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'Third way' needed to count sharing workforce

It's time the "sharing" workforce came out of the shadows.

From the tax code to the monthly jobs report to the whole premise of "retirement," America's concept of work is dangerously stuck in the 20th century.

Trends that were already taking shape—work becoming untethered from the office, the mobile and cloud technological revolution, benefits being decoupled from traditional employers—have burst to the fore in the aftermath of the Great Recession, the Affordable Care Act, and the rise of the 21st century "sharing" economy.

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This holds great promise for helping America break out of its productivity slump—if only it is supported as such.

Size Matters

For starters, consider the explosion in the size of the "freelance" or flexible workforce.

That's surprisingly hard to do, actually.

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Not because the work itself is all that difficult to tally, but rather because the Labor Department, which for decades has administered the monthly employment report along with dozens of other indicators, discontinued its "Contingent Work Supplement" in 2005.

The money, apparently, ran out. The Bureau of Labor Statistics has requested funding for the supplement each budget year since 2012 to no avail.

Meantime, the Government Accountability Office, citing the need for this data, has done its own tallies. These, however, are only released about once a decade and often rely on older data. The latest release, just this April, refers to figures as of 2010 that were still heavily influenced by the recession, making its findings less helpful as a general guide of the changing workforce.

Nevertheless, there is a rough consensus based on the GAO and separate private surveys that "contingent workers" comprise at least a third, and possibly upwards of 40 percent, of today's employed workforce.

That is a huge number, with dramatic implications for how Americans order their day-to-day lives, draw their income, secure their living standards, and are provided health and retirement benefits.

On-Demand

There was a time when "contingent" or "freelance" work, societally speaking, was frowned upon.

Today, that legacy is most lasting in the suspicious way such piecemeal work is treated for tax and legal purposes. To be a traditional employee filing one W-2 form to the Internal Revenue Service is to have a vastly easier time of it than an "independent" worker dealing with numerous 1099 forms, often for small amounts, and constant regulatory changes (such as those in the Affordable Care Act).

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To be sure, legitimate concerns over tax evasion and the separation of work from the workplace do exist. These can be addressed without unnecessarily burdening or interfering with America's emerging flexible workforce, however.

The lack of respect for this work is further revealed in the words used to categorize it. Imprecise and passe terms like "temp," "contingent," and even "freelance" fail to reveal the powerful shift taking place: America in the early years of the 21st century is seeing the "on-demand" revolution take full root in the workplace.

The classification of people as either employees or independent contractors for legal purposes is also not keeping up with that reality.

"The test the California courts have developed over the 20th century for classifying workers isn't very helpful in addressing this 21st century problem," said U.S. District Judge Vince Chhabria in a March dispute over the correct status of workers for ride-sharing service Lyft Inc.

"The jury in this case will be handed a square peg and asked to choose between two round holes," said Chhabria.

Uber for Everything

The rise of the on-demand workforce encompasses far more than Lyft, its rival Uber, or similar start-ups like Airbnb, for overnight stays, that allow for new "sharing" sources of income.

And it's hardly a millennial phenomenon, although younger workers do have the highest rates of "freelance" work—and generally hope to keep it that way, as Mary Meeker, a widely followed partner at Kleiner Perkins Caulfield & Byers, has noted.

Sharon Emek's typical worker is 58 years old.

Her firm places older workers who have left the insurance industry for one reason or another with firms needing their skills.

"There aren't enough younger workers coming into the industry," said Emek, who founded the company, Work At Home Vintage Employees, or WAHVE, five years ago while partner at a large insurance brokerage.

Through rigorous testing and training, Emek is able to match workers so well that they are productive "within three days" of being assigned to an employer—and working remotely, typically from home, to boot.

"They want flexibility, freedom, and quality of life, but they also want to work hard and use their knowledge," said Emek.

Same goes for the power industry.

Nearly half the workers in the nuclear power industry are expected to retire in the next several years, said Ricky Ehrgott. Very few younger workers exist to take their place in an industry that's been decimated by regulation and public anxiety.

Not only do existing plants rely on these workers' expertise, but global demand for their technical knowledge and experience is also strong. Rev1 Power Services Inc., the firm Ehrgott's father and his partner, Richard Emery, founded in Tampa, Fla., in 2001, helps fill that void with older workers, mostly in their 60s, in various degrees of "retirement."

And it's not just nuclear—work converting coal-fired plants to gas-fired ones, or retrofitting coal plants with costly scrubbers to lower their emissions, is the lion's share of what Rev1's hundred-plus "field personnel" are doing.

"We see ourselves as a kind of Uber or LinkedIn for the industry," said Ehrgott. "Guys have spent their entire lives building this knowledge base, and they're basically just throwing it away if they don't monetize or transfer that knowledge."

Work Everywhere

Even traditional employees are becoming more and more untethered from their actual workplace, able to work flexibly—and often, working more, and possibly better, as a result.

Indeed, "work" took up an average of seven hours, 45 minutes per workday for the average employed American last year, according to the latest American Time Use Survey from the Labor Department.

That's not only a ten-minute increase, on average, over 2013—it's the most yet for this series, which began in 2003. And yet, people also found more time to sleep last year, and to watch television.

It's possible that "work" is also coming in multiple forms, from multiple sources. Of self-described freelance workers, 27% have a traditional job and "moonlight," and another 18% do a mix of full-time and freelance work, according to Meeker of Kleiner Perkins.

Of course, some of this may be by force rather than choice. There are about 1.7 million more involuntary part-time workers than there ought to be at this point in the recovery, according to J.P. Morgan economists.

By incentivizing some employers to reduce hours to avoid mandated health insurance, the Affordable Care Act, they said, could be responsible for "one-fifth to one-third" of these workers.

Whether or not full-time workers stabilize as a percentage of the workforce, the flexible, "on-demand" nature of work is here to stay.

It's possible this will, after a long, difficult transition period, help trigger America's next productivity boom, a product of a truly "mobile" age.

As one Silicon Valley entrepreneur recently observed, "The productivity gap is the chasm between all the information we can access on our phones, and the limits on using that information in an effective way."

Pessimists say the expected benefits of this newfound mobility and flexibility will prove to be over-rated.

At the very least, when it comes to today's workforce, we ought to be properly measuring it.