Unmasking Gig Workers: In a groundbreaking revelation, research presented at a Boston Federal Reserve labor market conference sheds light on a potential blind spot in the U.S. government’s employment report: the millions of gig workers who might be slipping through the statistical cracks every month. This discrepancy holds significant implications for how Federal Reserve officials evaluate the job market and the associated risks of inflation.
Conducted by economists Anat Bracha, an associate professor at the Hebrew University Business School in Jerusalem, and Mary A. Burke, a senior economist at the Boston Fed, the study challenges the conventional understanding of employment metrics. The core issue lies in how gig workers, whether driving for Uber or taking on piecework jobs, perceive their employment status. It appears that many casual contract workers do not consider themselves “employed” or part of the traditional labor force, leading to responses in government surveys that may significantly undercount their actual work.
Estimates vary, ranging from a few hundred thousand to potentially as many as 13 million unaccounted gig workers. This could result in a swing of around 5 percentage points in the share of the adult population considered to be working at least part-time—an essential metric closely monitored by the U.S. central bank. While this indicates that the labor market might be “tighter” than previously thought, the researchers suggest that it might also mean the economy has more room for expansion in terms of work and production without triggering inflation.
The researchers argue that the discrepancy observed in gig worker reporting may indicate a need to adjust the benchmark for full employment. Despite the substantial amount of hidden informal work documented, inflation was not accelerating, especially in the years preceding the coronavirus pandemic. This challenges the traditional assumption that inflation is primarily driven by low unemployment and rising wages.
The study involved a meticulous examination of detailed responses to a New York Fed survey on “informal work” conducted from 2015 through 2022. By comparing responses related to work obtained via online platforms or contract jobs with sections structured similarly to the Labor Department’s monthly survey of employment status, the researchers uncovered significant inconsistencies, potentially leaving millions unaccounted for.
This revelation opens a data gap that economists have struggled to grasp in unemployment and inflation. Over the past decade, low unemployment and growing earnings have been questioned as causes of inflation. The researchers propose the Fed reassess its monetary policy since their findings imply the economy could handle greater work and production without inflation.
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The Fed’s new estimate of the “longer-run” unemployment rate, between 3.5% and 4.3%, reflects its changing labor market view. The pandemic has raised issues about whether the U.S. would experience a continuous labor shortage or an era where changing job market dynamics produce more and more productive workers.
As the gig economy continues to shape the modern workforce, the study suggests that gig workers might have more to offer. Many gig workers express a desire for additional hours of formal employment, indicating a potentially untapped labor supply. This challenges existing notions and emphasizes the need for a more nuanced understanding of the evolving employment landscape.
In conclusion, the study not only highlights the critical role gig workers play in the economy but also underscores the importance of accurate employment data for informed policy decisions. The researchers argue that a more comprehensive view of the labor market could lead to policies that benefit a broader spectrum of workers, contributing to a vibrant and inclusive economy. The intricate dance between gig work, traditional employment, and the broader economy continues to unfold, reshaping our understanding of work in the 21st century.