The gig economy is bigger than US government data makes it look

A new kind of “going to the office.”
A new kind of “going to the office.”
Image: REUTERS/Steven Saphore
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It’s a longstanding challenge for business leaders: how can you make workforce decisions for the future when there are so many variables? For many, one answer is to pay close attention to studies and trends that indicate where we might be going, so they can make the most informed decisions. But when those studies are incomplete, like the latest survey from the Bureau of Labor Statistics on the size of the gig economy, business leaders can end up making the wrong moves—and put their companies at risk.

The study, released last month by the Department of Labor, found that people working in “alternative work arrangements”—a category that includes Uber drivers, freelance graphic designers, and people who find work through temp agencies—accounted for 10.1 percent of the workforce in 2017. That’s down from 10.7% in 2005, the last time the BLS conducted the survey.

Taken at face value, those numbers suggest people in alternative work arrangements, are not disrupting the workforce—and therefore, businesses don’t have to pay much attention. But while the BLS survey gives us insight into some types of work arrangements, it’s not a complete picture of today’s gig economy. That means leaders could be under the false impression that freelancers, contract workers and other types of alternative workers aren’t a key part of the labor pool.

The BLS survey doesn’t include “moonlighters”—those who do gig or freelance work in addition to holding full-time jobs—or “diversified workers,” people with multiple sources of income from a mix of traditional employers and freelance work, like an adjunct professor who also works 20 hours a week as a receptionist for additional income.

Factor in those types of workers, and the number of people in the gig economy is much higher. Recent data released by the Federal Reserve found that nearly a third of adults engaged in some form of gig work, while a 2017 Upwork/Freelancers Union study found that 36% of the US workforce is freelancing. Meanwhile, the number of 1099-MISCs, which is used to record payments to individuals who are not employees, has jumped about 22% since 2000, indicating a rise in the number of people engaging in freelance work. In comparison, the number of W2s—typically used in traditional jobs, although some temp and contract workers also file W2s—fell during the same period by around 3.5 percent.

The real issue isn’t how you define or count alternative workers, though. It’s about making sure you’re prepared to compete for talent in a workforce that is indisputably changing, with more diverse types of workers than ever before. Freelancers give companies flexibility, including the ability to scale their workforce to meet demands and deadlines, while protecting full-time workers from cutbacks or layoffs during leaner times. But finding the right mix of full-time staff, alternative workers—and soon, automated workers—takes careful thought and planning.

We’ve seen non-traditional work rise across every industry, posing new challenges for just about every type of business, from managing access to sensitive information to competing for freelancers with the most in-demand skills. These types of workers need to be factored into your workforce plan so you can better address those risks, as well as capture opportunities to tap into hot talent, diversify your workforce, and save money.

There’s no question that the gig economy is changing the way we work. In today’s complex business environment, it’s not enough to focus only on your own staff. Contractors and freelancers who supplement your workforce need to be a key factor as well—no matter what the numbers say.

Mike Boro is a partner at PwC.