The Pew Research Center recently released a report on self-employment in the United States, which appears to contradict the storyline about the rise of the “gig economy.”
It showed that 10 percent of the civilian labor force is self-employed, which is actually a slight decline from recent years and below the levels of 1990.
Many people, including writers at the Wall Street Journal and The Economist, tie the question of self-employment rates to the questions about “gig economy” and its poster child company, Uber. If the sharing economy is on the rise, why isn’t this reflected in self-employment statistics? Shouldn’t Uber and other such companies, whose primary workforce are currently classified as independent contractors, be driving up self-employment?
This is a deceptively simple question with two potential types of explanations. The more obvious one is that the amount of popular discussion of Uber and similar companies, from mass media outlets to presidential candidates to AIER’s own economists, is disproportionate to its true size. At the end of last year, Uber had about 160,000 drivers, which is a large number but represents only one-tenth of a percent of the U.S. civilian labor force. Still, that is measuring only one company, and even if its relatively modest size cautions us against expecting big increases in self-employment, we may still be surprised the trend is down. Another potential explanation, which may not be as exciting, is to think carefully about what type of data we are using and whether it is answering the question we want to study.
The data in the Pew report came from the Current Population Survey, which is conducted by the Census Bureau for the Bureau of Labor Statistics. The survey is an immensely valuable resource for economists and other social scientists, but it is designed to answer a wide range of broad questions about American households. The self-employment statistics come from a direct question about whether the surveyed individual works for a private company, the government, or is self-employed.
It is possible this misses some of the people we are concerned about for one of two reasons. First, a worker is classified by the job he or she works the most hours. A person who is employed part time and works a few hours in the gig economy will not be counted. This rule has been constant over time, but it is possible that Uber, Airbnb and others have made it easier to be self-employed as a supplement to a worker’s main job.
It also may be that some respondents who are legally self-employed erroneously consider themselves to work for Uber, and fill in the survey accordingly. It is a pretty safe bet that these factors aren’t large enough to completely reverse the trend, but they might warn us against making too much of the measured decline.
This question is a good illustration of the strengths and weaknesses of large-scale survey data like from the survey. We can use it to get a bird’s eye view of important features of the labor market such as self-employment, and assess our perceptions of what is going on. But we cannot use it to answer precise questions about changes in the economy, especially in situations where we know the changes in how people live and work may outpace the changes in the questions.