Understanding the size of the gig economy is so complicated, you couldn't ask gig economists to do it. The Treasury Department had one estimate of 0.7 percent last year after poring through administrative tax records. Last week, the Bureau of Labor Statistics said 1.3 percent, 1.6 percent, and 3.8 percent over three estimates, and the Federal Reserve Bank said 30 percent.

With answers like these, why bother to ask the question?

With all the talk about the gig economy, though, it's smart to separate hype from reality. Whether you're an entrepreneur, a business manager, or a worker, you can't ignore it. But to grapple, you've got to understand it first.

Definitions are everything

The major reason the numbers are spread so far is that everyone works from a different definition.

The Treasury used administrative tax records, taking a sample and analyzing results. But the data was from 2014 and the analysis depended on people having declared their gig income and filed taxes for it. From what I've seen, that was likely optimistic, especially as I've interviewed gig workers and found that some thought they weren't required to file and were shocked when they learned the bitter truth.

The Bureau of Labor Statistics explicitly listed three different estimates:

  • Wage and salary workers who expect their work to continue for up to a year, including temporary and contract workers but not the self-employed or independent contractors: 1.3 percent.
  • Same group as above, only including people who have been self-employed for a year or less: 1.6 percent.
  • People who don't expect their jobs to last, even if they have been employed for more than a year but expect to continue for no more than an additional year, including self-employed and independent contractors: 3.8 percent.
  • There are additional measures: freelance and independent workers or consultants (6.9 percent), on-call workers who wait to hear if they're needed that day (1.7 percent), temp help through agencies (0.9 percent), and workers employed by a company and sent to work for other companies under contract (0.6 percent).

The first three estimates include significantly different groups (with overlap) and include people who think their permanent jobs are in jeopardy. In that sense, the definitions, and resulting estimates, include some measure of employment insecurity. That could explain why the numbers are down somewhat from 2005 levels (when the economy was artificially heated and people optimistic they could make it on their own).

Then we have the Fed's definition, which includes providing offline services such as housecleaning or child care; offline sales such as selling at thrift stores or flea markets; and online platform-based work like driving for Uber or Lyft.

Sifting through the realities

Many in business and media will latch onto one or the other of these definitions because the size of the numbers support some agenda. That means, when looking at anything that claims to discuss the gig economy phenomenon, you have to be on guard.

Many of these definitions seem far different from the associations "gig economy" raises, including the virtual relationships, bidding on work, and necessity of a smartphone to check in with the platform of choice. Depending on the definition, a "gig" could refer to a temporary employment arrangement or the operation of an entry-level entrepreneur. I remember when working at a company years ago, one of my co-workers had a part-time job in a fabric store. The more expansive definitions of gig would have included her. Are kids who mow lawns during the summer in their neighborhoods now gig workers?

The truth is that work seen as supplementary by an employer, worker, or both is nothing new in the world, although many would like to rebrand it to their advantage. Perhaps it's larger than in the past, although some skepticism seems in order. Do a third of the people you know run a side hustle?

Still, nothing seems ready to upset the long-standing structure of companies and jobs, employers and employees. Maybe you can start something on the side and grow it into a full business. Perhaps your startup could, and probably should, employ people on the side for work that is done only sporadically and not yet worth hiring someone full time to do.

But, all in all, forget the talk of the new approach to labor that will overturn the world of business. The longer you're around, the more times you'll be able to count someone having made the same claim--and it rarely happens.

Published on: Jun 11, 2018