No Stimulus Check? Four Reasons Economists Ignore Freelancers

Economists have no idea how many people work freelance – they can’t even agree on a definition.

Gig workers. Talent. Temp. Flex talent. Flex worker. Freelancer. Hustler. Side-hustler. Self-employed. Creator. Contributor. Contingent worker. Contractor. Contract Killer. Contract Man. Girl Friday. Casual. Servicer. Provider of services. On-demand. Fissured worker. Decentralized Worker. Supplier. Sole Proprietor. Nano job. Small Enterprise. Micro Enterprise. Micro Business. Small Business. Mom-and-Pop. Guru. Hotshot. Partaker. Practitioner. Purveyor. Provider. Producer. Independent. Outworker. Go-getter. Grubstaker.

If you think it’s hard coming up with a name for these workers, imagine counting them? Economists can’t. And don’t. 

So is it any wonder the CARES Act and subsequent Covid-19 bailout packages can’t seem to figure out how to get relief checks to gig-less gig workers.

The decentralization of work — whether it’s Taskrabbit taskers assembling Ikea furniture or machine learning programmers building apps on Braintrust* — is largely unmeasured by traditional economic surveys.

Gig apps accelerated the move freelance work with the launch of TaskRabbit in 2008, Uber

UBER
in 2009, Postmates in 2011 and Lyft 2012. So in 2018, when the Bureau of Labor Statistics (BLS) released new data on “contingent workers” — the first survey since 2005 — there was much anticipation that we’d finally see proof of the Uber-effect on employment.

Instead, we saw bupkis. 

According to the BLS, four categories of contingent workers (“contract workers,” “independent contractors,” “on-call workers” and “temp workers”) added up to just 10.1% of workers, virtually unchanged since the 1990s. BS from the BLS you say? 

How could these numbers jibe with other studies that found more like 15.8% of workers were in “alternative arrangements” or so said economists Lawrence Katz and Alan Krueger in 2015. Or the Freelancer’s Union/Upwork survey that found, incredibly, that 35% of Americans freelanced in 2019, 28% of them full-time. 

“BLS statistics are just not picking up workers who do independent contracting on the side, for supplemental income in addition to a W-2 job,” says University of California economist Annette Bernhardt PhD., author of “The Gloves-off Economy.” “This is a real significant challenge to understanding what’s going on in the labor market.”

There are at least four important reasons: 

First of all these studies study how people have traditionally worked, in a single “main” job. They measure real estate agents, hair stylists, electricians and their ilk. But not moonlighters, not the Covid-19 inspired blockchain programmers or crypto day traders. Government statisticians have not targeted the identification of supplemental income.

Then there’s the fact that side-hustler’s don’t always want to be counted. They call it off-the-books for a reason. This kind of tax cheating may well be at an all-time high, as the IRS budget for enforcement has fallen 14% in the last decade even as the number of returns has expanded. Audits of people who don’t report income have become anemic. A 2019 investigation by Pulitzer Prize winner Jesse Eisinger of ProPublica found these audits, ‘“nonfilers” as they’re called, “dropped from 2.4 million in 2011 to 362,000” by 2018.

Thirdly, subcontractors are vastly under measured by the BLS. Their notion of “contractors” includes only on-site workers for, typically, one company. But it doesn’t count the window washer who works the entire block, or the work-from-home call center worker or the logo designer on Upwork

Finally, the flex workers are not well surveyed. Just-in-time manufacturing often means just-in-time workers, but they don’t make the record book. The Economic Policy Institute’s Lonnie Golden, Ph.D., found in 2015 that “ten percent of the workforce is assigned to irregular and on-call work shift times and this figure is likely low.”

The result, shocker, is that government economists are looking backwards — at how things used to be done — while the economy is moving forwards, to the future of work. That that future is as decentralized as Bitcoin and, hell, Covid-19 itself.

“In the long run there’s a real challenge to economists,” Bernhardt said in a 2016 lecture. “We tend to think that the world consists of workers who have one job. They can tell us about that one job. We can record it in data. We can analyze it. But I think increasingly we’re going to have to think about workers as having lots of different kinds of income, and generating work where and when they find it.”

Source: https://www.forbes.com/sites/coryjohnson/2020/06/30/economists-ignore-freelancers/