Study Identifies Factors Behind Gig Economy’s Flat Growth

Data released by the Bureau of Labor Statistics in June showed that despite the “gig economy’s” high profile, there has been no growth in the share of gig workers in the U.S. since the mid-90s. Now, The Conference Board has released a report seeking to explain that growth in the sector has been stagnant, highlighting factors like a tighter labor market, slower rate of outsourcing, operational challenges at companies and U.S. public policies encouraging “traditional” work.

The Conference Board defines the gig economy as workers in nontraditional working arrangements, including independent contractors, temp workers and on-site workers employed by outsourcing companies. As a sector, its often associated with several online labor platforms, which quickly link individuals and businesses with independent contractors who can provide services. Outside of the transportation sector—Uber and Lyft—online labor platforms, however, represent a small share of the labor market.

“The perception about rapid growth of the nontraditional workforce is not supported by hard data,” says Gad Levanon, chief economist of North America at The Conference Board. “The cause of this hype was the emergence of online labor platforms. However, other than the transportation sector, these platforms represent a tiny share of income and total hours worked in the US economy. This may change in the future as more employers unlock the potential of these platforms, including their ability to provide businesses with additional workers for the fast-approaching holiday retail season.”

Looking at causes for the flat growth in the gig economy, The Conference Board found from tax data on self-employed workers that the sector did expand during the Great Recession, as companies had a strong incentive to remove employees from the payroll to cut costs. Today, however, the labor market is much tighter, and many gig economy workers have returned to regular employment.

Another trend identified in the study is a slow-down in outsourcing. In the 1990s, large numbers of jobs were moved from full-time, traditional employees to nontraditional workers outside of companies. This practice has been declining since the 2000s.

The gig economy also presents operational challenges to companies, as many tasks simply do not lend themselves to nontraditional work arrangements. Moreover, The Conference Board notes that while HR oversees the hiring of “regular” employees, Procurement often oversees the spending on nontraditional workers. Given the distinction between the two departments, employing nontraditional workers can pose an operational challenge.

And finally, U.S. public policies encourage “traditional” work. Unlike their counterparts in Europe and elsewhere, workers in the U.S. face greater exposure to financial and health-related risks without a traditional job as less government support incentivizes workers to gravitate more to full-time work rather than nontraditional, gig work.

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