Gigs — temporary jobs typically without benefits but with a great deal of flexibility — are getting a lot of media attention even though experts are divided on (a) what they are, and (b) whether their role in the actual economy is expanding.
“You can see the gig economy everywhere but in the statistics,” wrote New York Times economics and business writer Ben Casselman. The Bureau of Labor Statistics released its first in-depth look at nontraditional work since 2005, and concluded the old-fashioned job remains king.
“Roughly 10 percent of American workers in 2017 were employed in some form of what the government calls ‘alternative work arrangements,’” says Casselman. But he points out, that 10 percent doesn’t illustrate a boom in gig work; in fact, it represents a slight decline from 2005, when about 11 percent of workers fell into those categories.
Some of the discrepancy is in confusing what constitutes “gig work.” The Bureau of Labor Statistics groups independent contractors, on-call workers, temporary help agency workers, and workers provided by contract firms in their “alternative work arrangements” category, which they separate from contingent workers. But under most definitions, contingent workers include freelancers, consultants, independent contractors, and part-time employees. “Gigs” could reasonably manifest as one of both of these categories.
Instead of splitting hairs on the different types of work that qualify as gig roles, I like this McKinsey breakdown, which divides what they call “independent workers” themselves into four categories:
- Free agents, who actively choose independent work and derive their primary income from it, make up 30 percent of independent workers
- Casual earners, who use independent work for supplemental income and do so by choice, make up 40 percent
- “Reluctants" make their primary living from independent work but would prefer traditional jobs. They account for 14 percent of independent workers
- The financially strapped do supplemental independent work out of necessity and account for 16 percent
These last two categories are important, as they illustrate that even if there is an increase in gig workers, it may be because – due to health, personal, financial or other reasons – those workers are not able to secure or hold a traditional job. If they do have a traditional job, it may not be enough to support the worker and his or her family. When workers settle for gig roles instead of the traditional roles they want, they skew the employment landscape. Sure, employment rates show that only 4 percent of those actively looking are unemployed. But what about those who are employed and actively looking, what of those who are employed and unable to make ends meet, what about those who are employed and unhappy.
Gig economy news coverage is broken, as well. Lifestyle publications and career advice columnists focus on the 70 percent, those who want to work independently. Coverage glorifies the idea of “side hustles” as the ultimate show of entrepreneurship, of pursuing one’s purpose.
“The traditional way of working is dead,” writes one Forbes columnist. “Freelancing, self-employment, gig-working and portfolio careers” are the new normal he argues. Hustling is the new boot-strapping.
Despite this romanticizing of gig work as young and entrepreneurial, gig workers are not confined to one or even two generations. Even the reasoning for seeking gig work is pretty generation-agnostic: Americans just want to right-size their financial lives.
I recently explored the volatility threatening America’s “new middle class”: People have less consistent income, limited access to tools like credit that may make assets more elastic, and more responsibility to pay for healthcare, emergencies, education, and retirement.
Side hustles aren’t about monetizing hobbies. They’re evidence of Americans’ effort to balance their financial scales, to smooth that volatility. Per CNMC research, half of non-prime Americans have an income that fluctuates month to month. This can make budgeting, planning and long-term saving far more difficult.
This side work may also be used to supplement that saving to achieve what are painted as standard financial milestones, but are increasingly unattainable. These are human stories.
Like the story of Gary, who turned to Uber when the small business that he worked for lost their biggest account and closed down. Sharla cobbles together a living from two jobs; she would never claim the lower-paying, but higher-flexibility second job as her career, but it helps her fill in the gaps when work from the proxy company turns slow. Or, meet Stan and Brent: They left college early when they were given a great opportunity at full-time employment. That fell apart. Now, they are driving for Lyft and Uber and consoling themselves by going camping. I’ve changed the names, but these stories are very much real. These aren’t hoody-wearing,“entrepreneurial bootstrappers.” They’re just hardworking Americans trying to make an honest living.
In a past blog, I wrote about Federal Reserve data that found that about 40 percent of adults said that if faced with a $400 unexpected expense, they would either not be able to pay it or would do so by selling something or borrowing money. We’ve measured a similar statistic, and found that matters are significantly bleaker the non-prime: 69 percent could not cover an urgent $500 expense with their savings.
Without the means to cover $500, it seems safe to assume that many non-prime won’t be able to retire – or may work gigs to help supplement social security. “We’re seeing people carrying much more debt than previous generations into retirement,” said Ron Rhoades, professor of finance at Western Kentucky University, quoted in a Money article. And we found that Baby Boomers – particularly those with credit scores below 700 – were the most likely generation to hold more than one job.
In 2016, Harvard Business Review published a piece titled “Who Wins in the Gig Economy, And Who Loses.” Author Diane Mulcahy also published a book, aptly titled The Gig Economy: The Complete Guide to Getting Better Work, Taking More Time Off, and Financing the Life you Want. No surprise here: the HBR article was very pro-gig work, focusing on the freedom for the worker.
Entrepreneurial workers win, she says. “The gig economy rewards hustle. Workers entrenched in a passive, complacent employee mindset that relies on their employer to provide a sense of stability, career progression, and financial security will struggle.”
This assessment is not wrong, per se, but it’s a bit short-sighted. Gig work may be a positive thing for those who want the available work, and who can weather volatile income streams and manage the many more financial responsibilities – complicated taxes, self-funding healthcare and retirement, etc. – that come with this type of work.
But remember that 30 percent of independent workers are working in the gig economy even though they crave the “sense of stability” and “financial security” of a traditional job. The popularity of the gig economy is not necessarily a sign of the country’s renewed sense of entrepreneurship. It’s a symptom, and worse still a cause, of the country’s fragile economic state.