When two labor market scholars set out to study a decade of job growth, they shed light on changes in how we work that had been underway, though largely under the radar, for decades. Originally conceived of as contract work, “alternative” work today includes a range of work performed by outsourced teams; temporary and on-call workers; contractors; freelancers; gig workers, who are paid for tasks; and the crowd or outsourced networks.
The big news was that the alternative workforce turned out to be not so alternative after all. It had become mainstream. Like a snowball rolling down a mountain after a blizzard, the alternative workforce had steadily been growing in size, and picking up momentum for more than 75 years. Today, more than one-third of U.S. workers (36 percent) participate in the gig economy, either through their primary or secondary jobs. Most notably, for 29 percent of all workers, the alternative work arrangement is their primary job rather than a side hustle. By 2023, the percentage of the workers that participate in the gig economy or have worked independently at some point during their careers, is expected to grow to half of the workforce in the United States (52 percent).
The High Price of Flexibility
In the pursuit of greater efficiency for companies and under the guise of offering more flexibility to the workforce, we have been fueling the growth of the alternative workforce for more than half a century. Alternative work can offer a clear upside to people seeking a little extra cash. However, it can also presents significant drawbacks to those who seek a consistent or predictable income with benefits. The flexibility that alternative work arrangements offer has been widely cited as a key advantage. This flexibility comes at a steep price. On average, gig workers earn about 58 percent less than full-time employees and more than half do not have access to employer provided benefits.
Though alternative work can offer flexible schedules that can improve work-life balance and well-being, they are not necessarily worker-friendly. Alternative work jobs often have irregular schedules that do not allow workers to anticipate when they will work from one week to the next. Many workers are on-call or work evenings and weekends.
A Tale of Two Janitors
An increasing number of people are spending significant portions of their careers working for third-party business services companies. The farther away alternative workers are from the company buying their services, the worse their opportunities, prospects, and benefits. The New York Times offered a snapshot of the strikingly different opportunities available to two employees over time as some companies have moved to a focus on core competence while outsourcing the rest.
A janitor working at Apple headquarters in the last decade and a janitor working at Kodak in the 1980s both cleaned offices for innovative and highly profitable companies. Their wages are about the same when adjusted for inflation. However, that is where the similarities end. The janitor at Kodak was a full-time employee of Kodak who enjoyed four weeks of paid vacation per year, reimbursement of some tuition costs to attend college part time, and a bonus payment every March. When the facility she cleaned was shut down, Kodak found another job for her. The janitor cleaning the facilities at Apple had a very different experience. She is an employee of a contractor. She has not taken a vacation in years because she cannot afford the lost wages. Tuition reimbursement, bonuses or transferring to another role at Apple are not options.
The dramatic difference in the work lives of these two women is not their benefits or bonuses but the stark contrast in opportunities available when working for your employer versus working for a third party hired by your employer. The janitor at Kodak took a computer class and was soon teaching other employees how to use spreadsheet software to track inventory. She finished her college degree, was promoted to a professional-track job in information technology, and about a decade later, was the chief technology officer of the whole company. By contrast, the janitor at Apple had little opportunity to advance beyond becoming a team leader who oversaw a few other janitors, which paid 50 cents more an hour. The investment that Kodak made in an employee 35 years ago is one that fewer companies are choosing to make today.
Workers in the Platform Economy
Though the gig economy is not new, the rise of the gig economy through digital platforms is. In the context of workforce options, platforms are online talent marketplaces for a wide variety of work and skill levels.
A trend highlighted in research by Deloitte Consulting LLP is the need to improve opportunities for employees within their companies so they can try out new roles, projects and geographies without quitting their job. Recognizing the success of talent marketplaces, companies have started to replicate them internally, encouraging employees to look inside their current workplace, rather than outside, for new opportunities.
Schneider Electric discovered the power of its own internal marketplace when analytics revealed that nearly half the employees who left the organization did so because they felt they lacked visibility of growth opportunities. In 2018, the company launched an open talent market, which used artificial intelligence to match employees with short-term projects, stretch assignments, side gigs, full-time roles and mentors. The goal was to encourage employees try out the internal talent market rather than go out into the external market. Schneider found that attrition decreased in areas where the opportunity market had been launched.
Making Alternative Work a Meaningful Opportunity
The insecurity of alternative work arrangements and lack of benefits present us with opportunities to improve the support available to these workers as we create our future world of work. The protections gig workers receive are starting to shift. California is the first state to pass legislation requiring that companies treat contract workers as employees, granting gig employees in America’s largest state access to basic protections like a minimum wage and unemployment insurance. The 2019 bill is an acknowledgment that labor laws developed during the Industrial Revolution in the 1930s no longer fit today’s gig economy. New York City passed a proposal setting the country’s first-ever app-based drivers minimum wage, which went into effect in 2019.
The issue of equitable treatment for alternative workers came to a head during the COVID-19 pandemic. When the economy ground to a halt in 2008, most people without full-time jobs did not qualify for unemployment benefits because they could not claim an employer who had paid unemployment taxes. This changed with the outbreak of COVID-19. For the first time, people classified as independent workers, including freelancers and the self-employed, received unemployment benefits under the CARES Act, signed into law in March 2020. The law grants states the option of extending unemployment compensation to independent contractors and other workers who are ordinarily ineligible for unemployment benefits. As the COVID-19 stay-at-home restrictions kept many people indoors, delivery and other contract workers received unprecedented attention. Cities on lockdown even classified their work as “essential,” bringing into relief the fact that most of these workers have been denied basic protections like health care, sick leave, workers’ compensation and stable pay. It is unclear whether these temporary fixes will become permanent.
At a Crossroads
“Some people say, no, no, no, all this talk of flexibility, empowerment, are just a corporate dodge,” said economic historian Louis Hyman, a professor at the Cornell University’s School of Industrial and Labor Relations and author of Temp: How American Work, American Business, and the American Dream Became Temporary. “I don’t think so. I think that it’s actually a deep American value to desire to have autonomy. It’s a very human value to want control of your time. I think that we’re at a crossroads and we can choose to make it work for us or just to have it work us over.”