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NY Times, Mar. 31 2016
Job Growth in Last Decade Was in Temp and Contract
by Neil Irwin
If you believe the Silicon Valley sloganeers, we are in a “gig economy,”
where work consists of a series of short-term jobs coordinated through a
mobile app. That, anyway, is both the prediction of tech executives and
futurists and the great fear of labor activists.
But anyone who cares about the future of work in the United States
shouldn’t focus too narrowly on the novelty of people making extra money
using their mobile phones. There’s a bigger shift underway. That’s a key
implication of new research that indicates the proportion of American
workers who don’t have traditional jobs — who instead work as
independent contractors, through temporary services or on-call — has
soared in the last decade. They account for vastly more American workers
than the likes of Uber alone.
Most remarkably, the number of Americans using these alternate work
arrangements rose 9.4 million from 2005 to 2015. That was greater than
the rise in overall employment, meaning there was a small net decline in
the number of workers with conventional jobs.
That, in turn, raises still bigger questions about how employers have
succeeded at shifting much the burden of providing social insurance onto
workers, and what technological and economic forces are driving the shift.
The labor economists Lawrence F. Katz of Harvard and Alan B. Krueger of
Princeton found that the percentage of workers in “alternative work
arrangements” — including working for temporary help agencies, as
independent contractors, for contract firms or on-call — was 15.8
percent in the fall of 2015, up from 10.1 percent a decade earlier.
(Only 0.5 percent of all workers did so through “online intermediaries,”
and most of those appear to have been Uber drivers.)
And the shift away from conventional jobs and into these more distant
employer-employee relationships accelerated in the last decade. By
contrast, from 1995 to 2005, the proportion had edged up only slightly,
to 10.1 percent from 9.3 percent. (The data are based on a person’s main
job, so someone with a full-time position who does freelance work on the
side would count as a conventional employee.)
This change in behavior has profound implications on social insurance.
More so than in many advanced countries, employers in the United States
carry a lot of the burden of protecting their workers from the things
that can go wrong in life. They frequently provide health insurance, and
paid medical leave for employees who become ill.
They pay for workers’ compensation insurance for people who are injured
on the job, and unemployment insurance benefits for those who are laid
off. They help fund their workers’ existence after retirement, at one
time through pensions, now more commonly through 401(k) plans.
Perhaps most significant of all, the implicit contract between an
employer and an employee is that there is a relatively high bar for
firing the employee if business slumps. If the economy turns down or
business slows, a contract worker is, as a rule, far more likely to be
out of a job than a conventional employee.
It’s true that the Affordable Care Act has made health insurance more
easily within reach for independent contractors, for example, and
temporary services firms can offer retirement benefits and workers’
comp. But over all, there’s little doubt that workers in these
nonconventional work arrangements carry some of the burden of protecting
themselves from misfortune that employers traditionally have carried.
That makes the question of why the shift has happened particularly
important.
You could imagine a world in which more workers become independent
contractors voluntarily, trading the social insurance functions of
traditional employers for higher pay and greater flexibility. If the
period from 2005 to 2015 had been one when workers had a lot of power in
the job market, that might even be plausible.
It wasn’t. The unemployment rate was above 7 percent for nearly half of
the period, from the end of 2008 to late 2013. Employers had the upper
hand. That suggests it’s more likely that employers were driving the
shift to these alternate arrangements.
But Mr. Katz and Mr. Krueger raise the possibility that something has
changed beyond the weak job market of the last several years. And that’s
technology.
When people working as a team need extensive experience working
together, it can be tricky to contract out the work. But when there are
clear, simple measurements of how successful each person is, and a
company can monitor it, the employer now has flexibility.
“New technologies may allow some things to be shipped out and
standardized and easily monitored,” Mr. Katz said. “Call center workers
can be at home. Independent truck drivers can be monitored for the
efficiency of their routes. Monitoring makes contracting more feasible.”
So Uber alone may not be a major force reshaping the nature of work. But
the same technologies that made it possible could be making employers
more interested in building a work force of nonemployees. A weak job
market has probably given them more ability to make it a reality.
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