One of the arguments made in favor of establishing a raft of new regulations on alternative work arrangements in previous years was that a weak recovery and lackluster labor market was funneling people looking for work into these arrangements.
Since those first early arguments two developments have occurred that weaken the case for a rush to regulate this sphere. Firstly, what initially seemed to be the first wave of an ever-growing number of workers in the online sharing or “gig” economy now looks more similar to another form of alternative work arrangements, not a harbinger of the type of work all people will be doing.
In the new Contingent Worker Supplement released by the Bureau of Labor Statistics (BLS) this week, the broadest measure of independent contractors found there were 10.6 million independent contractors, representing 6.9 percent of total employment, smaller than the 7.4 percent in 2005. This survey was conducted in May, while previous iterations in 2005 and 1995 were conducted in February, so that might affect the direct comparability of these new findings to past surveys. In addition, the survey only counts people who were in one of these arrangements as their primary job in the previous week, so does not capture people using alternative work arrangements to supplement their traditional job.
Even so, there has clearly not been an inexorable increase in contingent work or independent contractors that some predicted.
Just as importantly, the labor market today is much stronger than it was in the early years of the recovery. In May the unemployment rate declined to 3.8 percent, the lowest level since April 2000. Unemployment rates have declined for all levels of educational attainment, and some employers are relaxing their criteria and increasing compensation in the search for workers.
The number of job openings recently reached 6.7 million, the highest number on record since the series started in December 2000. There are now more job openings than there are unemployed people in the country.
The labor market is the strongest it has been in years, and most people who want to find a full-time job are able to do so. The fears that full-time work would be gradually displaced by people cobbling together a series of alternative work arrangements appear so far to have been unfounded.
Allowing for more options and types of work arrangements give people more options to choose from, and provides space for new types of activities. Until they fully develop, it is exceedingly difficult to anticipate which ones might eventually be beneficial, and imposing substantial regulations in this space would choke of those opportunities in their nascent stages.
For example, new technologies and companies might offer opportunities that could not be anticipated. As a recent article in The Atlantic noted, many young people are earning supplemental income by locating and charging dockless scooters, which has the positive spillover effect of increasing the usefulness of the scooters to riders and reducing clutter on city sidewalks. Arrangements such as this may not fundamentally alter the face of the labor market, but regulations should not preclude the benefits they already can provide, and their potential down the line.
Part of the problem, recognized by the BLS, is that we still do not know that much about the role of mobile apps and similar platforms in providing these types of arrangements. The Federal Reserve’s “Report on the Economic Well-Being of U.S. Households in 2017” report used the Survey of Household Economics and Decisionmaking and found that online activities were performed by 16 percent of adults, compared to 14 percent in offline services and 9 percent in offline sales. To better understand the topic, BLS added four new questions to this year’s survey intended to specifically identify people who found an arrangement through a mobile app or website and were paid through the same platform. This data will be released September 30th, and will provide more valuable insights.
It is also important to understand why and how people are taking part in these alternative work arrangements. The Federal Reserve report found that 39 percent of participants reported supplementing income as their main reason, while 19 percent said it was a hobby or just for fun. Only 16 percent said it was their primary source of income.
The initial fears about a surging “gig” economy where more and more people would fall out of traditional work and be funneled into alternative work arrangements seems misplaced, as do the related calls for massive new labor market regulations to address the perceived related dangers. The substantial improvements in the overall labor market have created a situation with a record number of job openings and the lowest unemployment rate in years. What data that is available indicates that many people in their alternative work arrangements do not rely on them as their main source of income, and enjoy the flexibility and opportunities to earn some money to supplement their traditional job.
More research is needed, and the forthcoming report from the BLS will be a welcome step in that direction. For now policymakers should reconsider those calls for a wave of new labor market regulations designed to address a problem that does not appear to exist.
Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes.
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