From US to Europe, the face of employment is changing

The number of temp, on-call, contract, and freelance workers is growing so rapidly, it may explain most of America's job growth in the last decade. It also poses challenges.

It’s hard to say exactly what Erica Prather does.

She's milked cows in Australia, worked as a tour guide in Alaska, taught science in South Korea. This summer, she cleared boulders and marked trails for Iceland’s environment agency while living in a tent. The only steady job she’s had over the past eight months is generating leads for a Texas solar company.

Wherever she happens to be in the world, she logs into the satellite feature of Google maps to see which commercial buildings in San Antonio have rooftops suitable for solar panels. “It doesn't pay me a lot,” she says. But “I've done it in Iceland, I've done it in Bosnia, I've done it in Kansas.”

Welcome to 21st century work. Instead of holding full-time jobs, millions of workers are contracting out their labor for minutes to months at a time. Called contingent, independent, or solo works – or sometimes alt-labor – it is not particularly new (think temp workers or substitute teachers). What is new is their ranks are growing, apparently rapidly.

The rise of alt-labor is so rapid it can account for virtually all America’s job growth since 2005, according to one new study for the National Bureau of Economic Research. That’s a startling – and controversial – finding. It suggests that of the 9.1 million net jobs created in the past decade, only 6 percent were traditional full-time positions, conclude Harvard economist Lawrence Katz and Princeton economist Alan Krueger. The rest were temp, on-call, contract, or freelance jobs.

The same phenomenon is happening in western Europe. To some, this means that developed economies are on the cusp of redefining their social contracts with workers, offering unprecedented freedom and flexibility to build the kind of employment trajectory they want. The Internet makes it much easier and faster for employers and workers to match up, perhaps making the need for traditional companies less compelling.

“Just as working models changed in the wake of the Industrial Revolution, the nature of work may be evolving again as the digital revolution takes hold,” says a new study by McKinsey Global Institute.

But others say all this is backward. As economies have become more developed during the past century, corporations have offered an increasing share of workers steady, full-time jobs, often with high pay and benefits such as paid vacation, free or low-cost health care, and funding for retirement. If alt-labor labor is reemerging, it’s a backward step that may make income inequality worse, these analysts add.

“What we're doing is returning to an historical norm,” says Arun Gupta, a freelance journalist in New York who has covered labor issues and protests. Except for a few decades in the 20th century, “contingent workers have always been the norm.”

The yin and yang

At this point, alt-labor is creating both positive and negative effects.

When Trevor Chamberlain soured on videography as a career, he moved to San Diego looking for a fresh start. He began working for the county’s voter registration board, but it was hard work and paid only $10 an hour. So in May, he switched to driving for Lyft, the ridesharing service, and, eventually, its competitor, Uber. He also taught some videography courses.

Then this summer, he landed a contract with a major ad agency for videography editing that paid him what he was used to making when he was working full time. But “it's only a two month contract,” he says. “In a couple weeks, I'll be back looking. And I'll probably drive for Lyft and Uber.”

If he had his druthers, Mr. Chamberlain would make his own movies, but it’s too hard to break in. “I'm already tired of this life,” he says. “I'm in a boatload of debt from film school and investing in my portfolio and camera equipment. I live in a very small studio with a cat. I've never been married. I'm not financially secure whatsoever. I live check to check.”

On balance, however, independent workers are satisfied more often than not with their employment. The McKinsey report survey found that 68 percent of those who make most of their money from independent work would like to continue that arrangement. Also, 32 percent of those who supplement their work with freelance jobs would like to make most of their living from independent work. Even among traditional workers, 12 percent would like to go freelance as their primary source of income.

Alt-labor is an international phenomenon. Some 94 million people in the more developed nations of the European Union (EU-15) are independent workers, according to the McKinsey study. Up to 68 million people in the US fall into the same category. Combined, that represents some 28 percent of their combined working-age populations. (But half of those are full-time workers moonlighting on the side.)

The Millennial myth

One of the myths surrounding independent workers is that they are mostly Millennials driving for Uber – the so-called gig economy. In fact, older Americans age 55 to 75 are nearly four times more likely to be independent workers than 16- to 24-year-olds are, according to the study by Professors Katz and Krueger. And independent workers are twice as likely to use offline means of finding work or customers offline rather than new online platforms.

Mr. Gupta, the freelance journalist, considers himself fortunate because he and his partner can pursue their dreams, while many other freelancers have given up. But “I don't think the freelance economy should be romanticized,” he says.

Gupta and his partner earn about $30,000 a year each. They have a rent-stabilized apartment in New York, some savings built up (he from previous advertising jobs, she from work in Hollywood), and a huge network of friends who can step in to support.

“We're willing to put up with a lot of circumstances,” Gupta says. “We don't want to own a home. We're willing to live in strangers' living rooms for three days when we're covering an assignment….  But for us, it gives us such incredible freedom. We are thankful we can do this kind of work.”

There are other privations freelancers often endure: no benefits, no company matching of retirement investments. Gupta has to spend a significant amount of time making sure he gets paid, including a year’s worth of compensation from an independent publication he founded.

New York City is considering a new measure to make it easier for freelancers to collect. The bill would require companies hiring freelancers to use written contracts and to pay them within 30 days of the completed assignment or the due date on the contract. Penalties for not paying could include double damages, attorney’s fees, and civil penalties.

It’s a start. But much more needs to be done if alt-labor is going to thrive, the McKinsey report says, including the creation of income-security measures and training and credentials.

Challenge of numbers

Not everyone believes the independent workforce is growing that much. For one thing, the numbers don’t add up. Inexplicably, there are fewer self-employed workers today than a decade ago, according to data from the Bureau of Labor Statistics (BLS). And the number of workers with multiple jobs – a hallmark of the gig economy – has barely changed since 1994, labor historian Kim Moody points out in a recent article. “The evidence on recent growth in the independent workforce is thin,” the McKinsey report concedes.

A big reason is that the BLS hasn’t studied the issue since a 2005 survey, a gap that Labor Secretary Tom Perez promises to remedy next year. In the meantime, the Katz and Krueger study has attempted to update the 2005 BLS survey with 2015 data. It is that survey that leads them to conclude that independent workers’ share of the workforce has risen from 10.7 percent in 2005 to 15.8 percent by 2015.

Furthermore, they point out, Internal Revenue Service data contradict the BLS self-employment contraction. Tax returns show that the share of taxpayers identifying themselves as self-employed or independent contractors, consultants, or freelancers has climbed from 6.9 percent to 8.4 percent during the same period.

And the Internet-fueled gig part of the alt-labor is growing furiously. In one year, Uber doubled the number of daily rides it handles from 1 million to 2 million. Between 2012 and 2015, the number of adults using digital platforms to find work grew an astonishing 47-fold, according to a 2016 study by the JPMorgan Chase Institute.

How far can this go?

It’s unlikely that alt-work will replace the great bulk of traditional full-time jobs, says David Hale, chief executive officer of Gigwalk, a mobile platform for managing large distributed workforces based in San Francisco.

Six years ago, Gigwalk started as a website where freelancers could bid for projects from companies. But the company found that firms were really interested in its scheduling software to schedule their own workforces. So Gigwalk has begun selling its software to insurance companies, retailers, and even other staffing companies.

“There are benefits of companies bringing people together around their core values, and there are benefits of having people work for you,” says Mr. Hale. “My view, and honestly my hope, is that we will not just become a workforce of entirely contingent workers.”

The growth of alt-labor could reinforce the inequality already apparent in US and European societies. Research shows that a healthy share of workers strike out on their own as specialists because they can make more money than at their firms. Independent contractors, for example, earn more per hour than their traditional colleagues, but they end up making less per year because they work fewer hours, the Katz and Krueger study suggests. Meanwhile, temp workers and even gig workers usually get paid less than their traditional colleagues.

For example, US workers who sign up for jobs at Amazon’s Mechanical Turk rarely make more than $8 an hour, according to a recent study. Most made less than $5 an hour, which is less than minimum wage. The online service allows people to sign up to do jobs that can last as little as a few minutes.

Taking a break

After her three-month stint in Iceland and living in a tent, Ms. Prather has come back to Denver to figure out her next step. “I'm definitely exploring right now,” she says. “Is the constant life on the road over?”

In Denver, 90 percent of her friends are working as independent workers, she says. In one case, they gave up high paid engineering jobs to start their own brewery.

“One of the fears that my parents had about me not building my résumé is that it would hurt me. And it has not at all,” Prather says. The lack of job security or the prospect of another Great Recession don’t faze her because she has accumulated a wide variety of skills and learned how to survive and adapt even in places where she didn’t know the language.

That her next destination is unknown does not trouble her either, she says. “There's some stability in the instability of my life because I know I can crack it.”