How Contract Work Growth Outpaces Silicon Valley-Style Gig Jobs

All the attention has gone to the gig jobs at Uber, Lyft and the other avatars of the on-demand economy (seems like just last week it was romantically labelled the 'sharing' economy). But even as reality has intruded - turnover is huge and unsustainable due to the inability of anyone who needs sleep and food to actually earn a living at these tasks - the data shows, as the following article explains - that the real growth in alternative arrangements has come in replacing full-time employees with contractors compensated at a lower level for the same work.

The question is to what degree the economy benefits from such arrangements which may optimize returns for a shrinking set of private shareholders, while the consumer class - which fueled much of the growth of the developed world for the past century and a half  - contracts. And as the data shows, entertainment and media, computer and math - and those who have college degrees - are among those most impacted by this trend. JL

Anna Louie Sussman and Josh Zumbrun report in the Wall Street Journal:

Since 2005, workers in alternative arrangements climbed by more than half, rising to 16% of the workforce from 10% a decade ago. The gig economy employs only 600,000, less than 0.5% of the workforce. Workers in alternative(s) find erratic schedules, spotty earnings and few benefits such as health insurance, Social Security or a retirement plan. Some raise questions about worker safety, employer liability and consumer protections.
Uber drivers aren’t the only “gig” workers rattling the U.S. economy. Older workers, especially women, increasingly are filling in as contractors across a range of traditional industries, from highway inspectors to health aides.
As companies look to shed noncore tasks and government budgets come under strain, an expanding share of the workforce has come untethered from stable employment and its attendant benefits and job protections.
The explosive growth of Silicon Valley companies such as Uber Technologies Inc., where on-demand drivers summoned by an app set their own hours and are paid by the ride instead of an hourly wage, has shined a bright light on the so-called gig economy. But new research shows this shift away from steady employment has taken place largely in the shadows.

 The rise has happened even across industries including health care and education, manufacturing and public administration, with professions that have traditionally offered stable employment.
Since 2005, the number of workers in alternative arrangements has climbed by more than half, rising to nearly 16% of the workforce from 10% a decade ago, according to forthcoming research by Alan Krueger of Princeton University and Lawrence Katz of Harvard University. Meanwhile, the on-demand workforce or gig economy employs only about 600,000 people, or less than 0.5% of the workforce, the research finds.
Worries about the gig economy have “distracted us from this larger change that’s had more fundamental and pervasive effects,” said David Weil, administrator of the Labor Department’s Wage and Hour Division, which enforces employment standards.

The Labor Department breaks down the four main types of alternative work arrangements into independent contractors, on-call workers, temp workers and workers employed by contract firms, but it hasn’t updated its count of such workers since 2005.
Messrs. Krueger and Katz hired Rand Corp. to replicate the survey, sampling roughly 4,000 people. The findings show how alternative work has spread across industries and occupations—including those not associated with the gig economy.
For example, they estimate the share of workers in alternative arrangements has more than doubled to 11% in manufacturing and to 16% in health and education. It has quintupled, to 10%, in public administration.
Workers in these alternative arrangements often find themselves with erratic schedules, spotty earnings and few benefits such as health insurance, Social Security or a retirement plan. Some arrangements, like subcontracting or independent contract work, raise questions about worker safety, employer liability and consumer protections.
Mr. Krueger said the sharp rise in these kinds of jobs highlight the need for measures to “help people smooth their incomes from up and down periods,” adding that it also left workers on the hook for their own social safety net.
That is often the case for home health-care aides like Nena Ruiz, 72 years old, who has worked as a caregiver since 2003, sometimes as a full-time employee and sometimes as an independent contractor. For the past two years, she has been working on-call, filling in for other caregivers when they call in sick or go home for a vacation. She would like to find more regular work, but without any savings she can’t afford the $60 to $80 to do fingerprinting and a tuberculosis test that are required in applying to a new agency.

Alternative work has evolved from industries like construction and transportation to health and education. A decade ago, the phenomenon was more common for male workers, about 12% of whom were in alternative arrangements compared to 8% of women. That gender pattern has reversed, Messrs. Krueger and Katz found. Today, about 17% of women and 15% of men hold such jobs.
Nor have white-collar industries been immune from the shift. The number of workers in alternative arrangements, for example, in the legal industry has nearly doubled over the past decade. The business process outsourcing industry—essentially white-collar contracting firms—had $136 billion in revenue last year and has been growing 4% a year since 2000, according to the industry research firm IBISWorld.
Companies seeking to reduce in-house operations have many options. Large staffing agencies like Adecco SA, ManpowerGroup Inc. and Kelly Services Inc. can place workers into a growing range of roles—including higher education, government and health care.
The steep jump in workers in alternative employment complicates the rosy picture of the labor market highlighted by officials at the Federal Reserve and in the Obama administration. While the economy has added nearly 14 million jobs since 2010, more than recovering the number of jobs lost during the recession, the new data suggests a growing slice of the workforce has only tentative ties to a main employer.
The rise of alternative work has many causes. Some workers, such as lawyers, doctors or professionals near retirement, may prefer the flexibility of self-employed contracting.
In other cases, companies contract out to shed benefits they pay to full-time staff, to focus on core competencies, or to distance themselves from liability costs.
Last November, Tori Johnson was hired through a staffing company to work the overnight shift as a production technician at Nissan’s auto plant in Canton, Miss. She hopes to get hired by Nissan at the end of her six-month contract, since the unionized workers doing the same job can make nearly twice as much as the $13.75 an hour she gets as a temp.
But she isn’t optimistic her status will change, since she works alongside people who have been “permatemps” for two or three years.
“I’m on my feet the same amount of hours, and I’m making $13 an hour,” said Ms. Johnson, 40.
A Nissan spokesman said the company offers wages “well above the average manufacturing wage in areas where it has U.S. operations” and has “clear career progression” for its contract workers.
Even federal, state and local government increasingly use contractors throughout their ranks to carry out administrative, management and information technology tasks.
A Congressional Budget Office report last year said spending for these government services had nearly doubled between 2000 and 2012, after adjusting for inflation, accounting for about $260 billion of spending. The contracts were so widespread and complex that CBO said it was unable to quantify how many people were in this contracted workforce.
Supporters of these outsourcing practices such as Jeffrey Eisenach, a business consultant and economist with the American Enterprise Institute, a conservative think tank, see them as “ways to use labor more efficiently and to hire people when you need them.”
However, opponents like Rebecca Smith of the National Employment Law Project, which advocates for low-wage workers, see the practice as a “pattern where companies that call the shots distance themselves from the people doing the work at the bottom.”
Mr. Weil of the Labor Department dubbed this economywide phenomenon the “fissured workforce,” the title of a 2014 book he wrote on the topic. Messrs. Krueger and Katz’s new research provides the broadest confirmation to date that these trends are growing.
His hunch for the future? The economic, technological and organizational forces behind this fissuring “are likely to be stronger than ever.”