Small Business Labs

Vanity Fair Covers the Contingent Worker Supplement to the Current Population Survey

Vanity Fair's The Obama Administration Is Finally Getting Serious About the On-Demand Economy covers the plan by the Department of Labor and the Bureau of Labor Statistics (BLS) to run the contingent worker supplement as part of the May 2017 current population survey. 

In the forecasting world, we call this a signal.

Up until recently, I doubt any mainstream publication had ever written a story about the contingent worker supplement.

It was last done in 2005 and stopped in large part due to a lack of interest in the results - even by labor economists.

But the rise of the on-demand economy has changed all this. Even publications like Vanity Fair are now writing about labor data collection methods.

I'm not knocking Vanity Fair, just pointing out this topic seems a bit different than their usual coverage. For example, after reading their article on the CWS I found out Why Kris Jenner Still Feels Guilty About the Death of Nicole Brown Simpson.

When the general media takes a strong interest in a trend it usually means that trend has moved or is moving to the mainstream.

Aging Boomers Discovering the Gig Economy

Next Avenue's Gig Economy: Better for Boomers Than Millennials covers the growing trend of retirement age Americans choosing to work in the gig economy. Key quote:

The lure of job flexibility and part-time income may be too hard to resist for millions of older Americans.

This is borne out by the research on the on-demand economy (ODE) we conducted with Intuit. 

We found about 18% of all ODE worker are aged 55 or older. This means despite being seen as a workplace for millennials, mature ODE workers (aged 55+) are roughly equally represented in the ODE workforce as in the overall workforce. 

The research shows older Americans are turning to ODE work for the reasons mentioned in the article:

–Flexible work and flexible work schedules

–A way to earn income and to supplement retirement income.

–A way to stay engaged and be social. 

The vast majority of these folks are not looking for full-time work. Nor do they want to be traditional employees. They want to supplement their income with work that is as flexible as possible.

The numbers of older Americans seeking gig work will likely continue to grow. This is driven by the need to earn income to supplement retirement as well as the desire to work to stay engaged and social.

We'll have more on this topic in the coming weeks.

"Gig" - The Word of the Year

NPR's Goodbye Jobs, Hello 'Gigs': How One Word Sums Up A New Economic Reality covers the history of the word "gig" and suggests it as the 2015 word of the year.

For those of us who have been saying for years that the gig economy is growing - and often being told we're wrong (we're still often told we're wrong) - it's nice to see recognition of the term and trend.

Now we have to get more people to understand that the shift to the gig economy isn't all bad. 

For example, the NPR article points out the good side of the gig economy:

The Financial Times explains that in the future, work will be less secure but lots more exciting. We can make our own schedule and hours, pick the projects that interest us, work from anywhere and try our hands at different trades.

Then says the majority of gig workers are ill-paid and "cut loose".

That's the image that phrases like "the gig economy" and "freelance nation" bring to mind, an economy populated by professionals and creatives, typically single millennials — people who may be willing to trade some security for the opportunity to take a month or two off to visit Patagonia. But that language doesn't get at most of the people who are cut loose in the new economy and who aren't reveling in the independence it gives them — the ill-paid temps and contingent workers that some have called the "precariat".

We regularly point out there is definitely a dark side to gig work and that a sizable minority (25% - 30%) of gig workers would prefer traditional jobs. We also regularly call for increased protections for gig workers and new laws and policies to make gig work more secure. 

But our research and the research of others (including government agencies) consistently shows the majority of gig workers chose to be gig workers, are satisfied with gig work and plan to continue as gig workers.

In fact, there's no credible research we're aware of not showing the majority of gig workers are satisfied with their work.

That doesn't stop a lot of people erroneously claiming otherwise.

So yes, let's make it better for those not doing well in the gig economy. 

But let's also keep in mind that most gig workers prefer their work over having a traditional job.

Survey Finds 1 in 8 Office Workers Moonlight as Freelancers

The Fiscal Times article This Is Why Freelancing Is the Hot Work Trend covers a Staples survey showing that 12 percent of office workers do freelance work on the side in addition to their regular job.

It also found that the same percent of office workers are full-time freelancers. Key quote on why they freelance:

Top drivers for freelancers include the flexibility to make their own hours (cited by 37 percent of those surveyed) and work-life balance (32 percent).

This is yet another survey showing that more and more people are taking on side gigs and/or moonlighting. 

These findings were part of a broader workplace study conducted by Staples. A total of 1,528 employees were surveyed in the U.S., with 1,026 classified as general office workers and 502 as business decision makers.

Go to their Workplace Index site for more information.

Do 45 Million Americans Work in the On-Demand Economy?

Last week in our article Confusion Reigns Over the Number of People Working in the Online Gig Economy we reported that a recent study developed jointly by Burson-Marsteller, The Aspen Institute’s Future of Work Initiative and TIME found that 45 million Americans have worked in the on-demand economy.

We suggested the reason why their numbers are so much larger than other sources – our work, for example found about 3.2 million Americans are working in the on-demand economy – was likely due to differences in definitions and study methods.

We had a chance to talk with the research folks who worked on this study and it turned out this is correct. They, not surprisingly, used different industry definitions and study methods.

The key reasons for the differences between their results and ours are:

1. Their study defines the on-demand economy much more broadly than we do.

The study from Burson-Marsteller, The Aspen Institute’s Future of Work Initiative and TIME was designed to capture all work related to activities in the areas they studied.

They provided survey respondents with online examples but did not exclude on-demand or gig work that was not found or done online.

Because of this, they phrased their questions so respondents could consider any work and did not limit their definitions or questions to specific, individual online services or platforms.

Additionally, their definition and questions could result in respondents including work found via sites like Craigslist (which they specifically listed as an example) as being on-demand economy work.  

We limit our definition of the on-demand economy workers to people who work with online work intermediation platforms that actively facilitate the connection of buyers and sellers of services such as Uber, Upwork, Fiverr, etc.

We exclude people who find work via sites that simply provide job listings, classified ads (such as Craigslist) or links to work opportunities (such as Nextdoor.com).

We also don't include work found offline in our definition of the on-demand economy. 

2. Their study is based on cumulative data; ours is based on current data

The study from Burson-Marsteller/The Aspen Institute’s Future of Work Initiative and TIME asked respondents if they had ever offered services in the online on-demand/sharing/gig economy. This means someone who drove for Uber two years ago but hasn’t done any on-demand work since could be included in their numbers.

Our studies are based on who is currently working in the on-demand economy. This, too, obviously leads to larger numbers in their study.

These two sets of reasons largely explain why their numbers are so much bigger than ours. There are also a number of other, smaller differences in study definitions and methods and pretty much all of these led to their study getting bigger numbers than we do.

So who’s right?

The quick answer is both of us – or maybe neither of us. Both approaches are valid from a methodological standpoint and both yield interesting results. 

But since we’re looking at very different worker segments, the studies really aren’t directly comparable. 

So getting back to our headline, are 45 million Americans working in the on-demand economy as is being reported by some of the media?

No.

The Burson-Marsteller, The Aspen Institute’s Future of Work Initiative and TIME (they really need a shorter name) study’s numbers are cumulative, so maybe 45 million have worked in the on-demand economy as they’ve defined it.

But 45 million are not working in it today, nor does their study provide data on how many Americans are currently working in the on demand economy.

That their study is based on cumulative numbers is described in the study materials. But unfortunately some of the press is mistakenly reporting the numbers as current.

Due to varying study definitions and methods confusion will continue to reign about this sector of the economy.  No doubt there will be yet more studies with new and different definitions - and very different results – that will add to this confusion.

The good news for us here at Small Business Labs is this means we will continue to have jobs - both as contributors to the confusion and folks trying to explain it.

Three Books That Explain The Economy (and Jobs)

We were asked the other day what books we thought best explain how the economy and jobs have changed over the past couple of decades.

We came up with these 3:

1. Supercapitalism by Robert Reich. The former labor secretary provides a historical view of how over the past few decades Americans as consumers and investors have gained power, while as citizens and employees we have lost power. It was released in 2007 and in our opinion nails how the economy has changed since the 1950s.

2. The Great Risk Shift by political scientist Jacob S. Hacker. Released in 2006 and based on work that started in the late 1990s, Hacker explains how risk has shifted from institutions to individuals. This shift has left Americans less financially secure than they used to be. We consider this to be one of the most important shifts we follow.

3. The Winner Take All Society by economists Robert Frank and Philip Cook. First released way back in 1995, it helps explain the growth of income inequality, the polarization of jobs, the growing role network effects play and many other aspects of how work and jobs have changed over the past couple of decades.

It's interesting that these books are all pretty old. 

We read a lot books here at Small Business Labs and review books we think will be of interest to readers. So it's not that we're not exposed to new books.

Maybe we can't really see how good a book is until some time has passed.

How the On-Demand Economy is Making it Easier to Start a Business

Intuit CEO Brad Smith's article How On-demand is Ushering in a New Era of Entrepreneurship covers a very important and under appreciated benefit of the on-demand economy - it reduces the friction and risk associated with starting a business. 

"Friction", in this case, means the amount of time, effort and money associated with getting a business going. On-demand economy platforms (Etsy, Upwork, Uber, etc.) reduce the need for all of these resources.

They also assist by providing access to customers, one of the biggest challenges associated with starting any business.

This reduction in the need for resources coupled with access to customers greatly reduces startup risk. 

Key quote on  on-demand platforms:

They de-risk the proposition of starting your own business – with these “businesses of one” using on-demand work to generate income in service to financing themselves, or finding customers at the push of a button. The entrepreneur becomes “the product,” with the on-demand platforms providing the connection to a pool of potential on-demand customers. This stunning ease-of-entry would have been impossible five years ago. 

This does not mean things are easy or there aren't challenges - and the article covers the main ones:

Current infrastructure and policies – in areas ranging from taxes and healthcare to rent and home mortgages – are designed for people with steady paychecks. The new breed of on-demand entrepreneurs don’t fit into this rigid system. They often experience irregular streams of income from a variety of sources. Taxes can be a nightmare, and many are unclear about their annual and quarterly tax obligations. To help these new entrepreneurs grow and thrive, we must create more flexible systems.

The on-demand economy also reduces the friction associated with getting and doing a part-time job.

On-demand jobs can be arranged in a matter of hours or even minutes via the Internet, schedules in most cases are completely under the control of the worker and workers can stop or start their work whenever they want. 

This is much easier (less friction) than with a traditional part-time job. This is a major reason most on-demand economy workers are part-timers. 

While the debates about on-demand economy jobs will continue, it's clear for many these jobs are providing an easier path to entrepreneurship and/or a flexible way to supplement income. These are good things.

Confusion Reigns Over the Number of People Working in the Online Gig Economy

Burson-Marsteller, The Aspen Institute and Time Magazine released survey results last week on the sharing/gig/on-demand economy. 

Time's Exclusive: See How Big the Gig Economy Really Is covers the study results, which indicate the gig economy is quite big. Key quote:

44% of U.S. adults have participated in such transactions, playing the roles of lenders and borrowers, drivers and riders, hosts and guests. The number this represents, more than 90 million people, is greater than the number of Americans who identify, respectively, as Republicans or Democrats.

They also found that 22% of Americans - 45 million - work in the sharing/gig/on-demand economy. Key quote from the study press release:

“With nearly a quarter of Americans already working in the On-Demand Economy, and more than a third buying its services, it is clear the sector is playing a major role in the growth and direction of the United States. 

These are much bigger numbers than have been found by other studies looking at the number of people working in the sharing/on-demand/gig economy.

For example, we worked with Intuit on a similar study and found that about 3.2 million Americans are working in the online on-demand economy. 

Another recent study, developed for the Brookings Institute and led by noted economists Seth Harris and Alan Krueger, found that about 600,000 Americans work in the online sharing/gig/on-demand economy.

So the numbers range from 600,000 to 45 million.

And keep in mind these numbers are just for those working in the online sharing/gig/on-demand economy - meaning they work with online platforms such as Uber, Lyft and Airbnb. 

They exclude the many millions of people who are gig/freelance workers but aren't using these platforms. 

So what's going on?

The answer is likely differences in how the sharing/gig/on-demand economy is defined coupled with different study methodologies.

We've had a chance to dig through the Brookings study and the key difference between their study and ours is they have a tighter definition of the online gig economy than we do. They only include those providing personal services in their definition while we include those providing on-demand business services and independent workers providing on-demand products.

When we rerun our data with the Brookings definition, we also get numbers in the 600,000 range. So these two studies have reasonably consistent results, once you adjust for the differences in definitions. 

We don't yet have enough information on the Time/Aspen study to explain how they got such big numbers. But we're digging into it and will report what we find in the near future.

For more on the Time/Aspen study see their results slide deck.

Is the Staffing Industry Facing a Kodak Moment?

These are good times for the temporary staffing industry.

As the American Staffing Association chart below shows, the industry has been booming since the steep declines caused by the Great Recession. 

2015 was another record setting year and pretty much everyone in the staffing industry is predicting good times ahead.

Many in the industry also feel the threat posed by online talent marketplaces, freelancer management systems and the direct sourcing of independent contractors in general is minor or simply doesn't exist. 

An interesting example of this comes from a quote from Peter Dameris, CEO of large staffing firm On Assignment. In the Staffing Industry Review article Human Cloud, IT Staffing Firms Eye Each Other - Warily he's quoted as saying:

“Almost all large, sophisticated corporations are flat-out refusing to use non-W2 temporary labor. The more sophisticated the company, the more likely legal, HR, and even procurement have weighed in and said ‘The risks are greater than the reward.’ Customers are continuing to embrace the realization that the best way to ‘fractionalize,’ or share, human capital and avoid the legal risks of misclassifying employees is by working with a staffing firm.”

This is clearly an attempt at spin by Dameris.

The data overwhelmingly shows the use of non-W2 labor is growing at a much greater pace than overall employment or the growth in temp labor.

As far as sophisticated corporations refusing to use non-W2 labor, we know from both our research and personal experience this simply isn't true. 

But it reminds me of how Kodak viewed digital photography in the mid-to-late 1990s.

For those not familiar with Kodak, it was the world's largest camera and film company until it failed to adapt to the shift to digital photography in the early 2000s - despite having invented key digital photography technologies. 

In the mid 1990's Kodak was listed among the top 5 most admired corporations by Fortune, employed over 100,000, had about $16 billion in revenues and earned over $1 billion in profits.

Things started going downhill quickly for Kodak in the late 1990's, they ceased being a effective competitor in the photography market by the mid-2000's and declared bankruptcy in 2012. 

A key reason Kodak failed is their financial results remained strong even as digital photography rapidly gained market share in the 1990's. Because of this, there was little pressure to react to the shift to digital photography. By the time they finally reacted, it was too late. 

So as the good times roll for the staffing industry, I have to wonder if Kodak's fate awaits some or many staffing firms. 

The Rise of the Independent Professional Working for Businesses

Getting lost in the various debates around the "gig economy" is the size and growth of the segment of independent workers who provide professional services to businesses. 

As the chart below from the HBR's Your Company Needs Independent Workers shows, the number of U.S. independent workers serving businesses has grown from 4.5 million in 2011 to 6.4 million in 2015.

  

This is about 3 times as fast as overall employment growth during this period.

This group also dwarfs the number of people working for the various on-demand/gig economy companies such as Uber, Task Rabbit, etc. that focus on consumers.

A recent Brooking report, A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: The “Independent Worker, suggests there are only about 600,000 Americans doing this type of work. 

Not only large in number, the professionals serving businesses are also relatively well compensated.

According to research conducted as part of the 2015 MBO Partners State of Independence study this group has a medium income slightly above $70,000 and 1.3 million make more than $100,000. 

Despite the size of this group and their growing importance as a source of talent for businesses large and small, this group doesn't get the press that Uber drivers and other gig economy workers get.  

But we'll be covering them in detail again in 2016.