Gig workers are an active part of the U.S. economy, with the drivers for ride-share companies Lyft and Uber among the most visible. But the contributions of gig workers are being underestimated by economic policymakers.

That’s because of shortcomings in a key survey used to measure U.S. employment. The survey hasn’t caught with times when gig work companies are important employers and many workers rely on gig work for extra money – or even to make ends meet.

Research indicates as many as 7 million workers may be getting missed. Economists say policymakers need better measures of gig work, or they don’t have a true picture of the labor markets. 

JAY LINDSAY:

Charles Clemons Muhammed is a lifelong Boston guy with stories to share, and the personality to make them interesting – if you happen to settle into the back seat when he’s driving for Lyft or Uber.  

He claims lineage on his mother’s side from the Mayflower Pilgrims and on his father’s from the Balanta people of the west coast of Africa, before they were stolen into slavery.

CHARLES CLEMONS MUHAMMED:

So, I am the fabric of America.

JAY LINDSAY:

The 62-year-old divorced father of six has worked as a cop, run for state representative and mayor, and he’s an entrepreneur.

For decades, he ran his own limo service, and that love of driving carried into his work now for the two biggest ride-sharing apps. But his current job is about more than love.

CHARLES CLEMONS MUHAMMED:

And my motto is, if my tires don't roll, then the dough don't roll. Okay?

It's my main income, so it's very important that I can make between $1,000 to $2,000 a week.

And for me, my bottom line is every mile, every toll. Everything counts when you run a business. And basically, I'm running a business. I am the business.

JAY LINDSAY:

Charles may see himself as a business, but do employment surveys and policymakers see him at all?

Federal Reserve Bank of Boston economist Mary Burke says the hours that so-called “gig” workers like Charles are putting in are being undercounted in official employment stats. And that’s because of shortcomings in the key survey that measures U.S. employment.

The survey hasn’t caught up with a time when app-based companies like Lyft, and Uber, and DoorDash, and Instacart are big names. And that fact leaves a pretty big hole when policymakers try to assess an economy in which gig work can be a main income source, a side hustle, or a lifeline.

Burke says policymakers need a better indicator of gig work numbers, or they don’t have a true picture of the labor market.

MARY BURKE:

I think the most important thing about it is just understanding how people are getting by, what they're doing, what the labor market is giving them, and what it's not giving them.

JAY LINDSAY:

I’m Jay Lindsay, and this is Six Hundred Atlantic, a podcast produced by the Boston Fed.

This season is focusing on issues discussed at our 67^th Economic Conference, which looked at “full employment,” half of the Fed’s so-called dual mandate from Congress. The other half of the mandate is “stable prices,” and the Fed’s job is to enable and promote both.

As discussed in earlier episodes, price stability is a lot easier to define and track than full employment, which varies over time based on changing business conditions. But the Fed’s mandate requires it to care about both equally, and it’s one reason Burke is looking at gig work.

Her research indicates several key employment measures are affected by undercounting gig workers, including the number of workers participating in the economy. Burke says it could be as high as an extra 7 million workers per month.

Boston Fed Research Director Egon Zakrajšek compares what we need to know about the economy to an iceberg, because most of it is below the surface. But even though the data is hard to see, we still need to see it.

EGON ZAKRAJSEK:

So, if you don't get the right picture of economic activity, how do you calibrate monetary policy in that sense?

We need to invest into, you know, knowing, measuring right activity in labor markets and product markets and stuff like that, because that will allow us to calibrate monetary policy effectively and hence achieve the dual mandates that we are tasked with by Congress.

JAY LINDSAY:

Gig work has been around a lot longer than your favorite rideshare app. Jazz musicians started calling their performances “gigs” in the 1920s, and the word evolved into slang for work in all sorts of music, then work in all sorts of fields.

New Yorker editor Tina Brown coined the term “the gig economy” in 2009. She used it describe the trend of workers in the digital marketplace pursuing (quote) “a bunch of free-floating projects, consultancies, and part-time bits and pieces.”

But the gig economy is not all about bits-and-pieces anymore. Burke notes it encompasses a wide range of full- and part-time activities, and countless goods and services – from car rides, to handyman work, to hairstyling.      

MARY BURKE:

But the thing that all of these activities have in common is that you don't have an employer in the traditional sense.

They're not setting your schedule, you set your own schedule, how many hours you want to work and when you want to work. And then you also don't get benefits. You're not getting a guarantee of a minimum wage, you don't get a pension, you don't get retirement benefits, you're not paying into Social Security unless you do all these things for yourself. So, you're really just self-employed. But it’s also not like a typical self-employment gig, where, like, you’re a freelance lawyer, and you do it full-time. At least typically.

JAY LINDSAY:

The flexibility of this informal work is what sells it for many. It keeps Charles out of Boston’s soul-crushing rush-hour traffic. He hits the road at 2:30 every morning until about 6:30. He’s back at around 10, until about 1 in the afternoon – before traffic heats up again. Then, he might grab a couple hours starting at 8 at night.

Or he might not.

CHARLES CLEMONS MUHAMMED:

I drive when I want to drive.

JAY LINDSAY:

For other gig workers, the flexibility just makes working possible. Burke’s research shows a significant share of gig workers have children at home. So, gig work can enable them to juggle a job and caring for a child.

The main tool to count those employed in gig work is the Current Population Survey, which is known as the CPS. Boston Fed labor economist Chris Foote, one of the conference’s organizers, says the CPS was built for different times.

CHRIS FOOTE:

Now, I've studied the CPS for many years, and many times I describe it as, the CPS was kind of designed way back in the '30s and '40s to see if we had enough manpower to beat Hitler. All right? It was like how many people have jobs? And back then, a lot of jobs were eight hours a day. You fill your lunch bucket, you go to the factory, you come back after eight hours, that is a job. Or you go to an office. The jobs were not often fluid as we have in the United States today. You didn’t have Uber drivers, or you didn’t have the internet allowing you to do tasks for pay.

JAY LINDSAY:

Research has indicated that relying on the CPS has resulted in significant numbers of active gig workers being misclassified as unemployed or out of the workforce.

To see if they could fill the survey’s gaps, Burke and former Boston Fed economist Anat Bracha dove into eight years of data from a tool they designed that measures gig work, the Survey of Informal Work Participation.

Their exhaustive work covered the years 2015 to 2022, and a profile of a typical gig worker emerged.

Just over half of gig workers they observed – about 55 percent – were women. They also tended to be younger, with a disproportionate share under 30 and fewer over 65.

There were fewer at the top income levels, but they weren’t poor, either. Most already had a job, and likely multiple part-time jobs.

And only about 1 in 9 said gig work is their primary source of income, as they pull in an average of $300 to $400 a month.

MARY BURKE:

But I would say the typical case is somebody doing it as a side hustle and maybe has multiple different types of gig work.

JAY LINDSAY:

The research by Burke and Bracha, who’s now at Hebrew University Business School, also illustrated the impact of undercounting this informal work.

It indicated that if gig work was counted properly, the employment rate would have ranged between 2.4 to 5.5 percentage points higher per year over the eight years studied.

In a separate analysis, the researchers looked at employment numbers from December 2017. They concluded the number of uncounted workers that month ranged from 316,000 to 7 million, depending on the assumptions you make.

MARY BURKE:

So, the seven million, we think, is closer to probably the truth. The 316,000 number is a really, really conservative lower bound.

So, again, as a share, the U.S. has a quite large population, it looks like a modest number of percentage points. But, yeah, and you think, ‘Wow, that's actually a non-trivial number of people who are engaging in this kind of work and yet aren't getting counted.’

JAY LINDSAY:

Still, Burke cautions against reflexively assuming that finding a hidden population of active workers is good news for the labor market.

MARY BURKE:

Okay, there's more employed people, that means there's fewer unemployed people, you'd think, ‘That's a good thing, the labor market is better than we thought.’ Okay. So that's one way of reading the number. The other way of reading the results is that, wait a minute, the fact that people are having to do this work on top of already having a job suggests that there was hardship. There was sort of a hardship or something missing that they needed to compensate for. They needed to earn extra money. And it could point to, well, what they really want is a full-time job when they only have a part-time job.

JAY LINDSAY:

It’s clear to researchers that updating the CPS to better count informal work needs to happen, but there’s a wrinkle: One reason the survey is undercounting gig work is because gig workers sometime aren’t counting themselves. Many don’t describe themselves as employed in the survey.

Burke says there are several possible reasons for that. Some are retired and consider themselves out of the workforce, even though they’re not.

Others are entrepreneurs using gig work to support themselves while they get their primary venture off the ground.

And some see it as a hobby, or “just for fun.”

MARY BURKE:

Or maybe they know that they're working, but they're like, “This isn't a real job.”

JAY LINDSAY:

So, how can the survey get past workers self-perceptions? Burke says one way is by making sure the survey drills into the details.

MARY BURKE:

This survey would have to ask, "Did you do any side jobs? Did you do any yard work? Did you do any driving for Uber? Did you do any work on these platforms?"

And so, the survey has to really get very specific. Now, that would be a big lift, that would be a big change to the survey. So, what is, in fact, in the works, the Bureau of Labor statistics is developing probes along these lines, and they're going to supplement their regular survey with these additional questions. And that seems, to me, appropriate, because, as I said, this kind of work is qualitatively different from other work, and we want to track it separately.

JAY LINDSAY:

Burke believes gig workers could represent a hidden labor pool for traditional employers. That’s because her research with Bracha indicated that 30% to 40% of gig workers would be willing to leave gig work behind for a more formal payroll job.

But they’d still prioritize flexibility. In fact, to preserve that flexibility many gig workers even seem willing to put up with lower wages, less employment stability, and no benefits.

MARY BURKE:

So, I think there is potentially a pool of workers that employers could tap, but then they might have to offer more flexibility in order to get them.

JAY LINDSAY:

Charles is not interested in a more traditional job. He enjoys the freedom his work gives him. And he says though his type of work may be overlooked in official labor statistics, it’s contributing to maximizing employment.

He sees Boston when the city’s public transportation is shut down in those early morning hours. But the workday is starting for some, and he’s one of the only rides on the road.

CHARLES CLEMONS MUHAMMED:

You have people that have to be to work at five o'clock in the morning, people that have to be to work at four o'clock in the morning, three o'clock in the morning, who's going to get them? Who's going to pick them up?

JAY LINDSAY:

Charles isn’t dealing with barriers to more formal work because he’s just not that into it. But we’ve already seen this season how real those barriers can be.

In Episode 2, we’ve looked at obstacles faced by women with children. Some have had to step back from the workforce due to the demands of so-called “greedy jobs.”

In the next and final episode, we’ll look at another pool of workers facing significant barriers to traditional jobs – those with criminal histories. Studies show they have higher rates of unemployment and stay unemployed longer.

Why? One undeniable issue is the stigma of that criminal history. And policies that aim to ease the burden of that stigma have backfired. 

What can be done to remove obstacles to employment for people with criminal histories? Some say an honest shot at a second chance is all they want.

SARAH REHMAN:

My charges will always come up. My criminal history will always come up.

It still follows you, and it feels like a life sentence, because you continually have to address that, and it continually comes up as a barrier.

Second chances are very important. We need to allow people to leave their mistakes, their past behind at some point.

JAY LINDSAY:

That’s next time on Six Hundred Atlantic.

JAY LINDSAY:

Thanks for listening to Season 6 of Six Hundred Atlantic. You can find interviews and our first five seasons and subscribe to our mailing list at bostonfed.org/six-hundred-atlantic. And we'd love it if you would rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app.

The producers would like to thank our contributors for their time and insights. They are Mary Burke, Chris Foote, Charles Clemons Muhammed, Sarah Rehman, and Egon Zakrajsek.

This has been “Rethinking Full Employment,” the sixth season of the Boston Fed’s Six Hundred Atlantic podcast.