Is the Gig Economy the Way of the Future?

A recent piece on NPR has touted the gig economy as the future of work for millennials and Generation Z. While it’s true that gigs provide less work security and fewer benefits than stable, full-time, structured employment, they do seem to offer that meaningful and romantic Kerouac-like work where the desire for adventure is a major motivator.

So are gigs the way of the future? Are they good jobs? Should schools focus on training for them?

When we look at the data, the answers appear to be not yet.

Gigs: What and why?

What is a gig? Just what it sounds like. A gig is a freelance project, a short-term job, or a “side-hustle” as Uber likes to say.

Why do people work gigs? Some need extra cash. Others create gigs out of hobbies that they haven’t successfully turned into full-time jobs. (Everyone wants to be a photographer, but few manage to make ends meet with just a camera.) Many gigs are seasonal work: harvest, farmers markets, holidays, weddings, festivals, concerts. Still others (think of college students) flock to the gig economy simply to gain real-world experience—so they don’t have to work gigs.

How many people work in gigs?

A precise number is hard to calculate. According to a 2016 report by Emergent Research and MBO Partners, there are 30 million full-time and part-time gig workers. This month, Upwork and the Freelancers Union calculated much higher: as many as 55 million, or 35% of the US workforce. Intuit research from 2015 showed that 36% of the workforce takes part in side jobs and that by 2020 it will be 43%. The Department of Labor has plans to start measuring and reporting on the actual size this year.

What jobs are gigs?

Gig jobs can be anything, so quantification is tricky. Generally speaking, if you engage in the gig economy, you’ll be classified as an independent contractor in the tax records.  But, if we want to think about it in more of an aggregate, big-picture way, it appears that gigs commonly appear in several areas:

1. The arts (writing, graphic design, photography)
2. Personal and homecare (in-home healthcare, yard care, housekeepers, fitness trainers, barbers, hairdressers)
3. Construction (roofers) and skilled trades
4. Sales (door-to-door work, real-estate, street vendors)
5. Secretaries and office assistance (personal assistants, bookkeepers)
6. Transportation (ride-sharing, driving, and material moving/handling)

Using self-employed data to study the gig economy

By exploring the trends for self-employed workers in each of these categories, we can gain perspective on the gigs themselves in terms of job growth, wages, and demand. Then we will better evaluate whether gigs will likely be the future of work for many people entering the workforce.

Why does self-employed data help us here? First, because many gigs (as part-time or freelance work) occur in the same areas as self-employment—which, unlike the gig economy, is reasonably well measured using administrative data provided by the US government. Second, the self-employed are sole-proprietors who work for themselves as their main form of income; hence, their work is often gig-like. They often move from job-to-job and are the “romantic” workers who depend on themselves and don’t really fit into the big corporate America structures. They are also distinguished from “employees”: people who work for other people/employers.

Also of note: Many major industries like health care (hospitals, doctor’s offices), manufacturing (factories), education (schools, colleges), retail trade (malls), IT (software companies), management (skyscrapers), accommodation (hotels), and government (big gray boxy buildings built in the 60s) do not lend themselves to self-employment or gigs. They depend on large, established structures staffed with regular worker bees. A few self-employed or freelance people might help them out from time to time (like groundskeepers for hotels, or web designers for schools), but they aren’t key to the full-time payroll.

Do gigs make good jobs? Should the education system focus on preparing students for gigs?

With the explosion of the gig economy, the question arises: Should colleges offer curriculum that prepares students specifically for gigs? That depends on the nature of the gigs themselves and how much they pay, since only gigs that pay enough to meet certain financial goals—such as support a family or purchase a home—should be considered worthy of official training and investment.

According to the latest Emsi data, there are 10.3M self-employed workers across the nation. This is 6.4% of the total U.S. workforce (159M). From 2013 to 2017, jobs for employees (folks on the payroll of a boss or business) grew steadily by some 9.3M jobs (7%) while jobs for self-employed increased by 4% (380,000 jobs). Self-employment is also a lot more volatile. Over the past five years it has ebbed and flowed while the covered or employee workforce has grown steadily.

Also of note, in 2013 there were 14.2 employee jobs for every one self-employed job. In 2017, that ratio widened slightly to 14.9 employees to every self-employed—likely because of a growing labor market. Within the major job sectors, more and more self-employed workers are shifting to full-time employee work. Employers can provide more steady work and benefits that the self-employed likely struggle to afford on their own.

These are the types of jobs with the highest percentage of self-employed workers:

1. Personal & home care – maids/housekeepers, janitors/cleaners, animal caretakers, barbers/hairdressers, manicurists/pedicurists, childcare workers, fitness trainers, in-home health care providers
2. Skilled trades – electricians, carpenters, roofers, plumbers, laborers
3. Creative jobs – graphic design, creative writing, musicians, photographers
4. Agriculture – farmers and ranchers
5. Transportation – truck drivers, taxi drivers (including ride-sharing)
6. Sales – real estate brokers, insurance sales, door-to-door sales
7. Office & finance – secretaries and administrative assistance, bookkeepers, accountants.
8. IT – web designers
9. Educators – self-enrichment teachers

For the purpose of this analysis, we isolated 40 common gig-like occupations that contain at least 30,000 self-employed workers. (Other job categories contain fewer and aren’t considered here.) We removed occupations such as doctors and lawyers since we wouldn’t associate such work—once you’ve spent all that time in school and need to keep up your licenses and training—as gigs.

About 21% of workers for these 40 occupations (5.4M out of 25M workers) are self-employed. Here is what we found.

1. Personal & home care

By far the biggest sector for self-employment is a combination of healthcare support, building and grounds maintenance, and personal care and service. Twelve of the 40 self-employed jobs (and over 40% of all self-employed workers from a raw numbers point of view) fall into this category.

From 2013 to 2017, these jobs grew by 6%, adding some 126,000 new jobs. On average, they pay $11.50 per hour—significantly below the national average, which is $22.00 per hour. These jobs require either no formal education or a non-degree certificate.

The fastest growing job is fitness trainer (21% growth). There are 47,000 self-employed fitness trainers across the US. Average wages are $17.28 per hour. Self-employed trainers make up 15% of the total trainer workforce (302,000). Employee fitness trainers earn a bit more than the self-employed (average of $18.41, largely due to benefits).

The largest occupation in this category is childcare workers. There are 509,000 of them and their average wage is only $6.77. Many of them might not work full 40-hour weeks, which brings the average wage down.

2. Skilled trades

The second largest self-employed sector is skilled trades. Seven of the 40 jobs are in this category, employing 824,000 people. Like the jobs in the previous sector, these jobs require either no formal education or only a non-degree certificate. The average wage is slightly higher at $13.71.

But the key observation here is that self-employment in the skilled trades has been pretty flat over the past five years. (In contrast, the “employee workforce” grew by nearly 393,000 new jobs, or 12% growth.) The only self-employed occupation that grew here is construction laborers (13,315 new jobs, 4% growth). Everything else declined, most notably carpenters (shedding 16,300 jobs).

3. Creative jobs

The third sector is the one that comes to mind when we think of gigs: the arts. They include seven of the 40 jobs and represent 9% (457,000) of the jobs. Writers and authors are the most plentiful (89,300), followed by photographers (86,300). Coaches and scouts have grown the most: 6,000 new jobs (18%). The highest-paying job is interior designers, earning an average of almost $20 per hour. Unlike the previous two sectors, many of these jobs require formal education. Five of the seven typically need bachelor’s degrees. Overall these jobs grew by 9% over the past five years. They also average about $15.40 per hour.

4. Sales

Self-employed sales jobs are largely represented by real-estate brokers and agents and door-to-door workers and street vendors. There are some 339,000 across the nation, and like a lot of the other categories, have declined since 2013, and do not typically require any formal education. However, since employee sales jobs are growing (5%) and typically offer attractive wages, the examples here might still make good side gigs. 

5. Office & finance

The highest-paying group of self-employed jobs on this list are office and finance jobs.  This is largely because we include personal financial advisors (average wage is $37.42 per hour) and accountants (average wage is $26.62 per hour). The major thing to note here is that these jobs are not growing from a self-employment point of view.

6. Transportation

The fifth sector is another well-known example of the gig economy: drivers. Companies like Uber and Lyft have big brands and put lots of money into advertising to persuade people to give ride-sharing a try. People who report driving as their primary form of income has climbed by nearly 20% in just five years. Right now we see 90,000 individuals work as self-employed drivers and another 300,000 people do it as employees.

Even larger than driving and ride-sharing is trucking, containing some 206,000 self-employed people, but declining over the past five years. In contrast, employee truck drivers (currently 2M) have grown by 8%. It is likely that self-employed truckers are attracted by the higher wages and better benefits of employee work and are being drawn into the companies as full-time employees.

7. Agriculture

There are 407,000 self-employed people working as farmers and ranchers. While this category represents 8% of the jobs on our list, it has declined the most since 2013 (9%). As you can imagine, much of this work is seasonal and often without high wages.

8 & 9. IT & Educators

Lastly, we have IT jobs (mainly web developers) and educators (mainly self-enrichment teachers). Of course, lots of IT and teaching positions could freelance, but none of them tend to have very high levels of self-employment compared to web developers and self-enrichment teachers. Unlike many other self-employed jobs, these two have actually shown decent growth since 2013.

Skills

If you want to pursue gig work, what skills do you need? First, you’ll need up-to-date skills related to your craft. Web developers need to be amazing web developers, photographers need to be fantastic photographers. But to succeed at freelancing, that’s just the beginning, which might be the primary drawback of gig work in these areas. When you’re a freelancer, you are essentially your own business. You’ll need to sell and negotiate prices, be your own project manager, keep your books, market your services, and communicate with your clients. See valuable discussion about this here, here, and here.

Essentially, very few of us out there have the combination of incredible technical skills (think about a super talented graphic designer who can make anything), organizational skills (think someone who can keep their books), and sales skills (think about the graphic designer convincing you to pay him top dollars for his work). This is what truly makes gig work work!

What Do Online Profiles Say?

So far, we’ve used administrative data from government sources in our analysis. Before concluding, let’s quickly analyze the creative jobs using Emsi’s new dataset that explore professional online profles.

Out of 65 million online professional profiles, there are 512,000 for fine artists, graphic designers, musicians, singers, coaches, scouts, writers, interior designers, and photographers. They are concentrated in the usual spots: New York City, Los Angeles, Chicago, San Francisco, etc. About 2,000 of the profiles we tracked were tagged with “self-employed” or “freelance.”

For employee workers, they reported working in companies like Lifetouch, Beachbody, the US Army, Walt Disney, Merrill Lynch, and Apple. So while many creative types work for themselves, it appears that many more are employed at big companies that can likely pay a lot more.

Overall: Sure, gigs might be the way of the future…for some

So should jobseekers go for gigs? Should schools train for them?

For now, although the gig economy is big and definitely growing, it is probably the key to a great future for only a small number of us, given the lower wages and higher instability. Self-employed people (those working in gig-friendly areas) generally earn less and don’t make up as many jobs as we tend to think. On top of that, every career sector except two (IT and the arts) shed self-employed jobs in favor of full-time employee jobs from 2013 to 2017.

And since many of the jobs in the gig economy do not require much or any formal education (think about the huge number of skilled trades, personal and home care, etc) schools don’t necessarily need to focus on training (other than perhaps some vocational certificates) for “gigs” specifically. Job growth tends to be spikey and unpredictable. Look at the chart below that compares the jobs requiring further education with the jobs that don’t. In each case, the more education you have, the less erratic the job growth.

If any training does take place, it should focus on instilling the skills in need throughout the labor market—technical skills that will help them qualify for jobs and that will help them keep jobs (like customer service, organization, and sales ability).

Now, it might be true that gig work congregates in the arts and IT, both of which are growing areas filled with demand. However, the data reveals that self-employed IT workers aren’t nearly as numerous as the self-employed in other sectors. Most of the lucrative employment occurs inside businesses, not in coffee shops and basements. Of course it’s possible to make good money freelancing; we all have that artistic friend who is really good at doing their own thing, but that person is an outlier.

As for the arts, it does appear that many of these folks will be major participants in the gig economy of the future. But it is not an easy way to go. Wages are generally mediocre and competition is high. If you want to make a career out of being creative, remember the skills you need as a freelancer: Be exceptionally good at your work, be able to sell and charge a lot, and be able to manage your own projects. If this isn’t you, then I suggest another form of employment.

Overall, gigs appear to be great opportunities to earn extra cash or gain experience, but — for now — precious few would actually offer full-time, long-term employment.

For more about the data, feel free to email Rob Sentz ([email protected]).

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