Employment in the gig economy is growing far faster than traditional payroll employment, according to a study out Thursday from the Metropolitan Policy Program at the Brookings Institution.
By using a little-know statistic, the researchers found evidence of a significant change in the numbers, and the potential for a huge realignment in the very nature of employment.
Over the past 20 years, the number of gig economy workers — those who operate as independent contractors, often through apps — has increased by about 27 percent more than payroll employees, according to CNBC calculations using data from the report. The change is even more severe in certain industries, like ground transportation, where the number of gig economy workers increased 44 percent more than payroll employees.
Especially along the coasts and in early adopter cities like Austin, Texas, and Nashville, Tennessee, the researchers found evidence of huge changes and the possibility of gig economy jobs replacing traditional payroll employment. Eighty-one percent of the growth in such jobs over the past four years took place in the nation's 25 largest metro areas.
In any major city, it's clear that companies like privately held Uber, Airbnb and Lyft are changing the landscape of employment. But the question of how to measure the effect of that type of company, both on employment and on local economies, has dogged researchers for years.
"The data is tricky," said Mark Muro, senior fellow at the Metropolitan Policy Program and a co-author of the report. "There's not been that much information about it, because there's no government statistics about it."
By definition, people earning money through companies like Airbnb and Uber are not employees of those companies themselves and are not listed on any official forms. As private companies, the major players in the gig economy aren't required to disclose anything like employee numbers, revenue or profits.
The government previously tracked so-called "contingent" workers — those without "an explicit or implicit contract for long-term employment" — but their reading was not considered reliable and was discontinued in 2005. Secretary of Labor Tom Perez announced in January that the Bureau of Labor Statistics will recommence gathering data on contingent workers starting in May of 2017.
To measure the rise of the gig economy, the researchers looked at data from the Census Bureau that tracks "nonemployer firms," which are "businesses" that earn at least $1,000 a years in gross revenue, but employ no workers. The Census data are based on tax records.
It's not a perfect measure: Nonemployer firms don't specifically equate to workers in the gig economy. By nature, employment in the gig economy is impossible to measure using traditional statistics. But nonemployer firms may be a useful proxy for those figures.
The researchers focused on two industries in particular, which they call rides and rooms — a.k.a. ground transportation and traveler accommodations. Those industries were picked, Muro said, because Uber and Airbnb are the most famous of gig economy companies, and also because of the industries' specificity. It would be much harder to measure people using the Taskrabbit platform, for example, because that work could fall into many different industry categories.
"For this exercise, we needed much tighter industries where the nonemployer firm growth was meaningful or referred to a specific industry," Muro said. "But we think it's possible to expand into other areas of the gig economy."
Nationally, the ratio of payroll-based employees to nonemployer firms tightened from 8.3 to 6.1 between 1997 and 2014. In the ground transportation industries, the change was far more intense, going from 0.9 payroll employees per nonemployer firm to 0.5 in that same time. Much of that change came in the last two years, as Uber expanded to more cities around the country.
"The $64,000 question is whether the platform matching services is meeting new consumer demand or is ultimately going to begin cannibalizing traditional payroll employment," Muro said.
So far, there's no systemic evidence that gig employment has taken the place of traditional payroll employment, but that's not true across the board. San Jose, California, for example, saw nonemployer firms in the ground transportation industry more than double between 2012 and 2014, but payroll employment fell by 30 percent in that same time. Memphis, Tennessee, saw an increase of 13 percent in nonemployer firms in accommodation industries and a decline of 9 percent in payroll employment.
"Those may be aberrations," Muro said, "but it appears that it's possible in some places for rising gig activity to coincide with a decline of payroll employment." Muro cautioned that the report's figures likely understate the actual dependence on the gig economy, as it depends on people to fill out their paperwork properly.
Until the government designs more specific measures to track the growth of the gig economy, the Census' nonemployer firms may be the best measure we have. But it has implications beyond measurements of employment: If the Bureau of Labor Statistics included gig economy employment in its monthly jobs report, for example, it's possible the country's unemployment could appear lower, which could convince the Federal Reserve that the economy is stable enough for an interest rate hike.
It also changes an individual's relationship with employment. Health insurance, for example, has long been tied to employment status. Without an employer, more workers are dependent on health exchanges that were set up under the Affordable Care Act and could be jeopardized if those disappear.
The same goes for things like retirement benefits, which means society could be feeling the effects of the gig economy for decades to come.
"I think you have a picture here of a potentially seismic reorganization," Muro said.