Economy & Budget

Washington should harness the power of the gig economy

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Growing fears about the “gig economy” are front and center, as companies like Uber and Airbnb have come under scrutiny from lawmakers, regulators and unions.

Policymakers often assume that the rapid growth in the gig economy is leaving workers vulnerable, and they have sought to constrain the independent nature of these jobs.

{mosads}Yet evidence indicates that the gig economy may be countercyclical in nature, and its rapid growth in the years following the Great Recession provided already struggling workers a flexible way to earn additional income where traditional payroll jobs failed.

Consequently, the shoot first, ask questions later attitude taken by local policymakers could be a big mistake. It could end up hurting the very workers that the policies are intended to help.

In Massachusetts, Uber and Lyft drivers will soon face new state administered background checks. New York lawmakers recently banned advertisements of short-term Airbnb rentals, predicated in part on the  belief that rents have increased as a result. Officials in Seattle issued rules allowing ridesharing drivers to vote to unionize.

Policymakers too frequently base these new laws and regulations on anecdotes as opposed to statistical facts. In truth, there is a serious information gap surrounding the gig economy.

Gig economy workers aren’t well documented by official statistics because traditional surveys like the Current Population Survey (CPS) don’t specifically ask respondents about work in the gig economy. For instance, people who use Airbnb to host travelers but do not have traditional jobs may report to CPS interviewers that they are unemployed or not in the labor market.

In a new joint report by the American Action Forum and the Aspen Institute’s Future of Work Initiative, however, we utilize the National Opinion Research Center’s General Social Survey (GSS). The survey specifically asks respondents about gig work and uses census non-employer firm data to examine the economic and demographic characteristics of gig economy workers.

Importantly, we find that the entire gig economy workforce grew by 15 percent between 2002 and 2014, twice as fast as the 7.5 percent that the entire U.S. workforce grew.

The recession played a major role in the growth of the gig economy workforce. Gig economy workers are far more likely to have previously faced setbacks than traditional workers. In 2014, 12 percent of gig economy workers had been previously laid off, compared to just 5.4 percent of the entire workforce.

Gig economy workers also worked less. In 2014, while gig economy workers worked 42 weeks on average during the previous year, the entire workforce worked 47 weeks.

Workers in those gig positions were already struggling and turned to that part of the economy for help. This turns the generalized argument that gig employers are harming workers on its head.

The frequency of part-time work confirms the narrative. In 2014, 18 percent of the entire workforce worked part time. Meanwhile, 36 percent of workers in the gig economy were part time, suggesting that they are much more likely to utilize those positions to supplement other sources of income.

Digital platforms have made the online gig economy more accessible, contributing to its rapid growth. In metropolitan areas, non-employer firms, which are businesses that have no paid employees but still pay federal income tax, have exploded in the sectors that include Uber, Airbnb and Etsy.

Before Uber, the average annual growth rate of non-employer firms in the transportation sector was 7.7 percent. After Uber, the growth rate jumped to 39.3 percent.

Evidence also suggests that in the last two years, the growth in the gig economy has started to slow just as the labor market has improved, further underlining the countercyclical nature of alternative work arrangements. A recent report from the JPMorgan Chase Institute documents rapid growth in earnings from online platforms that peaked in 2014, but slowed and then stopped growing as of 2016.

The gut instinct that gig economy workers are vulnerable is correct, but for the wrong reasons. Gig economy workers are vulnerable because traditional payroll jobs failed to deliver sufficient job growth and pay increases during the recession. Without the gig economy, these struggles very well could have been a lot worse.

Instead of trying to limit independent work in favor of traditional work, policymakers should look for ways to harness the strengths of the gig economy so that it can continue to provide a buffer for workers who fall on hard times.

Douglas Holtz-Eakin is president of the American Action Forum (AAF). He served as director of the Congressional Budget Office during the George W. Bush administration. Will Rinehart is AAF’s director of technology and innovation policy. Ben Gitis is AAF’s director of labor market policy.

The views of Contributors are their own and are not the views of The Hill.

Tags Airbnb Employment gig economy Jobs left Recession Uber

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