Misleading statistics on the freelance economy

The Bureau of Labor Statistics’ recent data on  the “contingent workforce” — what some call the “gig” or “freelance economy” — was greeted with much skepticism. The agency, which hadn’t studied freelance work in more than a decade, maintained that there are fewer part-time and contingent workers today than there were a decade ago.

Other well-regarded surveys have said the opposite — that one in every three workers is now self-employed on a full- or part-time basis today. Moreover, they contend that the “freelance economy” is growing three times faster than the overall workforce. 

Which numbers are accurate? Unfortunately neither — or, perhaps, both. Understanding why gives a glimpse at the complexity of a modern world that’s increasingly built on side hustles.

“There are no definitive numbers,” says Robert McGuire, founder of Nation1099, a website for freelancers. “There are a seemingly large number of studies, but they are not necessarily confirming each other.”

The problem?

To start, the much-awaited government “contingent workforce” numbers didn’t actually measure the gig economy. The Bureau of Labor Statistics, seeking data that would properly compare to past surveys, looked only at contingent workers as they were defined in 1999, when they did the first such survey. That precluded measuring the gig economy as it now functions. Unlike 1999, workers now often cobble together multiple part-time jobs to create a full-time income — or moonlight while holding down another full-time job.

“Anything other than your main job is not tracked at all [in this survey],” said Dori Allard, chief of the labor force statistics division at the Bureau of Labor Statistics. “That’s how the survey was initially done in 1999. We wanted to make sure that the data was comparable.”

The BLS did ask a few new questions aimed at ferreting out some information about the freelance/gig economy, but the results from that portion of the survey will not be released until September.

What’s a gig?

“We did not seek to measure the gig economy,” says Allard.  “We don’t have a definition of gig.”

With that, Allard struck on the real problem.

Every survey that has looked at the gig economy uses a somewhat different definition. Some surveys define the freelance economy solely in employment terms, defining “gigs” as temporary, contract and part-time work. Others add that gig workers are largely independent contractors — essentially self-employed — rather than employees. Most online job platforms that facilitate this economy maintain they are not employers, they are simply go-betweens, providing an easy way for self-employed individuals to find buyers for their services. McGuire estimates that about 11% of the U.S. population is self-employed full-time. A larger group turn to freelance gigs to supplement their wage income.

But there’s more….

But that doesn’t pull in the broader realm of money-making activities that are also often included in some statistics on the gig economy, such as renting out a spare room through Airbnb or selling products on websites such as Etsy and eBay. When you include people who have engaged in these and similar activities in the past year, the gig economy grows to about one third of the working population. This broader gig economy is growing at such a blistering pace that it’s predicted to sweep up the majority of Americans within a decade. However, this broad definition pulls in a large number of people whose connection to the gig economy is sporadic and potentially inconsequential.  

Does it matter?

The reason it’s important to nail down and understand these numbers is practical. If the nature of the workforce is changing, policymakers need to decide whether current laws and safety nets are adequate to address this workforce shift.

The U.S., for example, imposes minimum wage laws on employers and bars wage theft. But those laws do not appear to apply to “self-employed” freelance workers, who are often presented with work that pays as little as a few pennies per hour. Worse, online platforms that allow (or require) workers to accumulate earnings before they can cash out, sometimes boot freelancers from their platforms without notice or appeal, taking the worker’s accumulated wages with them. Employees could call that wage theft and report it to the Department of Labor. Gig economy platforms shrug at complaints and note that the possibility of losing accumulated wages is disclosed in the sites’ terms and conditions.”

Moreover, employers must pay into unemployment compensation and worker’s compensation insurance funds, which respectively cover employees who are fired or injured on the job. When you are self-employed, these protections are not available.

If the bulk of citizens are self-employed, it also begs rethinking other systems.

For instance, the U.S. court system relies on jurors who are paid only token amounts — typically between $5 and $50 per day — to serve. These token payments, largely aimed at recovering juror costs for parking and gas, were made possible by employers, who would often subsidize the system by continuing to pay salaries of their workers on jury duty.

Breaking the employer/employee connection means that workers must use their own savings to subsidize the courts.  When forced to choose between their “civic duty” to serve on a lengthy trial and the ability to pay rent, most are likely to choose their own roof. That could make it increasingly difficult to guarantee a trial by a jury of your peers.

“If this workforce is growing many times faster than the workforce as a whole, that’s a structural change,” says McGuire. “If we [as a nation] are operating without understanding that, it could cause us to make some really bad decisions.”