The Future of Work: Diving into the Data

Credit: Helloquence via Unsplash

The on-demand or “gig” economy gets a lot of buzz.  And for good reason: It’s an exciting, tech-driven, entrepreneurial development that has tapped into significant consumer demand. It offers new ways for people to monetize their existing assets − their car, their extra bedroom − and earn a living.

It also raises important questions about basic labor protections and the shift of risk onto workers from employers − risk of injury or liability or rapidly fluctuating demand.

For the last year and a half, we at the Department of Labor have been engaging with business leaders, workers and others in this dynamic sector of the economy to better understand it and to inform how the department does its work to protect and serve American workers.

But we have also emphasized that the on-demand economy is part of a much larger trend in the relationship between workers and businesses. Over the last few decades, more and more stable employment relationships have given way to something more arms-length − from contract work to temporary employment, to one-off gigs. In many ways, the challenges and opportunities of the on-demand economy mirror those of the larger trend.

One of the challenges we’ve faced as policy makers in addressing these shifts in the labor market has been a lack of current, reliable data. We have taken an important step toward a more detailed picture with the Bureau of Labor Statistics’ commitment to run the Contingent Worker Survey next year for the first time since 2005. But we’re also engaging with others who are bringing much needed data to the table.

This month, we hosted a pair of forums that both deepened our understanding of the on-demand economy and brought into sharp relief the much larger trends in play. On June 7, Marina Gorbis, Devin Fidler and Rod Falcon from the Institute for the Future came to the Labor Department for a policy forum on the on-demand economy, where they presented their research comprising detailed interviews with on-demand workers. And on June 10, professors Alan Krueger from Princeton and Larry Katz from Harvard gave a seminar on their recent research regarding the prevalence of alternative work arrangements in the labor market.

Large and Growing Trend Toward Alternative Work Arrangements

Professors Larry Katz and Alan Krueger at the Labor Department on June 10. Professors Larry Katz and Alan Krueger at the Labor Department on June 10.

Krueger and Katz are both former chief economists here at the Department, and Krueger served as chair of President Obama’s Council of Economic Advisers earlier in the administration. Both are leaders in the world of labor economics, and their research on alternative work arrangements is among the most authoritative recent work available on the subject.

Their research shows that the trend toward more arms-length work arrangements is large and growly rapidly. Often, this is the result of subcontracting, outsourcing, or other forms of “fissuring” of the kind that Dr. David Weil, our Wage and Hour Division administrator, has written about.

In fact, Krueger’s and Katz’s findings suggest that alternative work arrangements represent more than 15 percent of the labor market − and that they account for between 80 and 100 percent of the net employment growth since 2005.

Notably, Krueger’s and Katz’s research also provides insight into the gig economy, one part of the trend toward more arms-length work arrangements. As they define it, the on-demand economy, while still growing quickly, accounts for only about half of 1 percent (0.5%) of the labor market. This is similar to what the JPMorgan Chase Institute found in their recent study of more than 1 million randomized, anonymized Chase customers.

Seeing Both the Forest and the Trees

Marina Gorbis, Rod Falcon and Devin Fidler from Institute for the Future at the Labor Department on June 7. Marina Gorbis, Rod Falcon and Devin Fidler from Institute for the Future at the Labor Department on June 7.

However, to say that the on-demand economy is a relatively small part of the labor market is not to say that it is an unimportant phenomenon. It is a sector that is affecting millions of Americans in both positive and not-so-positive ways. And the technology behind it has far-reaching implications.

IFTF’s Workable Futures Initiative aims to “understand emerging work patterns” and to blueprint a generation of positive platforms that can create equitable opportunities and enable sustainable livelihoods.” Their leadership visited us at the Labor Department just over a year ago to talk about their vision for more socially positive digital platforms.

Since then, IFTF has conducted in-depth interviews with individuals throughout the on-demand economy, from those who are there because they are transitioning back into the workforce after time away, to those who are supplementing other income, to those who are earning their full-time living on digital platforms. They have also studied the ways that digital platforms continue to change.

While it’s important to understand the size and scope of the on-demand economy − the proverbial forest − it’s also important for policy makers to understand who is participating in this sector, how they’re participating and why – the proverbial trees.  IFTF’s research helpfully illuminates the perspectives of various groups of workers across the on-demand economy.

Charting the Way Forward

In December 2015, we hosted a symposium on the Future of Work that focused on exactly the trend that Katz’s and Krueger’s research highlights − the broad migration of longer-term employment relationships to more attenuated, shorter-term work arrangements. We addressed a series of crucial topics including benefit coverage in a changing labor market, training and development for a 21st-century workforce, enforcement of basic labor standards, the future of worker voice as the nature of work changes, and developing better data on emerging trends in order to inform smart policy making.

As we have discussed in related posts on this blog, we continue to move the ball forward in each of these areas, from our work on portable benefits to the forthcoming Contingent Worker Survey.

Along the way, we are fortunate to have the benefit of insights from thought leaders like Professors Katz and Krueger and the team at IFTF. Whether it’s understanding macro trends or getting a better sense of how individual workers from many different backgrounds interact with the on-demand economy, their work contributes to smart, data-driven policymaking.

Sharon Block is the principal deputy assistant secretary for policy at the Department of Labor.

Stock image credit: Helloquence via Unsplash

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This is a dangerous trend that in the end harms workers. It sounds very much like the "Independent Contractor Model". This model is crippling businesses that follow the rules. In effect businesses that are moving towards the "Independent Contractor Model" are requiring workers to become independent contractors so they can avoid the costs of worker's compensation, unemployment insurance, social security, and payroll taxes (FICA). With employees coming in as independent contractors the cost of doing business is reduced. The problem is now those workers are not protected as they once were if they are injured on the job. They no longer are having unemployment insurance contributions made on their behalf and are unable to apply for unemployment insurance when laid off. They are not paying into social security. They are losing out in many ways. The real problem is now legitimate businesses can no longer compete against businesses that are using the independent contractor model in bidding contracts. Thank goodness there is a growing awareness of this problem. Most states are taking a hard look and asking the question, are these workers truly independent contractors or are they employees? Many states are introducing legislation and creating a "Test" to identify those businesses that are truly using independent contractors versus just escaping the responsibilities required of a business hiring employees. in my opinion, this trend has to stop. It is very harmful to the employee and leaves many workers without protections that legitimate businesses factor in as part of doing business.

Oh good grief. I've built four businesses over the course of 32 years. The term "independent contractor" has been in existence for the entire time period. Yes, it refers to entrepreneurs, business owners, as it should. If you choose to live this life, you choose also the benefits and drawbacks that come with it. If you think like an employee and cannot bear a life of relying on your wits and your ability to manage your own financial security, then by all means be an employee as you wil fail in this world. So tread carefully when you hear the term independent contractor or freelancer. We're all in business -- and yep, no unemployment, no pay when sick, no paid holidays, no maternity leave. That's the job of the business owner who dared to create the business after all --- oh, oops, I remember...the federal government created it. Good grief.

Thumbs Up -Thank You!

The coming years will see a lot of shifting from the traditional office going employees to people working on their conveniences and time schedule. The emergence of freelancers and entrepreneurs is increasing day by day and is going to grow exponentially over the years. Due to no geographical limitation people often prefer to be wherever they want and work online and get paid online. This trend has lead to more and more people opting for either work-from-home or are leaving their jobs to start a business online.

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