An Empirical Snapshot of the Gig Economy: Most gig workers already have health insurance and retirement benefits and are looking to augment other income.

• Author: Brannon, Ike

California's attempt to limit the use and scope of "gig" workers--workers operating as independent contractors and not managed employees--has focused unprecedented attention on this type of worker. It has also prompted the federal and numerous state governments to reconsider how to treat workers who do not have a formal employer but instead contract with one or more firms to provide them discrete work.

In 2019, California passed Assembly Bill 5 (AB-5), which severely curtailed the ability of firms to use independent workers. The intent was to make most of these workers bona fide employees, with schedules and hours determined by the company rather than the worker. The legislation presumes, in essence, that most gig workers would prefer to be actual employees, with benefits and certain job protections not afforded to contractors.

However, ride sharing and food delivery platforms--most notably Uber and Lyft--objected to the legislation, as well as the implicit assumption that gig employees are somehow being exploited. The firms argued that most of their drivers have fulltime jobs elsewhere and that they do not want or need fringe benefits, nor another full-time job that would dictate when and where they would work. The workers simply want some extra money and gig work provides it.

The passage of AB-5 resulted in numerous other independent workers in other occupations having their work arrangements curtailed as well. For instance, it forced freelance writers who published more than 35 articles a year for a single entity to be classified as employees. That edict resulted in writers in the state losing assignments and had them up in arms. The California legislature was forced to amend the law several times to respond to the objections and lessen the unanticipated consequences of its passage.

The express purpose of the legislation was to convert platform drivers into employees. As a result, Uber, Lyft, and DoorDash launched their own ballot initiative--Proposition 22--that called for the repeal of AB-5's provisions for their drivers. The firms collectively spent over $200 million to promote its passage, and their effort succeeded. However, the issue is far from settled. New York City (and state) as well as several other states are contemplating legislation resembling California's AB-5.

At the end of 2020, the Trump administration issued a rule to simplify the determination of whether a worker is an independent contractor or an employee, as well as make it more difficult for states to impose their own determinations in place of the federal standard. The Biden administration withdrew the rule, which had not yet been made final, and its nominee for the Department of Labor (DOL) post overseeing gig workers is a strong advocate for making drivers for Uber and competing services bona fide employees.

Central to this debate, of course, is the household income, non-wage compensation, and other pecuniary benefits that accrue to gig workers relative to non-gig workers with similar skills and occupations, as well as the value they place on maintaining their independence. There is surprisingly little information on this. The DOL does not include questions about someone's status as a gig worker in its regular surveys, and its surveys that do look at this are infrequent. In short, there are limited official data available on the size of the independent workforce, their wages, and their benefits.

We conducted a survey to add to our knowledge of the gig economy. We used responses from nearly 1,100 people who do business as independent contractors to help us better understand their situation. The vast majority of the people in our survey reported that they had a full-time job in addition to their gig and spent less than 10 hours a week doing their independent contractor activity. Few of these people expressed any concern about the lack of fringe benefits from their independent contracting, as most already had access to a health care plan and retirement benefits, either through their full-time job, their spouse, or via Medicare and Social Security for the fraction of our respondents who were over age 65.

Our data suggest that most people who do gig assignments do not place a high priority on job security or fringe benefits, but instead desire a gig that has maximum flexibility to enter and exit to provide them a straightforward way to earn additional money when necessary. Attempts to restrict gig employment reduce their ability to do this and will leave many people worse off. Further, it is facile to assume that Uber, Lyft, and others will simply convert their contractors to employees and continue apace.

WHO SEEKS OUT GIG EMPLOYMENT AND WHY?

The advent of ride-sharing platforms such as Uber and Lyft and the concomitant rise in gig work is the proximate reason that governments in California and elsewhere have taken exception to independent contracting. However, workers for these firms make up a small fraction of all independent contractors in the United States.

Pre-pandemic, there...