7 million Americans— about 35% of the U.S. workforce— work independently, up four million from 2014.
Even more compelling data comes directly from the IRS. Data on IRS 1099 (for independent contractors) and Schedule C (for the self-employed) filings suggests greater growth in independent work than the BLS, particularly in secondary or supplemental gig work. Katz and Krueger found that the tax data showed a “sharp increase in 1099 work and in Schedule C work.” In particular, they found that the “number of Schedule C filings as a share of employment has continued rising by 3.7% from 2000 to 2016.” The tax data includes earnings from both primary and supplemental work and includes work over a full year.
“We’re very clear from the tax data and from other sources that the level of [alternative work] is probably understated,” said Professor Katz in an interview. “We think there’s a steady growth in primary jobs but that’s missing the large growth in secondary jobs that you see in things like the tax data.”
The BLS survey is the only source of historic data we have that attempts to measure the changes in independent work over time. Yet a survey that uses questions, definitions, and methods from 1995 is unlikely to be the best or most accurate measure of the changes taking place in our workforce in 2015 and beyond. When Katz and Krueger adjust and re-weight their data to better reflect the questions, definitions, and methods of the BLS survey, they are able to obtain comparable results. But those results are still fundamentally flawed in ways that understate the prevalence of alternative work and undercount the incidence of independent workers. The preponderance of surveys and data provide compelling evidence that the gig economy is large and growing.
And if you don’t believe the evidence, just look around.
January 23, 2019 at 10:50AM
Forbes – Entrepreneurs