I’ve seen the future and it’s much like the present, only longer.
– Dan Quisenberry
As has been discussed in these pages, the California Legislature in the closing weeks of this year’s session chose not to address the state Supreme Court ruling on Dynamex. The Dynamex case, issued in April this year, effectively tightened the standards under which workers in California can be classified as independent contractors rather than employees. Business interests in the state wanted the Legislature to suspend the decision for a year until compromise language could be crafted, but the Legislature refused.
The desires of labor unions to preserve the ruling certainly played a part, however political leaders in the Legislature argued that large transformations taking place in the labor economy required caution. Assembly Speaker Anthony Rendon noted, “Ultimately, this decision is about the future of the way work looks. And that requires us to be thoughtful and deliberate.”
That explanation sounds plausible, especially given all of the talk about the emerging “gig” economy.” A recent Washington Post article, for example, quotes Diane Mulcahy, a lecturer at Babson College and author of The Gig Economy: “We’re seeing only one trend here, which is that the gig economy is big and getting bigger.”
What is the gig economy? It essentially comprises alternative work arrangements like short-term projects and freelance work, as opposed to full-time employment with a company. Increasingly it involves the use of digital platforms on websites and mobile phones. Think Uber and TaskRabbit as examples.
Says Mulcahy, “Companies will do just about anything to avoid hiring full-time employees. Add to that the fact that there is no job security anymore, and workers are increasingly aware that they need to work differently if they want to create any sort of stability for themselves.”
A growing gig economy – and the upheavals in employer-employee relationships this entails – certainly appears ominous. The Legislature’s prudence seems warranted.
But what if the gig economy isn’t really the future of work after all?
Day by day, we’re seeing increasing evidence that this anxiety is misplaced because the work arrangements of the future will continue to look much like those of today.
Consider the report issued last week by the JPMorgan Chase Institute on the “online platform economy.” JPMorgan Chase tracked and analyzed 38 million payments directed through 128 different online platforms to 2.3 million different checking accounts from October 2012 to March 2018. JP Morgan Chase found, among other things, that most participants in the online platform economy are active for just a few months out of the year. Additionally, their average earnings from online platforms represent only about 20 percent of their total take-home income.
In other words, most gig workers do not rely on gig work as their main job. It’s just a way of making extra money.
This report is consistent with a recent analysis by the U.S. Bureau of Labor Statistics that shows that the percentage of Americans with alternative work arrangements actually decreased between 2005 and 2017, from 10.7 percent to 10.1 percent. The BLS statistics are based on the Current Population Survey, which asks workers about their main job. If gig work were becoming more prominent in the economy as people’s primary source of income, these numbers would have grown over time.
So the gig economy appears to be supplementing traditional work arrangements, not replacing them.
Why does this matter?
All of the focus on the gig economy, particularly the online variety, has obscured the fact that there are hundreds of thousands of self-employed independent contractors in California whose jobs are their livelihoods. Not Uber drivers, but doctors, construction workers, consultants and others. Don’t forget that independent contracting existed long before the internet gave rise to online platforms.
These independent contractors have been hurt by the Dynamex ruling, which has made previously acceptable work arrangements illegal. Notable in the Sacramento area is the story of Bottle & Barlow, whose entire seven-person staff of independent contractors quit after the ruling rather than be reclassified as employees.
If the Legislature actually wants to be thoughtful and deliberate about the future of work, they should fix the Dynamex ruling immediately and then focus their attention on reducing the cost of living in the state and the regulatory barriers that inhibit economic activity. Put another way, rather than upend people’s livelihoods, they should address the underlying reasons why workers might feel compelled to supplement their incomes through the gig economy.
Otherwise, I have seen the future of work and it’s much like the present. Only everyone is working longer hours.
Dr. Justin L. Adams is the President and Chief Economist of Encina Advisors, LLC, a Davis-based research and analysis firm.