Surprising Results from the Labor Department’s Alternative Work Arrangements Report

The Bureau of Labor Statistics released (BLS) has released a long-awaited survey on the prevalence of the “contingent workforce” (non-permanent jobs) and “alternative work arrangements,” which consists of independent contractors, on-call workers, temp workers, and workers provided by contract firms. This is the first BLS study on the subject since 2005.

The “Contingent and Alternative Employment Arrangements” report uses information from the Current Population Survey, which surveys around 60,000 households every month to collect data concerning employment.

Interested observers were surprised by the data presented. Contrary to popular belief, there has not been significant growth in the sharing economy or other non-traditional employment since 2005, when the government last produced a survey on alternative work arrangements. Rather, growth in contingent work and alternative work arrangements stagnated. Traditional employee-employer relationships are still the predominant form of work by a long shot.

Here are some of the highlights from the BLS survey:

• In May 2017, 3.8 percent of workers representing 5.9 million individuals held contingent jobs, which is defined by “workers who do not expect their jobs to last.”
• The percentage of alternative work arrangements—independent contractors, on-call workers, temporary help agency workers, and workers provided by contract firms—of total employment declined from 10.7 percent in 2005 to 10.1 percent in 2017.
• Growth in alternative work arrangements has slowed. Alternative work arrangement growth fell from 2.1 percent between 1995-2005 to 0.3 percent during 2005-2017. On the other hand, traditional employment growth dropped less during the same time frame.
• Of alternative work arrangements in 2017, contract company workers earned the highest median weekly earnings at $1,077. This is higher than that for traditional full-time employees, whose median weekly earnings were $884. Independent contractors’ earnings were roughly the same as  those of traditional employees, at $851 per week.
• 79 percent of independent contractors preferred their alternative work arrangement to traditional employment. Less than half of on-call workers (44 percent) and temporary help agency workers (39 percent) preferred their work arrangement.
• Independent contractors, including sharing economy workers like Uber drivers, is the largest of alternative work arrangements, but in terms of percent of total employment shrank from 7.4 percent in 2005 to 6.9 percent in 2017.

An important observation from thise data begins to unravel the logic behind Obama-era policies like the National Labor Relations Board’s decision in Browning-Ferris to broaden the joint employer standard and guidance from the Department of Labor to expand the definition of employee with the objective to limit independent contracting opportunities. These policies were undertaken because the administration believed that companies were outsourcing work to contract companies and using more independent contractors in order to pay substandard wages and generally take advantage of workers.

As shown above, contract company workers had the highest median weekly earnings—even greater than traditional employees. In addition, independent contractors’ median earnings were nearly identical to those of traditional employees. Further, the largest category of alternative work arrangement workers—independent contractors—overwhelming prefer their status as non-traditional employees.

With this data, it hard to see how businesses contracting out work and hiring independent contractors constitutes some scheme to disenfranchise workers. And this data from the BLS should not be surprising. Recent studies from McKinsey and MBO Partners find that many independent workers are high earners and are not “reluctant” to engage in alternative work arrangements.

Another interesting aspect of this data is that many economists and academics seem to have exaggerated the impact of the sharing economy, and greatly overestimated its growth and impact on the composition of the workforce. An American Action Forum analysis suggests alternative work arrangements are not as prevalent as some have estimated because, “Research suggests alternative work may be countercyclical, growing during recessions and declining during periods of growth.”

If true, it seems progressives, or at least those who view alternative work arrangements as a way to exploit workers, should get behind the Trump administration’s low tax and deregulatory agenda. The economy is currently humming. This economic growth comes on the heels of massive tax cuts passed by Congress and the Trump administration’s one-in, five-out phase-out for trimming regulations.

If Democrats want to reduce the amount of workers engaged in alternative work arrangements, the best way is to keep the economy on an upward trajectory.