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August 23, 2018

New data shed light on why some workers prefer non-traditional employment

August 23, 2018

Alternative employment arrangements, including “gig work,” threaten to disrupt the traditional employment model. Workers are less likely to receive or be eligible for benefits, have fewer protections, and may have greater income variability. At the same time, jobs in the gig economy and other alternative employment arrangements may allow workers more flexibility and the ability to decide where and how much to work.

Recently released Current Population Survey (CPS) data from the Bureau of Labor Statistics (BLS) shed light on the challenges and opportunities faced by workers with alternative employment arrangements. We focus our analysis of the data on self-employed independent contractors, who are particularly likely to be ineligible for benefits and protections available in many traditional jobs.

Independent contracting is the most common type of alternative employment arrangement in the survey, accounting for about 7 percent of total employment in 2017. Participants of the gig economy are often classified (sometimes incorrectly) as independent contractors, which include consultants and freelancers. Of this group, around 9 million or 85 percent also reported being self-employed.

Independent contractors cite independence and flexibility as important factors

Surprisingly, only 20 percent of self-employed independent contractors were in their current arrangement because it offered more money, it was the only type of work available, or they hoped to gain experience or become a permanent hire.

The relatively low share citing economic reasons as their primary motivation for working as independent contractors is not consistent with either the perception that these are precarious positions taken as a last resort or the only option, or with the idea that these jobs are particularly lucrative.

Indeed, the survey found that median weekly earnings were similar to or slightly lower for independent contractors overall ($851) compared with traditional workers ($884).

Instead, independent contractors more often cited nonmonetary reasons related to independence and flexibility as the most common rationale for their current work arrangements. Being one’s own boss was the most frequently declared motivation, selected by 31 percent of self-employed independent contractors as the reason for their current work arrangement.

The next most common reason workers cited was flexible scheduling, which was cited by 27 percent, and another 5 percent referenced other family or personal obligations, including child care issues and being in school or training, as their primary rationale.

An additional 11 percent cited other reasons including health limitations, retirement and Social Security earnings limits, and the nature of work or seasonality, while 5 percent did not know why or did not otherwise respond.

Most independent contractors prefer their current work arrangements

Around 80 percent of self-employed independent contractors preferred their current employment arrangement. A majority stated they would prefer traditional employment only among those who cited being in school or training as the reason for their current work arrangement.

For those who mentioned other reasons for their employment arrangements, less than half indicated that they would prefer traditional employment. Those that cited independence and flexibility as their rationale for being self-employed independent contractors were among the groups with the greatest preference for their current arrangement.

These preferences are evidenced by the amount of time workers have been independent contractors and how long they planned to remain self-employed. Typically, self-employed independent contractors have been working in this work arrangement for 10 years. Our conservative estimate also indicates that the typical respondent expects to be self-employed for another 5 years.

Independent contractors have similar preferences and motivations of those in other alternative employment arrangements

These findings parallel those of a recent Gallup study. Sixty-four percent of gig workers say they are doing their preferred type of work (although their overall share is smaller than that of traditional employees’ preference for their arrangements).

Both studies also show variation by how much independence and control these employees have over their arrangements. Gallup found that independent gig workers, including online platform workers (e.g., Uber drivers) and independent contractors, were more satisfied than both traditional workers and more-contingent gig workers including temporary and on-call workers. 

Similarly, BLS found that most contingent workers would prefer a permanent job. Contingent workers are those who did not expect their job to last, and may or may not include workers with alternative arrangements. Only 3 percent of independent contractors in the CPS data fall into this group.

Less than half of workers in other alternative employment arrangements, including on-call and temporary help agency workers, also stated they preferred their current arrangement compared with almost 80 percent of independent contractors overall.

We need better data on independent contractors, other alternative work arrangements, and the broader gig economy

The new CPS data focus on workers primary jobs, so the data may overlook those who take on gig work or other alternative employment arrangements as secondary or supplemental jobs, or via a more traditional employment relationship.

Variables in the survey that specifically ask about participation in the gig economy (i.e., electronically mediated employment) for worker’s primary jobs have also yet to be released, which may help clarify this issue.

We must continue to study these workers’ diverse characteristics, outcomes, and motivations. Better data on participants in the gig economy and those in alternative work arrangements can help us understand how workers are responding to these positions’ challenges such as lack of benefits, steady work, and legal protections and potential advantages like independence and flexibility.

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