I s the U.S. increasingly a freelance nation with a growing flexible workforce or not? Is the ‘gig economy’ real? The Wall Street Journal says no. Moody’s says no. Freelancers Union says yes. Economists Larry Katz and Alan Krueger say yes.
In this post in our “Future of Work” blog series, we look at the controversy and gauge the size of the flexible workforce in the U.S. Then we consider what this means for employers as well as what they can do to quantify and optimize their own flexible workforce.
Measuring the nation’s flexible workforce
Why the controversy over whether there really is a flexible workforce revolution? One reason: we’re lacking good data.
The Bureau of Labor Statistics tracks workers in different categories, but these categories haven’t kept up with the reality of today’s flexible workforce. The Current Population Survey from the BLS tracks unincorporated self-employed workers, part-time workers, and workers reporting multiple jobs—with curious results.
The unincorporated self-employed category represents only 6.5% of all those employed, far less than the 30% figure bandied about the media, and has been decreasing since a high in 2005. The number of workers reporting multiple jobs has also been decreasing in recent years, according to these CPS figures, leading Moody’s to say, “we are not a nation of freelancers” and the Wall Street Journal to doubt the reality of a ‘gig economy’.
Recognizing the limitations of the CPS employment statistics, last April the Government Accounting Office released a supplementary report measuring the contingent workforce and found that 40% of the employed were in other than full-time employment:
- Agency temps: 1.3%
- On-call workers (people called to work when needed): 3.5%
- Contract company workers: 3.0%
- Independent contractors who provide a product or service and find their own customers: 12.9%
- Self-employed workers such as shop and restaurant owners: 3.3%
- Standard part-time workers: 16.2%
This gets us pretty close to the number cited by The Freelancers Union, that 34% of the country’s workforce is freelancers, with that total breaking down into five categories: independent contractors, moonlighters, diversified workers combining traditional work with freelance, temporary workers, and freelance business workers. Take the 16% of part-time workers away from the total above, and you get to the same figure: 34% of the workforce in alternative arrangements.
Why do the CPS numbers fail to reflect that large portions of the workforce are apparently engaged in flexible work arrangements? Economists Katz and Krueger analyzed 1099 data representing self-employment income alongside the CPS figures. They found that many 1099 workers don’t consider themselves self-employed or multiple jobholders. But workers like those are exactly who employers might look to in order to more flexibly meet labor demand.
Employers, too, need to measure their workforce
The increasing flexibility of the workforce means increasing flexibility for companies to optimize their workforce mix. It’s less important to employers how large the flexible workforce is than how they can best take advantage of it. However, based on the numbers above, it seems a fair bet that at least 30% of the nation’s workforce can be considered flexible.
Just like as a nation we need to know the composition of our workforce, companies need to accurately quantify their workforce before they can optimize it. Workforce analytics is every bit as important—maybe more important—at the employer level as at the national level.
To understand and optimize your workforce and take advantage of flexible possibilities, you need to:
- Track your contingent workforce – not just your full-time employees.
- Combine your contingent workforce data with your full-time employee data – to get a picture of your total workforce.
- Understand the work that your workforce is doing – via enriched data normalized with standard occupational and skills markups.
- Collect and analyze outcomes over time, with reference to the employment structures and employees involved – so that you can predict which structures and types of employees will give you the best outcomes in the future.
How do you do this? Incorporate a workforce analytics strategy into your vendor management system (VMS) and contingent workforce program. Using the right technology, your program leaders should be able to gain a holistic and historic view of your end-to-end contingent workforce and historical workforce trends.
This insight into business-critical data―like headcount, supplier performance, program spend, and compliance and risk mitigation tasks―can empower you to elevate your program decision-making. You’ll reach a new level of program intelligence, so you can adjust your contingent workforce and cost structures in response to changing business conditions, and ultimately, get the most from your investment in your contingent workforce.