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The Significance and the Uncertainties of the Rise of the Contingent Workforce.

On-demand or ‘gig’ economy is characterized by Apps like Uber have marked a trend in the way workers are employed. Increasing trend of flexible work arrangements may have been caused by various reasons: reducing business costs, enhanced technology, and flexibility. Job security has become a concern for even many employees. 1

 

Recent studies show that alternative arrangements increased not only in ‘gig’ jobs, but also increased at a faster rate in industries like transportation, construction, healthcare and education.2

GAO identifies alternative work arrangements more broadly to include agency temps, contract company workers, day laborers, independent contractors, on-call workers, self-employed, and standard part-time workers.3 In 2010, employees working in the alternative work arrangements constituted 40.4 percent of the workforce in 2010.4 Independent contractors constituted 12.9 percent of the total workforce in 2010.5 GAO may have categorized the alternative work arrangements broadly, but these statistics alone reveal the significance of the contingent workforce in the current economy.

 

This increase in contingent workforce is also significant because there is an ongoing legal debate on whether some of these workers are employees or independent contractors, as in the case of Uber drivers. This distinction of whether a worker is an employee or an independent contractor matters because federal statutes such as National Labor Relations Act (“NLRA”) and Federal Labors Standards Act (“FLSA”) only apply to employees and excludes independent contractors from the coverage6, Independent contractors do not have the same rights employees to receive minimum wage, overtime pay, or the right to organize or collectively bargain7. This is also possibly due to the fact that when NLRA or FLSA were enacted, the traditional employment structure was more a predominant form of employment relationship. This has become a bigger issue now because more and more employment relationship has evolved into a more flexible, alternative work arrangements. There are also issues of employer misclassification of employees as independent contractors.

 

While the federal statute excludes alternative employment relationships, state and local governments can possibly fill the gaps. Seattle City Council voted last year to allow Uber drivers to unionize and engage in collective bargaining for better pay and working conditions. (Beekman, Daniel. Seattle First U.S. City to give Uber Drivers Power to Unionze (Dec. 14, 2015), http://www.seattletimes.com/seattle-news/politics/unions-for-taxi-uber-drivers-seattle-council-votes-today. )) Despite these attempts by the state and local governments to extend protection to independent contractors and contingent workforce, the federal statute may preempt the local laws.

 

What’s the effect of this changing trend? Workers in alternative arrangements face irregular work schedule, face job insecurities, and receive fewer benefits such as health insurance, Social Security, or retirement benefits.8 It’s true that some workers will benefit from this flexibility. However, this trend in the alternative employment may foreshadow a bleak future of the recovering labor market.  It is undeniable that the innovative arrangements have created more jobs for people. But, even as more traditional industries are beginning to shift to alternative flexible work arrangements, it is important for the government to consider regulatory schemes to cope with the distressing effects to the economy and its workforce. The changing trend in the workforce raises a flag for policy makers in government to rethink about its institutions and regulatory systems already in place.9

 


  1. Scheiber, Noam. Growth in the ‘Gig Economy’ Fuels Work Force Anxieties. (July 12, 2015), http://www.nytimes.com/2015/07/13/business/rising-economic-insecurity-tied-to-decades-long-trend-in-employment-practices.html?_r=0

  2. Sussman, et. al. Contract Workforce Outpaces Growth in Silicon-Valley Style ‘Gig’ Job. (March 25, 2016), http://www.wsj.com/articles/contract-workforce-outpaces-growth-in-silicon-valley-style-gig-jobs-1458948608 . 

  3. US Government Accountability Office (GAO) report, Contingent Workforce: Size, Characteristics, Earnings, and Benefits. (Apr. 20, 2015), http://www.gao.gov/assets/670/669899.pdf

  4. Id. 

  5. Id. 

  6. National Labor Relations Act, 29 U.S.C. § 152, et seq.; The Federal Labor Standards Act of 1938, 29 U.S.C. 201, et seq. 

  7. Id. 

  8. Sussman et al., supra. 

  9. The Economist. The Future of Work: There is an app for that. (Jan. 3, 2015), http://www.economist.com/news/briefing/21637355-freelance-workers-available-moments-notice-will-reshape-nature-companies-and