By Jennifer Van Grove
San Diego Union-Tribune
WWR Article Summary (tl;dr) Jennifer Van Grove of The San Diego Union-Tribune takes a look at how free market forces are fundamentally changing the way we work.
San Diego Union-Tribune
With everything from rides and food to massages available at the push of a smartphone button, it’s easy to assume that independent contractors working on behalf of online platforms, or gig workers as they’re also called, are taking over the American labor force. But such is not the case, yet.
It’s true that the independent workforce is massive and growing. An estimated 20 percent to 30 percent of the working-age population engaged in independent work in the U.S. and EU, or up to 162 million people, according to an October 2016 report from McKinsey Global Institute.
The firm defines this type of work as free agents working jobs that have a high level of control and autonomy, pay by task or assignment, and are short in duration.
But gig work should not be conflated with independent work. It is, rather, a much smaller subset of independent work, with digital platforms serving as intermediaries between workers and jobs.
Most experts also limit gig work to labor-specific jobs, via Uber, Postmates or TaskRabbit, for instance. That means leasing assets or selling wares through sites such as Airbnb and eBay are not included in the definition.
Using this standard, gig workers represented just 0.5 percent of the U.S. working population in 2015, according to esteemed researchers Lawrence Katz, a professor of economics at Harvard, and Alan Krueger, a professor of economics and public affairs at Princeton.
And even when including the broader spectrum of digital marketplaces such as Etsy and VRBO, roughly 4 percent of the working-age population in the U.S. and the EU has used them to generate income, according to McKinsey. That equates to just 15 percent of the independent workforce using these online platforms to make money.
“I found that surprising,” said Susan Lund, a McKinsey partner who co-authored the report. “I was struck by how only 15 percent (of independent workers) had used a digital platform … but I do think digital platforms are going to grow quite substantially.”
These types of jobs, though newly facilitated through technology companies, aren’t wholly dissimilar from the jobs of a simpler time. Until the Industrial Revolution, much of the labor force was independent, with people working as farmers and artisans.
“This is nothing new,” Lund said. It wasn’t until the rise of manufacturing did the notion of shift-based work become the new normal in America. “Now (the 9-to-5) is culturally enshrined as to what a job is.”
But even with the advent of wage-based work and structured employer-employee relationships in the 19th century, unskilled workers had little job security, working conditions were poor and people were often exploited.
During the 20th century, however, what some labor experts refer to as a workforce “social compact” developed over time between employers and employees in the U.S., meaning changes to labor and employment laws, starting with workers’ compensation, ensured that employees who gave over control of their work lives were guaranteed certain benefits and protections.
And, from World War II until 1980, America’s labor market reached a mature stage where people could stay at the same job for their entire career, employers were generous with benefits and wage growth was real.
“That period was an anomaly in American history,” said Seth Harris, a former deputy U.S. secretary of labor who now has his own law practice centered around public policy and labor laws. “The world today is very different than what was in middle 1970s and public policy has not kept up.”
Globalization and technology have been the primary driving forces behind the changes to the labor system, with competition putting downward pressure on wages and benefits, Harris said. The American social compact is driven through private enterprises and therefore is also susceptible to competition, with labor laws only holding up the bottom-floor of employee benefits, he added.
Those same, base-level benefits aren’t applicable to independent contractors, making them attractive to corporations looking to cut costs in favor of profits.
“If you’re Uber and you’ve got almost 500,000 drivers who are outside the organization … you can treat them however you think is right and they can either accept it or not,” Harris said. The same holds true for Microsoft, he added, which might opt to hire a cheaper temp worker where it once would have employed someone full-time.
In other words, free market forces, and not the Ubers and Lyfts of the world, are fundamentally changing the way we work.
As a result, we’re seeing the rise of what’s called alternative work arrangements, with gig employment currently a small piece of the bigger pie.
Alternative workers are considered independent contractors, temporary agency employees, on-call workers and contract workers. These jobs accounted for more nearly 16 percent of the U.S. labor market in 2015, according to the Katz and Krueger report, which was designed to emulate the Bureau of Labor Statistics’ Contingent Worker Survey, last conducted in 2005.
“A striking implication of these estimates is that all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements,” the pair wrote.
Gig work seems poised to accelerate the trend, as many of the jobs created by the platforms never existed before. Whereas grocery shopping was always an errand one had to complete for themselves, now they can outsource the chore to an Instacart gopher. The same goes for package delivery, which replaces the trip to the mall, and an Uber ride, which is often a substitute for simply driving yourself.
“It’s almost like when women entered the workplace in large numbers in the ’70s and ’80s and households started to pay for things they used to do for free,” McKinsey’s Lund said.
The net effect is that more people are paying someone else to do something they used do themselves, and that could have a positive impact on labor productivity, she said. There are caveats, of course.
“What we need to monitor and watch out for is, what’s the quality of jobs being created?” Lund added. “Right now, the jury’s still out … it’s not correct to assume that these jobs will be low-paid, dead-end jobs.”
McKinsey’s report highlights that, in the U.S., 72 percent of independent workers are participating in alternative work arrangements because they want to, not because they have to. While the statistic is not applicable to gig workers specifically, it does suggest that alternative work is here to stay.
And, according to the same study, there are 87 million more people in the U.S. and EU who would like to work primarily as independent workers if they could pursue their preferred working style.
That means the notion of the 9-to-5 job could disappear from our expectation of work just as quickly as it arrived.
___
ABOUT THE WRITER
Jennifer Van Grove covers e-commerce and digital lifestyle for The San Diego Union Tribune.
