The ‘gig economy’ – revolutionising the world of work, or the latest storm in a teacup?

Published on Jobs, Skills and Pay

Listen to some parts of the online media and tech press and you hear that the traditional employee job is on its way out. That’s especially true across the pond, but the issue is generating an increasing amount of heat here in the UK too. Whether it’s selling your crafts on Etsy or Ebay, offering taxi services through Uber (perhaps renting out your car on easyCar Club the rest of the time) or accommodating tourists in your spare room via Airbnb (perhaps also commuters in your driveway via JustPark), the world of work appears to be changing. This is the so-called ‘gig economy’ – where incomes are earned or supplemented by trading individual goods and services online.

But turn to official datasets and evidence for this revolution is hard to find. In both the US and the UK, the share of workers with permanent jobs hasn’t changed much in recent decades, and nor has multiple job holding. The share of workers who are self-employed is actually falling in the US. While it had been rising quite rapidly in the UK, it has plateaued in the past year.

Dig deeper into the data and the gig economy remains elusive. Freelancers – the most likely representatives of this brave new labour market – represent barely 2 per cent of the workforce, a figure that hasn’t changed much in 15 years. There has been far stronger growth among those who ‘work for themselves’ but it’s not clear whether this really captures the new economic model rather than traditional forms of self-employment.

Perhaps gig working is something people explore on the side of traditional employment rather than as a main income? Official data doesn’t back this up either – deriving a second income from self-employment is done by a very small minority of workers.

gig economy

Maybe there are signs of the gig economy in the jobs self-employed people are doing? Here, the picture is mixed – the three biggest growth sectors for self-employed workers since 2009 have been hairdressing, cleaning and management consultancy. Granted, these services could be traded in the gig economy, but they’re also jobs with a history of growing self-employment incidence that pre-dates the birth of the online marketplaces we’re talking about. The next biggest riser is ‘renting and operating real estate’, which – promisingly – could reflect people offering their homes and driveways online. On the other hand, taxi operation is the biggest faller, perhaps quelling the suggestion that Uber is taking over.

So there are relatively limited signs for the rise of the gig economy in the official data. However, let’s not conclude the naysayers are right just yet, principally for two reasons.

First, it’s possible that we’re not asking the right questions. Long-standing government surveys have never been good at measuring emerging developments in the labour market. The recent furore around the true extent of zero hours contracts is a case in point. This is especially true given the potential confusion around one’s employment status in the gig economy. For example, earning money renting out the property you live in would technically be classified as ‘property income’ rather than self-employment; and the rules around what kinds of online goods trading count as self-employed work are complex and not well understood.

Limiting our questioning to ‘work’ and not probing for these new ways of earning income means our surveys may miss some of what’s going on. Early evidence from the US has indicated this this might be the case. Similarly, a recent UK survey (by software provider Intuit) probed specifically for gig activities and estimated that 6 per cent of Brits are creating or earning income in the sharing economy – a somewhat higher proportion than the official data suggests.

The second reason not to dismiss the gig concept out of hand is that the revolution may be in its infancy, with new forces in the UK labour market potentially quickening its progress in the coming years. For instance, some have suggested that the significant rise in the legal wage floor associated with the new ‘national living wage’ might drive an increase in self-employment as the costs of hiring employees rise. The significant losses that many tax credit recipients are facing next April may also lead to them looking for ways to top up their income outside of their existing job.

The blurring of the lines around work, jobs, hobbies and income sources that the gig economy claims to have built itself upon makes the task of measuring it difficult. But with evidence that bespoke surveys are uncovering change, and with potential headwinds pointing towards further growth in coming years, it’s time for official agencies to have a go.

Measuring the gig economy accurately matters because understanding how people combine jobs, work and other activities to create income is crucial to getting a clear picture on living standards. And this gets to the key question of whether the gig economy represents a positive or negative development for workers.

Choice is usually a good thing in life, and the lowering of barriers provided by today’s technology might be viewed as democratising entrepreneurial opportunity. But the fragmentation associated with gig economy working may bring with it new forms of insecurity. At the very least, it’s likely to require new ways of looking at traditional policy tools around employment (and consumer) rights, income smoothing and pensions.  If we want to properly understand this balance between freedom and security and the space for policy change, a vital first step is to find ways of better capturing who the giggers are.

This post originally appeared on The Economist Free Exchange blog.