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By MoneyTips
October 29, 2015
Ride Share Companies
Uber and Lyft cars are restricted to drop off only at LAX. Despite promises by Mayor Eric Garcetti in April that pick ups would be allowed by Summer, drivers are still waiting for the go-ahead.
Robert Gauthier—LA Times via Getty Images

The explosion of on-demand sharing services through smartphone apps like Uber has produced talk of the new “gig economy,” where people increasingly work as self-employed independent contractors. That concept may be dashed by a lawsuit brought against Uber, charging that their workers are actually employees and not independent contractors. In the meantime, there is significant argument as to whether the new gig economy exists at all, or if it is just overhyped reporting on typical conditions.

The Wall Street Journal posited that “Proof of a Gig Economy Revolution Is Hard to Find,” citing Labor Department statistics showing that the percentage of Americans classified as self-employed and unincorporated has been on a steady decline since 1995. Approximately 6.5% of Americans are self-employed, as compared to 8.5% in 1995.

It is possible that people could be dabbling in the gig economy as a side job, but the number of Americans holding down multiple jobs has also been decreasing steadily. Neither self-employment nor multiple-job numbers indicate any sort of an upward trend. If the gig economy exists, it has not shown up yet in Labor Department Statistics.

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Other estimates include the Government Accounting Office (GAO) tally of a contingent workforce including on-call and temporary workers. The GAO determined this contingent workforce is approximately 8% of the total, but without a frame of reference, it is hard to call that evidence of an increasing gig economy.

According to Forbes, one of the conclusions of the GAO report may hold the real answer: depending on the exact definitions used, the contingent workforce could be assumed to be anywhere between 5% and 30%. Economists Larry Katz of Harvard and Alan Krueger of Princeton found fuzzy definitions in interviewing those in the gig economy, noting that a majority of those who have a regular job in addition to gig employment do not consider the gig employment as a “regular job” and thus do not report having multiple jobs in standard government surveys.

Katz and Krueger argue that there is evidence that the gig economy is expanding, primarily in tax information. The share of workers receiving 1099 forms and filing Schedule C forms, the necessary evils of self-employment, is on the increase even though the standard self-employment measures from the Labor Department are down. This backs up the premise of a significant unreported slice of the gig economy.

Economic Modeling Specialists International (EMSI) compiled data from the Census Bureau and Bureau of Economic Analysis (BEA) and produced charts showing a decline in the number of traditional 9-to-5 full-time employees and an increase in the number of independent contractors, based on the ability to receive less than full wages and benefits in return for job flexibility. Definitions and reporting criteria may be the reason for the divergence from Labor Department values.

So is there a new gig economy revolution, or are we just slapping a new name on an old situation? The gig economy may be based more on perception, such as the staggering market valuation of companies like Uber, compared to their actual effect on employment. It is also possible that the gig economy has not yet made it to standard Labor Department data, either through natural time lags or underreporting.

Either way, it seems likely that opportunities for a gig economy revolution are increasing, but it is too early to say that the revolution has arrived. Let’s see what happens after a year or two of on-demand company expansions, legal challenges, and the response of an economy mired in slow growth and desperate for an increase in full-time jobs.

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