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Gig economy: Contract work on the rise

Ross Norton //April 2, 2018//

Gig economy: Contract work on the rise

Ross Norton //April 2, 2018//

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The predictions were dire. The economy was tanking in 2008 and struggling in the months and years that followed, and word was, traditional jobs were on the way out.

Employers and laid off workers alike were turning to staffing agencies for short-term solutions to their needs. Employers needed folks to get the job done, but the unsteady economy made them reluctant to invest in a long-term hire. And laid off workers needed income, even if it came without benefits.

The fear was that it would become the new way of life for American workers. Employment in the future would be different. There would be no careers of 40-hour weeks and a benefits package.

Although those fears have not played out yet, a study published in 2016 by financial software company Intuit predicts that 40% of American workers would be independent contractors by 2020.

That’s not necessarily something to fear, though, says Clemson University assistant professor of economics Aspen Gorry, because although many people seek temporary work as a stepping stone to full-time employment, others choose to be part of the “gig economy” for their own reasons. In fact, it already comprises 34% of the economy.

There is a shift to a larger number of workers being self-employed or somehow having a nonstandard work arrangement, Gorry said, but that doesn’t mean they can’t find traditional full-time employment. In fact, some of them do. The Labor Department doesn’t distinguish among someone who is self-employed as a full-time plumber, for example, and someone who may drive for Uber after knocking off work for the day, and someone working for a temporary staffing agency until something else comes along. Or, for that matter, someone who enjoys working for staffing agencies because an occasional change of scenery is desirable. All are part of the gig economy, but some are making a living at it and others are simply picking up some extra money.

Some people may choose to give up the relative security of a traditional job for the flexibility and freedom of contract work.

“We know gig work is growing … but we don’t know to what extent it’s extra or a sole income job,” Gorry said. “That’s the hard thing to get at in the data.”

The government did conduct a survey in 2017 that will bring some clarity to that question, but the results have not yet been released.  

“Some of that shift is happening, but it is difficult to measure,” Gorry said. “There is some evidence from tax filings that more workers have such income, but it isn’t clear if that is just part time work or a growing share of overall income.”

Gorry said notions that contract workers would replace traditional workers was probably overblown as the economy reached its nadir in 2008-09, because these things tend to run in cycles, as the advantage moves back and forth from employer to employee.

In an economic downturn employers like to use staffing agencies because they can save money and also because employers won’t have to go through the grueling task of hiring when hopeful, but then being forced to lay off workers. Employees, for their part, are willing to work for less when jobs are hard to find, but as the economy improves, they start to demand benefits again and employers are willing to pay.

“There is a cyclical component to providing benefits. In downturns firms pause or cut back, but then as the labor market tightens workers demand more,” he said. “Firms respond more in good times by upping benefits packages. My guess is we’re going to continue to see that.”

Gorry said we should be reluctant without more data to say that a growth in the gig economy is good or bad because we don’t know to what extent those employees are receiving a positive tradeoff, such as more flexible working conditions.

The data show that full employment and temp work are not on opposite ends of the teeter-totter. Even though it may seem that temp work rises during times of widespread layoffs, temporary and permanent work tend to rise and fall together, Gorry said.

Temp work fell sharply in 2008-09 and grew steadily stronger in the years that followed, only to level off in recent years, he said.