A recent study released by Harvard and Princeton University economists concluded that the US economy created 10 million net new jobs in the decade from the end of 2005 to the end of 2015. That is similar to figures from the US Labor Department.
That number is actually impressive when you consider that the period from 2005 to 2015 includes the Great Recession and financial crisis of late 2007 to early 2009. But there is much more to this story. The question is, what kinds of new jobs were created?
Were most of the new jobs created the traditional full-time, 8:00-5:00, salaried types of jobs, with health and other benefits attached? Or were most part-time jobs, temporary jobs or “contract labor” jobs that rarely have health insurance and other benefits included?
So let me ask you to make a guess, before we get started. I’ll give you a hint. The percentage of part-time, temporary or contract jobs created over the last decade, versus full-time jobs, was much higher than you probably think, so guess high.
Would you guess 40%, 50% or even 60%? If so, you wouldn’t be even close according to the new Harvard/Princeton study. It’s much higher. Knowing that, would you guess even higher, say 70% or even 80%? You’d still be low.
The latest study from leading economists at Harvard and Princeton concludes that 94% of the new jobs created from 2005 to the end of 2015 were part-time, temporary or contract labor jobs. If true, that is alarming!
Survey research conducted by economists Lawrence Katz of Harvard and Alan Krueger at Princeton shows that from 2005 to 2015, the proportion of American workers engaged in what they refer to as “alternative work” jumped by over 50% from 10.7% to 15.8%.
Other sources believe the numbers are much higher. The McKinsey Global Institute reported earlier this year that 27% of American workers, or some 68 million, are employed in part-time, temporary or contract work because they can’t find full-time jobs.
Alternative work is characterized by being temporary or unsteady — such as work as an independent contractor or through a temporary help agency. Harvard’s Katz concluded:
“We find that 94% of net job growth in the past decade was in the
alternative work category. And over 60% was due to the [rise] of
independent contractors, freelancers and contract company workers.”
In other words, nearly all of the 10 million jobs created between 2005 and 2015 were not traditional 9:00 to 5:00 full-time employment positions. The economists conclude that traditional full-time jobs are disappearing at an increasing rate.
Both economists were surprised by the findings of the study, especially since there had been almost no change in the prior decade from 1995 to 2005. The decline of conventional full-time work has impacted every demographic group, but especially women as we’ll see below.
Women experienced an unusually large increase in their share of alternative work. They were three percentage points less likely than men to engage in alternative work in 2005, but two percentage points more likely in 2015. This is in large part because the sectors that saw the largest move towards alternative work arrangements — like education and medicine — have a high proportion of female workers.
The So-Called “Gig” Economy is Rising Rapidly
A gig economy is an environment in which temporary positions are increasingly common and organizations strive to contract with independent workers for short-term engagements, rather than create full-time positions. The trend toward a gig economy in the US is well underway.
There are a number of forces behind the rise in short-term jobs. For one thing, in this Digital Age, the workforce is increasingly mobile and work can increasingly be done from anywhere — so that jobs and location are decoupled.
This means that freelancers can select among temporary jobs and projects around the world, while employers can select the best individuals for specific projects from a larger pool than what is available in any particular area.
The gig economy is exploding in large part because businesses save resources in terms of employee benefits, office space, training, etc. They also have the ability to contract with experts for specific projects who might be too high-priced to maintain on staff.
A recent study by Intuit (maker of TurboTax and QuickBooks) predicted that by 2020, 40% of American workers will be independent contractors. That’s more than double the 15.8% level cited by the economists noted above! And we’re talking only a few years from now.
Perhaps such change is inevitable but it’s a bad omen for our children and grandchildren and beyond, since the percentage of full-time jobs will almost certainly continue to decline.
Gary, Great article and I would add another big drag on the economy and growth – our bloated liability system! We need to adopt Loser Pays for lawsuits like they have in Britain! The time and huge cost of not only defending and settling plus the time and money spent trying to avoid phony suits it a huge drag on the economy and productivity!!
Its no wonder productivity has dropped like a rock!