Academic Studies Show Gig Economy Larger Than Government Data Suggests

Several papers related to the gig economy presented last week at the American Economic Association annual meeting caught our eye. 

Making Ends Meet: The Role of Informal Work in Supplementing Americans’ Income looked at data from the Federal Reserve Board's Survey of Household Economics and Decision Making (SHED).

The study found "28 percent of adults age 18 and older participated in informal work for pay during the survey reference month." This equates to about 70 million Americans.

The study also found that the income generated by gig work "appears to be important in helping many households make ends meet." 

The chart below (click to enlarge), taken from the study presentation, shows the types of gig work performed and the importance of gig income.

These finding are not surprising.

The Federal Reserve itself, in their 2017 Report on the Economic Well-Being of U.S. Households, reported that 31% of Americans do some form of gig work and that gig work income was important to many. This study was also based on SHED data.

A large number of other studies, including ours, have similar findings. 

But despite a preponderance of studies showing that the gig economy is large and growing, this has not been accepted as true by many in the academic and policy making communities.

A key reason for this is data from the U.S. Bureau of Labor Statistics (BLS) hasn't shown growth in self-employment, second jobs or contingent work.

The BLS 2017 Alternative Employment Arrangement Survey results even showed the share of U.S. gig/contract workers in the U.S. workforce had declined since 2005. 

Which gets us to the second paper that caught our eye.

Independent Contract and Informal Work: Preliminary Evidence on Developing Better Measures in Household Surveys covers research on whether or not the way questions are asked in government surveys like the Current Population Survey (CPS) result in the underreporting of gig work.

They found it does. Key quote from the paper:

In summary, our preliminary findings support concerns that household surveys like the CPS may be missing a significant amount of work activity, particularly in the form of secondary jobs, and thus may have missed a significant shift towards self-employment or nonemployee work.

This, of course, is not new news to those who have been following industry research on the gig economy. 

For example, we reported in 2014 on our research that showed the questions asked in government surveys led to an underreporting of gig work. We first realized this in 2007, during a series of studies of what at that time we called "personal businesses".

And, of course, many others - including The Fed - have for years been using survey methods and questions that get around the underreporting problem. 

But for a variety of issues too complex to explain here, the BLS surveys continue to understate the size of the gig economy.

The very good news is this issue is (finally) being recognized by the academic community - and, hopefully, the BLS and other government agencies responsible for collecting labor data.

The other very good news is there (finally) appears to be a consensus that the gig economy is large, growing and an important income source for most of its participants. 

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