[By Greg Iacurci]
The last decade has seen a surge in the number of gig workers, indicating broad economic and demographic shifts and raising concerns around long-term financial security for a growing share of the workforce, according to some experts.
“We’re just going to keep seeing more of it,” Kerry Hannon, the author of several books on jobs and entrepreneurship, said of gig work. “For the bulk of the population, it’s really, really unfortunate.”
What constitutes the “gig economy” isn’t well-defined but typically includes people such as independent contractors and on-call and temp workers.
The rise of online and app-based services such as Uber, Airbnb and Task Rabbit have contributed to gig work’s popularity.
New research indicates that businesses are turning to gig workers with greater regularity.
The share of independent workers at U.S. businesses stood at 16% last year, according to a report published Feb. 4 by the ADP Research Institute, which analyzed payroll data from more than 18 million workers.
That was a jump of 2.2 percentage points — or 15% — from 2010, according to ADP.
In total, there are 6 million more gig workers today than a decade ago. Half, or 3 million, of that growth reflects the shift of the labor force toward this type of work and away from more traditional employment.
The analysis didn’t encompass all gig workers — just 1099-MISC contractors and short-term W-2 employees. (Uber drivers, for example, aren’t counted because they’re a different type of contractor.) These jobs may constitute seasonal work, one-off projects or skilled workers hired for more complex projects, for example.
“The dynamics of the workforce are changing,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
Estimates vary widely as to the size of the total gig economy. The Bureau of Labor Statistics believes such “alternative work arrangements” account for 10.1% of the American workforce, while the Federal Reserve pegs the share at nearly a third of American adults.
This type of work comes with several additional financial responsibilities relative to full-time workers, who often have employer-sponsored benefits — such as health insurance, a 401(k) plan and employer match, and paid vacation time — that offer a “security blanket,” Hannon said.
Workers are 15 times more likely to save for retirement when they can do so at the workplace using payroll deduction, according to the AARP Public Policy Institute.
“There’s a sense of having some stability,” Hannon said of benefits offered through the workplace.
Research has shown that independent workers are also more likely than traditional employees to under-report their income, which could lead to smaller Social Security checks in retirement.
Gig workers may be able to get health coverage through a spouse’s employer or through their state’s insurance exchange. They can also open an individual retirement account or solo 401(k) plan. They should also set aside taxes, preferably making estimated payments on a quarterly basis, to avoid an unexpected hit at tax time, Hannon said.
On the other hand, contractors typically have more leeway to give themselves a raise more often than full-time W-2 employees by negotiating a pay rate with employers with more frequency, Hannon said.
States appear to be pushing back on companies offering this kind of work. A law that took effect in California this year makes app-based companies such as Uber designate workers as employees instead of contractors in certain circumstances. New York is considering a similar proposal.
Unemployment figures, at their lowest levels in around five decades, and a “skills mismatch” between workers and businesses are pushing employers to hire people outside of traditional full-time arrangements, ADP’s Yildirmaz said.
“Right now, we are facing a big labor shortage in our economy,” she said.
Gig relationships can offer an economic benefit for employers, since they can hire skilled workers for certain jobs or projects without paying for benefits or training.
These workers also skew older, partly as a result of the need for more skilled labor. For example, 30% of 1099-MISC contractors working at companies are over age 55, whereas that’s true for only 21% of full-time W-2 employees, according to ADP.
“The difference between 21% and 30% is huge,” Yildirmaz said.
While some older contractors may enjoy the relative flexibility and freedom afforded by this type of relationship with an employer, as well as a perhaps greater ability to find work they enjoy, the trend may reflect ageism in American society — or, the unwillingness of employers to hire older workers full time, Hannon said.
“For someone in that age group who has been downsized from a job or taken early retirement, it’s really hard to get a full-time job,” said Hannon, whose books include “Great Jobs for Everyone 50+.”
And, as more baby boomers reach retirement age and wish to stay in the workforce, either for money or personal engagement, it’s likely they will continue expanding the ranks of the gig workforce, Hannon said.