To monitor trends in alternative work arrangements, we conducted a version of the Contingent Worker Survey as part of the RAND American Life Panel (ALP) in late 2015. The findings point to a significant rise in the incidence of alternative work arrangements in the U.S. economy from 2005 to 2015. The percentage of workers engaged in alternative work arrangements – defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers – rose from 10.1 percent in February 2005 to 15.8 percent in late 2015. The percentage of workers hired out through contract companies showed the sharpest rise increasing from 0.6 percent in 2005 to 3.1 percent in 2015. Workers who provide services through online intermediaries, such as Uber or Task Rabbit, accounted for 0.5 percent of all workers in 2015. About twice as many workers selling goods or services directly to customers reported finding customers through offline intermediaries than through online intermediaries.
Many possible factors could have contributed to the large increase in the incidence of alternative work arrangements for American workers from 2005 to 2015 that we have documented in this paper. Although a fuller evaluation will have to await further research, here we provide an initial evaluation of some leading explanations.
The first explanation is that alternative work is more common among older workers and more highly educated workers, and the workforce has become older and more educated over time. A shift-share analysis, however, indicates that shifts in the age and education distribution of the workforce account for only about 10 percent of the increase in the percentage of workers employed in alternative work arrangements from 2005 to 2015.13 Other supply-side factors, such as a possible increase in demand for flexible work hours (perhaps supported by the increased availability of health insurance as a result of the Affordable Care Act) may also have contributed, although it is unlikely that supply-side factors account for the lion’s share of the rise in alternative work arrangements since the rise in employees who are hired out to other firms through contract firms or temporary help agencies accounts for more than half of the overall rise in the share of employment in alternative work arrangements in the last decade.
Second, technological changes that lead to enhanced monitoring, standardize job tasks and make information on worker reputation more widely available may be leading to greater disintermediation of job tasks. Coase’s (1937) classic explanation for the boundary of firms rested on the minimization of transaction costs within firm-employee relationships. Technological changes may be reducing the transaction costs associated with contracting out job tasks, however, and thus supporting the disintermediation of work.
Third, Abraham and Taylor (1996) argue that contracting out is often sought because firms seek to restrict the pool of workers with whom rents are shared, as well as to reduce the volatility of core employment. A rise in inter-firm variability in profitability is thus consistent with a greater desire for contracting out to reduce rent sharing (although increased contracting out could also have contributed to the rise in inter-firm variability in profits). Relatedly, Weil (2014) argues that competitive pressures are causing a “fissuring” of the workplace, with either workers being misclassified as contract employees or work being redefined to make greater use of contract workers and independent contractors.
Finally, it is plausible that the dislocation caused by the Great Recession in 2007-2009 may have caused many workers to seek alternative work arrangements when traditional employment was not available. Although we cannot assess how much of the rise in alternative work arrangements occurred in the aftermath of the Great Recession, if this is the case then one might expect a return to a lower percentage of workers employed in alternative work arrangements over time, as the effects of the recession continue to fade.
Chosen excerpts by Job Market Monitor. Read the whole story at The rise and nature of alternative work arrangements in the United States, 1995-2015