The gig economy? Or the fissured workplace?

The growth of online apps like Uber has ignited a debate about the “gig economy,” in which people don’t hold regular jobs in traditional workplaces but rather work in some “alternative arrangement.” Research on the gig economy, however, finds that it reaches much deeper into the labor market than most observers realize.

If there were a measure that showed the ratio of hype to actual impact on the U.S. economy, the rise of online “gig economy” companies like Uber would certainly rank quite high on it. Uber and its ilk have been hailed as companies that will usher in a new kind of work that will have a significant impact on the employer-to-employee relationship. But until now, the data haven’t shown that much about the kind of employment we’d see at these firms. And any sign of increased contracting work in the data show that the rise in contracting far precedes the advent of app-based ride sharing companies. New research, however, shows that the online gig economy may have distracted us from the importance of the rise of another major trend in the labor market.

Anna Louie Sussman and Josh Zumbrun of the Wall Street Journal highlight research by economists Larry Katz and Alan Krueger on the changing employment relationships that U.S. workers find themselves in these days. For a period of time, the U.S. Bureau of Labor Statistics conducted the Contingent Worker Survey, which asked workers about the amount of contingent or temporary work that they were doing. Such a survey could tell us more about how much firms contract out labor, but it hasn’t been conducted since 2005. (Fortunately, the Department of Labor plans on bringing the survey back in 2017.)

With some help from the RAND Corporation, though, Katz and Krueger replicated the survey for 2015 and found a significant increase in the amount of non-standard work, or work where a laborer isn’t a direct employee of the firm they work for. According to the two economists, the share of U.S. workers in these “alternative arrangements” grew significantly from 10 percent in 2005 to 16 percent in 2015. The increase was across a wide number of industries such as manufacturing, health and education, and public administration. Online gig economy companies had quite a small impact, however, as they account for less than 0.5 percent of the U.S. labor force. And there’s a pretty good chance that the “online gig labor force” is a synonym for “Uber drivers.”

So if apps aren’t the main driver of the rise in non-standard work, then what’s behind this transformation? Sussman and Zumbrun note that this increase could be the result of the “fissured workplace,” a trend highlighted by David Weil who’s now at the U.S. Department of Labor as the Administrator of the Wage and Hour Division. Weil’s story has less to do with disruptive technology and more with companies outsourcing many jobs that would usually be inside the firm to focus on their “core competencies.”

As part of the fissuring of the workplace, workers and roles that were not at the heart of the firm’s particular strength were shed, and contractor firms were formed to provide these jobs. As many of these contracted-out jobs were lower-paying jobs, this may explain some of the increase in inter-firm inequality as low- and high-wage workers ended up working at different firms.

As such, the term “gig economy” is probably not the best way to describe the actual increases in contingent and alternative work in the U.S. labor market. The Uber driver who can control when they drive by opening and closing an app is not the poster child for this trend. Rather, it seems the trend reaches much further in the U.S. labor market than most observers realize

March 30, 2016


Nick Bunker


Bargaining Power

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