Why Earning Side Income Is Increasingly A Fact Of American Life

The number of people filing taxes who receive forms indicating they are employees has not changed in 20 years.

But the number of people with full time jobs indicating that they also have side jobs has risen significantly.

Behavioral economics suggests they are engaged in 'side hustles' to generate additional income because their compensation has not kept up with inflation, especially the rising costs of essentials like food, health care and housing. JL


Jonathan Rothwell reports in the New York Times:

One-third of people with multiple jobs say they do them out of financial necessity. 48% of those with multiple jobs do it to earn extra money or some other reason. Such jobs are supplementing traditional employment, not replacing it. In 2017, 17% of tax filers indicated receipt of self-employment income, the highest share since 1957.55% of self-employed workers also receive a W2 from an employer, a share not changed since 2000. 92% of tax filers receive W2 income as employees, also steady in recent years.U.S. workers are finding it harder to make ends meet in the face of growing income inequality and rising costs for health care, education and housing.

Even after a long economic expansion, America is still the land of the side hustle.

New evidence suggests that nontraditional work arrangements with multiple income sources are more common — involving around a quarter of workers — and more complex than commonly thought.

About one-third of people with multiple jobs say they do them out of financial necessity. At least two comparable nations, Canada and France, are not experiencing these trends, perhaps because of a stronger social safety net and less inequality.

On the other hand, some legislators and presidential candidates who have taken aim at regulating the so-called gig economy may want to consider another data point: About half of those with multiple jobs do it to earn extra money (48 percent) or for some other reason that suggests it is their preference.

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Because measurements depend on how a job is defined, it’s not easy for policymakers to get a clear portrait of the American work force. The stereotype is a person performing one job for one employer. But that describes only about two-thirds of workers. Increasingly, people are drawing income from self-employment, as independent contractors, freelancers, drivers, among other gigs — on top of what their employer pays them. And many are in multiple jobs, whether as an employee or not.

Altogether in 2017, 17 percent of tax filers submitted a form to the I.R.S. indicating receipt of self-employment income, the highest share since data became available in 1957 and up substantially from 10 percent in 1981.

While these nontraditional relationships raise concerns about job quality and access to benefits, the evidence suggests such jobs are in many cases supplementing traditional employment, not replacing it. Just over half of these self-employed workers (55 percent) also receive a W2 from an employer, a share that has not changed since 2000. The vast majority of tax filers (92 percent) continue to receive W2 income as employees, and that also has held steady in recent years, according to research from I.R.S. economists.The I.R.S. data on the level and trend in self-employment contradicts information from the Bureau of Labor Statistics. The B.L.S. has shown a slight decline in the share of workers who are self-employed and estimates it at now around 10 percent. The discrepancy arises because both the bureau’s Current Population Survey and the Census Bureau’s American Community Survey identify people as self-employed based only on the job in which they spend the most time working.

At Gallup, my colleagues and I decided to go beyond collecting data on primary work experiences and directly ask about multiple jobs and employment relationships. Our Great Jobs Demonstration Survey was based on responses from over 6,000 American workers in the spring of 2019. The data show that 36 percent of workers are not in the traditional one-job-for-one-employer relationship. Eleven percent of all workers are both self-employed and working for an employer, similar to I.R.S. data showing that 10 percent of tax filers fall into that category.

Our Gallup survey puts the number of people holding multiple jobs at 28 percent, well above the B.L.S.’s estimate of 5 percent. That’s because the bureau measures this quite differently than we did. It counts only people who reported working both their jobs in the prior week, and excludes those who are self-employed in multiple jobs. In fact, the bureau defines a job as a definite arrangement for regular work for pay every week or month, so it could count a worker with two irregular gigs as having one job, or none.

The Gallup survey prompted respondents to think about their distinct sources of income and allowed them to judge whether that source was meaningful enough to qualify as a job or not. The resulting estimate was much closer to I.R.S. data than the B.L.S. estimates.

To investigate job quality, the Gallup survey asked workers to rate their “employment situation” on a 0 to 10 scale, where 0 is the worst possible employment situation and 10 is the best. Workers in the traditional one-job employee relationship rate their employment situation only slightly better than all other workers (65 percent give their situation a high rating, from 7 to 10, compared with 59 percent of all other workers).

Self-employed workers with one job rate their employment situation better than those who are employees with one job — with 74 percent providing a high rating. This seems surprising, because the self-employed workers are much more likely to be working only part time and much less likely to have health insurance or retirement benefits through their work. Several explanations are suggested by the data: Compared with workers in traditional relationships, those who are self-employed with one job are much more satisfied with their power to change things they don’t like about the job, and with their control over hours and their sense of purpose. They are also more engaged in their work — in that they more regularly have opportunities to use their strengths and be creative.

The reasons people give for working multiple jobs are strongly related to how they evaluate their employment situation. Those who say they work multiple jobs for some positive reason — they want to earn extra money; they enjoy, love or are interested in what they do; or they see it as a hobby — are generally upbeat about their work. Sixty-four percent rate their job situation a 7 or above, whereas those who work multiple jobs out of necessity view their work less favorably (41 percent rate their job a 7 or above).

Over all, very few — just 2 percent — say they work multiple jobs because they can’t find a full-time job.

These answers shed light on why people work multiple jobs, but it remains unclear why self-employment relationships have expanded over the last four decades. Especially in recent years, technology has played a role, greatly helping customers match up with contractors and making it easier to find an interesting job that leads to extra income.

Yet those technologies are available in other countries, which have not experienced the same trend. In France and Canada, the proportion of people filing government pension taxes indicating that they receive self-employment income is less than half that of the United States — around 6 percent. In Canada, the rate has not meaningfully increased since 2009. In France, the share of people filing self-employment taxes did not change from 1994 to 2009 and seems to have gone up slightly since then (to 6 percent from 5 percent) in response to changes made by the French government to streamline tax filing for the self-employed.

Another possibility is that U.S. workers are finding it harder to make ends meet in the face of growing income inequality and rising costs for health care, education and housing. In Canada and France, health care and postsecondary education are both more affordable and financed by the public sector.

Whatever the reasons for the increase, workers rather than employers seem to be driving the trend in self-employment, since the increase comes from people combining self-employment with traditional employee relationships. Some politicians and places, like California, have sought to curb self-employment, on the theory that employers have created the gig economy in an effort to evade their tax and regulatory obligations. The reality is more complicated.