Summary

MOTIVATION FOR THE STUDY: BETTER DATA TO INFORM RESEARCH AND POLICY

Business structures, employment relationships, job characteristics, and worker outcomes have changed in the United States over the last few decades—in some ways unpredictably. The way people work, for whom they work, how that work is arranged, and how they are paid are all elements of the evolving labor market. The goals of businesses to be more flexible and to lower costs continue to shape employment relationships, aspects of which have been enabled by new technologies.

A high level of interest exists among policy makers and researchers in addressing concerns about the future of work in the United States. These concerns are heightened by the perceived fracturing of relationships between workers and employers, the loss of safety net protections and benefits to workers, the growing importance of access to skills and education as the impacts of new technologies and automation are felt, and the market-based pressure that companies face to produce short-term profits, sometimes at the expense of long-term value. These issues, as well as related ones such as wage stagnation and job quality, are often associated with alternative work arrangements (AWAs)—which include independent-contractor and other nonemployee jobs, work through intermediaries such as temporary help agencies and other contract companies, and work with unpredictable schedules—although they also pertain to many standard jobs (Howell and Kalleberg, 2019). A better understanding of the magnitude of and trends

in AWAs, along with the implications for job quality, is needed to develop appropriate policies in response to the changing nature of work.

Along with addressing challenges inherent in AWAs, policies also need to nurture the positives created by innovative new employment models. People often value being their own boss and the scheduling flexibility that some AWAs afford. And, from the perspective of businesses, companies may use independent contractors not just to lower costs, but also to tap into skills pools with the agility required to maintain competitiveness. Sustaining a strong economy requires that policies be designed to make new employment models work well both for workers and for the organizations that hire them. One policy goal is to protect the lower-paid workers who are vulnerable to abuse as part of a “race to the bottom” while simultaneously enabling on-shore economic growth for the higher-skilled and higher-paid jobs where workers often have choices.

Congress and other policy makers will move forward on legislation and advocacy regarding the future of work in some capacity with or without data-based evidence. This makes it all the more urgent to improve the data infrastructure for studying the alternative worker population.

MEASUREMENT NEEDS FOR UNDERSTANDING THE CHANGING NATURE OF WORK

Changes in the structure of work—specifically growth in temporary work—were already apparent by the 1980s. Recognizing a need for high-quality data that could be used for analyzing these trends shaping the labor market, the U.S. Bureau of Labor Statistics (BLS) developed the Contingent Worker Supplement (CWS) of the Current Population Survey (CPS), which was first administered in 1995.¹ The Supplement has been fielded five times since 1995, at irregular intervals depending on funding, most recently in 2017. The CWS was implemented to measure aspects of the employment relationship—specifically, whether people’s jobs were temporary or contingent in nature, and hence less secure. The supplement also measures work arrangements thought to be associated with lower commitment by companies to their workforce. The CWS currently collects information from individuals identified as employed in the CPS only about their main job, defined by BLS as the job associated with the most hours worked.

Although much has changed in the 25 years since the first CWS was implemented, the broad measurement objectives as originally conceived are

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¹ As defined by BLS, contingent workers are those who “do not expect their jobs to last or who report that their jobs are temporary.” They also do not have an implicit or explicit contract for ongoing employment. Available: https://www.bls.gov/cps/contingent-and-alternativearrangements-faqs.htm.

still relevant today. Indeed, when BLS received funding to field a new round of the CWS in 2017, a primary objective was to assess how the number of workers in contingent work and AWAs had changed since 2005, the last time the supplement had been fielded. However, modifications to the survey are needed to accurately measure changes in the workforce in a way that meets current policy and research requirements.

The charge to the authoring panel of this report was to develop recommendations to help guide BLS in its efforts to improve and modernize the CWS.² In so doing, the panel’s work reflects research and policy questions that have arisen from concerns about the economic and health impacts on the population of modern work arrangements, which are evolving in response to emerging technologies and the shifting boundaries of where, how, and by whom work is performed. These concerns have only been heightened during the current critical time for our economy. The onset and now deepening impact of COVID-19 has exposed how vulnerable our society can be when workers are participating in the labor market without an adequate and well-coordinated social safety net. This unprecedented economic disruption has made it even more clear the importance of BLS’s work to better measure alternative work arrangements in the United States.

In carrying out its charge, the panel assessed (1) the measurement needs for monitoring the changing employment landscape and for informing policies designed to mitigate negative effects while preserving the benefits from these changes; (2) the role of household surveys, and the CWS specifically, in fulfilling the spectrum of measurement needs concerning AWAs; and (3) the comparative strengths and weaknesses of the CWS in the context of complementary survey and nonsurvey data sources.

THE ROLE OF THE CWS IN MEASURING ALTERNATIVE WORK ARRANGEMENTS; RECOMMENDATIONS FOR FUTURE ITERATIONS OF THE SURVEY

The CWS measures arrangements concerning the main job of everyone who reports having worked during the survey reference period in the basic monthly CPS. By design, it does not capture work done by a person to generate income that is not reported in response to the core CPS employment questions. The panel considered whether this universe of workers and work activities is defined appropriately to capture the information on work in contingent and alternative work arrangements needed for policy and research. In so doing, issues related to the survey reference week, work activities that might not be reported on the main CPS, and secondary work activities were all examined.

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² The statement of task is reproduced in full in Chapter 1.

Survey Scope: The Universe of Workers and Types of Work Covered

Before AWAs can be measured, the universe of respondents (workers) from whom information is being requested must be determined. In the current CWS, other than a single question asked of unemployed and discouraged workers, questions are asked only of those who are identified in the basic monthly CPS as having been employed in the prior week. One major survey design feature that could affect which respondents are within the scope of the CWS concerns the timing and regularity of respondents’ work in relation to the survey’s 1-week reference period. People who report being unemployed or not in the labor force may nonetheless engage in work activities periodically to supplement household income. Unlike people who work a regular weekly schedule or who do not work at all, those whose work is sporadic may be missed. The choice of reference period may be particularly important for measuring platform or app-based work and informal independent contractor work. Analyses of financial account data (e.g., Farrell, Greig, and Hamoudi, 2018) indicate that most individuals participating in platform work do so during no more than 3 months of the year. As a result, platform participation rates are much lower if estimated for a particular week as opposed to a longer period.

Recent research (e.g., Abraham and Amaya, 2019; Bracha and Burke, 2017) also suggests that the standard CPS employment question does not capture everyone who performs work for pay during the survey’s reference week. For reasons specified below, some types of AWA work—such as performing housekeeping or yard work, providing child care or elder care, driving for Uber, and many others—appear especially elusive. One possible explanation for this finding is that some people engaged in AWAs may not think of themselves as employed in the labor force, especially if they have held a standard employer-provided job in the past. In the CWS, people whose only employment is work they do not report in response to the basic CPS employment question are not asked about the arrangements under which that work occurs. This is a potentially important omission.

The CWS could address these two issues—a short reference period and potential under-reporting of certain AWAs—by asking CPS respondents who did not report any work in the main CPS a set of initial screener questions.

Further limiting the scope of work activity covered in the CPS is that it has traditionally been concerned only with the main job held by respondents. CPS data indicate that the share of workers who held more than one job averaged about 5 percent during 2017. However, research based on other data sources suggests that secondary work activities are far more common (Abraham, Hershbein, and Houseman, 2019; Allard and Polivka, 2018; Bracha and Burke, 2018). Moreover, evidence suggests that secondary work activities often generate a substantial portion of people’s income and can be important for helping households offset a reduction in income earned from a main job. For those reporting that they worked, it would therefore be extremely useful to follow up about secondary work activity.

The 2017 CWS already asked respondents with at least one main job about additional work they may have done for pay using web platforms. Recommendation 3.2 simply expands this line of inquiry to include other types of work.

At least a subset of the questions asked about primary jobs should also be asked about the second jobs, whether those second jobs are identified in the basic monthly CPS or (as recommended above) in response to a question about additional work asked on the CWS:

As is always the case when new questions are added to the CPS or its supplements, careful cognitive testing will be required:

It is critical for policy purposes that BLS endeavor to capture all work activity. Because employment mediated through platforms/apps is perceived to be growing rapidly, there is strong research and policy interest in tracking it. To do so, and to address one of the profound policy questions about modern employment—how people are piecing together income—some disruption of the CWS is warranted. Adding follow-up probing questions to the CWS could potentially affect responses in subsequent waves of the main CPS survey. While careful question wording should mitigate any such effects, the BLS may want to run tests on outgoing rotation groups to see how much additional employment is being picked up in such questions.

Job Types: Categories of Alternative Work Arrangements

The CWS permits the classification of a respondent’s main job into one of several mutually exclusive work categories:³

• Temporary agency worker;
• Contract company worker, other than a temporary agency worker;
• Independent contractor;
• Employee, not in an alternative work arrangement; or
• Self-employed, not independent contractor.

This categorization captures whether a worker is an employee of the organization for whom he or she is performing work. The set of AWAs distinguishes between those who are not employees (independent contractors, day laborers) and those who are in an intermediated arrangement (temporary agency worker, contract company worker). In the latter, workers are employees of a temporary help agency or other type of company that contracts their services to other organizations. On-demand platform work, captured only in the 2017 CWS, is a hybrid of these two job types. Although payments to workers in this category are mediated by the platform company, the workers are usually classified as independent contractors.

Among these categories, there is particularly strong policy and research interest in distinguishing between those who are W-2 employees and those engaged in various self-employment or nonemployee arrangements. The

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³ The CWS also collects information on on-call and day laborer work, which are covered in the next section.

latter are not covered by employment and labor laws such as those regulating wages and hours or guaranteeing collectively bargaining rights. Nor are they covered by social insurance programs, such as unemployment insurance and worker’s compensation. And finally, they have no access to the benefits often provided by employers, such as paid sick leave, health insurance, and retirement benefits. If work migrates toward a nonemployer structure, pressure will build to adjust social safety net and employment laws to mitigate this potential negative side effect of the trend. Recent legislative initiatives, such as California’s new law establishing a strict test for independent contractor classification, which might result in the reclassification of independent contractors such as those working for Uber and Lyft as employees, are suggestive of future policy initiatives.

One challenge that household surveys have in measuring self-employment and subcategories of self-employment, such as independent contractors, is that respondents vary in their interpretation and understanding of what these terms mean. For example, while some respondents may understand “self-employment” to mean a status where one is not an employee of an organization, others may understand the term to mean the situation of owning and operating one’s own business. In coding whether a worker is an employee or self-employed, the CPS, like other government household surveys, does not ask respondents who report working whether they are employees, but rather whether they work for an organization or are self-employed. Those who do work for an organization but are not W-2 employees may report working for that organization rather than being self-employed. As a result, surveys may be prone to misidentifying independent contractors as employees (Abraham, Hershbein, and Houseman, 2019); this, in turn, may help explain why research using administrative data based on tax filings shows a greater share of (and higher growth in) individuals with self-employment income than does the CPS (Abraham et al., 2020; Abraham et al., Forthcoming; Jackson, Looney, and Ramnath, 2017; Lim et al., 2019).

Given this evidence, a broad approach is needed for measuring independent contract work. Many who work as independent contractors do so primarily for one organization and may not think of themselves as obtaining customers on their own in the same way as, say, a self-employed business owner might. For this reason, that definition, which is used in a CWS question on independent contractors, is problematic.

The goal of the question referenced in recommendation 3.5 is to distinguish between W-2 employees and nonemployees, and the independent contractor work measure should include the types of AWAs wherein the individual is not an employee. The CWS should also clarify exactly what an independent contractor is:

As described above, BLS has recently prioritized the measurement of web platform work. One reason for this increased interest is that internet intermediary companies are formalizing some work arrangements that were previously considered informal work. There is also evidence that web-mediated options are displacing more traditional job arrangements, as in the case of restaurants using web platforms to fill very-short-run staffing needs in lieu of hiring workers directly.

A decision must be made about which web-mediated activities should be considered within the scope of the CWS. One distinction that can be made is between “work-based” income and income that is generated by a combination of work and capital. However, this distinction is blurry, because many web-mediated jobs combine capital and labor inputs. For example, renting out rooms through AirBnB entails both a capital-based component and a work- (or time-) based component. Someone operating several properties may be occupied full time in the enterprise. Likewise, Uber drivers must own or rent capital in the form of a car that passes the company’s equipment standards. How far apart Airbnb and Uber are on the labor/capital continuum is an open question, and there is a conceptual arbitrariness about drawing the line of inclusion for measurement in labor statistics between the two.

Additionally, respondents may have difficulty differentiating between platform work that is more capital-based and that which is more labor-based.

Including all income-generating activities would avoid requiring respondents to make this subjective call.

Job Characteristics: Predictability, Stability, Security

A primary focus of the CWS has been on capturing the security of workers’ jobs. The concept of contingency, as measured in the CWS, pertains to whether a worker’s job is temporary in the sense that it is expected to last for a limited time. This measure captures job insecurity which, in cases where loss of the job results in employment gaps, may lead to employment and earnings instability. Job insecurity is one factor that may result in earnings insecurity.

The CWS also asks wage and salary workers whether they work on an on-call or day laborer basis—that is, whether they work only when needed. Identifying this type of on-demand work captures a different element of earnings insecurity. Even if a job itself is not temporary, as is the case for much on-call work, the hours and hence a worker’s earnings may be variable. Although the AWA categories described in the preceding section are mutually exclusive, these essential characteristics of jobs may be present in all or most work arrangements.

A number of surveys (the 2017 American Time Use Survey Annual Leave Module is one example) offer options for question wording related to characteristics of jobs that could serve as models for the CWS.

Schedule predictability and hours instability. The CWS is well suited to measure the instability in workers’ employment and earnings that occurs when their jobs are short term or performed on an on-call basis. But other aspects of schedule variability, such as (un-)reliability and (un-)predictability of hours, are also of great interest given their relationship to earnings and economic well-being. Many jobs, especially in retail and other service sectors, are highly variable in the timing and quantity of work hours. As with temporary work, this kind of variability can lead to economic insecurity. On the positive side, for some workers, the employment fluidity of such work arrangements has added a welcomed element of flexibility for them to earn income. This dichotomy—the implication of both insecurity and flexibility—points to the importance of measuring and tracking job characteristics that directly affect the well-being of workers. The policy implications are clearly different if the trend toward irregular hours is being driven by a desire by

workers for flexible scheduling versus being driven by a lack of opportunities to acquire steady work.

The 2017 CWS found that only 1.9 percent of respondents self-identified as on-call workers, but the research cited above indicates that using a broader measure of schedule variability would yield a considerably higher rate. Given the prevalence of unpredictability in people’s work schedules, it has become important to measure this aspect of employment and earnings instability in a large, nationally representative survey:

• Usual hours worked and hours worked last week (on main and secondary jobs);
• Schedule autonomy—who determines the schedule, the employer or the worker?
• Schedule predictability—whether the schedule is generally the same from week to week or, if it varies, how much notice the worker typically receives;
• The amount by which weekly hours vary; and
• Whether a worker must be available if called. (Recommendation 3.11)

Asking respondents for information about their work schedules can also reveal insights into people’s motivations for pursuing a different or a second job.

Contingency and job insecurity. A large number of questions on the CWS are devoted to measuring the contingency of jobs. Over its history, the CWS has uncovered no trend growth in contingent jobs, and BLS’s measures of contingency have not gained currency among policy makers and researchers. Moreover, the questions pertaining to expectations about job length have proven difficult for respondents to answer. For these reasons, some modification of the CWS is warranted.

Other Information Needed to Understand the Implications of Alternative Work Arrangements for Workers

A key goal of the CWS is to facilitate an understanding of the relationship between specific work arrangements or job characteristics and worker

outcomes. Toward this end, the CWS measures workers’ earnings and benefits as well as their preferences regarding work arrangements.

Earnings and benefits. The positive relationship between people’s earnings and their well-being is obvious. Much attention has been given to the flat earnings growth experienced by workers over recent decades and the negative economic, health, and social impacts this has had on families. But how this trend relates to changing work arrangements and the expansion of AWAs is not fully understood, nor are the potential ripple effects of AWAs on conditions in standard employment settings understood. Given the stark contrast between higher-skill and lower-skill independent contractors, the relationship between AWAs and earnings is not well captured by measures of averages.

Given the employer-delivered nature of many benefits in the United States, AWA workers are in some cases disadvantaged with respect to retirement plans, medical care plans, and other benefits. The possible link between AWAs on the one hand and wages and access to critical benefits on the other is of high policy interest. The onset of a global pandemic has underscored the need for increased awareness of the economic vulnerabilities present in the labor market. Basic information on the incidence of benefits being offered would be useful for discussions about the future of work.

Reasons for choosing a work arrangement. The current CWS asks temporary workers, temporary agency workers, on-call workers, day laborers, and self-employed/independent contractors whether they would prefer a “non-contingent” or different job arrangement. The existing line of questions on individuals’ preferences for work in alternative arrangements provides information that is potentially valuable but, for reasons described in Chapter 3, difficult to interpret. Nonetheless, it is important to know the reasons people engage in AWAs as well as why people hold multiple jobs. Questions on job satisfaction, on reasons for working in an alternative arrangement, and on the motivation for working a second job/work activity would be extremely useful for understanding people’s work patterns.

Components of the CWS to Streamline

In order to create survey space, some parts of the current CWS could be streamlined. Some questions have proven less useful than others because evidence indicates the quality of the resultant data is poor. For example, while tracking temporary help employment is important, the incidence measured by the CWS is well below that indicated by employer surveys and administrative data (Polivka, 1996). Respondents appear to confuse their actual employer, the temporary help agency, with the client for whom they are performing work. Similarly, while information on contract company workers is needed, household surveys may not offer the best method for collecting it. Partly because BLS concluded that respondents cannot reliably report on the contract arrangements of their employers, the CWS focuses on measuring a narrow set of contract company work: individuals who work primarily for one client company at the client’s worksite (i.e., remote work is not included). This narrow definition misses a lot of contract work.

Data supplied by businesses are largely complementary to those captured in household surveys and can fill in some information needs. Establishment- and firm-level surveys are an underexplored source of data on AWAs, especially subcontracted work, that could yield vital information about the prevalence and nature of firms’ contracting-out activities.

Another set of questions in the CWS asks each respondent what they or other household members were doing prior to becoming an independent contractor, a temporary agency worker, an on-call worker, or a contract company worker. Because of the retrospective nature of the question, the data quality is likely to be poor. The CWS also asks respondents in AWAs or temporary jobs if they have looked for other types of work. Although searching for another type of job may be an indicator that workers in alternative or temporary arrangements are dissatisfied with their jobs, questions on respondents’ job satisfaction and reasons for working in a particular arrangement, discussed above, are a more direct way of obtaining this information:

In general, panel datasets already exist that are much better at tracking job history and worker transitions, although samples tend to be small.

THE ROLE OF MULTIPLE DATA SOURCES IN MEASURING ALTERNATIVE WORK ARRANGEMENTS

No single data source is capable of informing all research and policy questions regarding AWAs. Fortunately, surveys other than the CPS/CWS also add to the knowledge base. They have done so by (1) demonstrating how varying definitions affect measures of work arrangements and, closely related to that, how question wording and respondent interpretation affect estimates; (2) testing the sensitivity of measurement constructs used in surveys, including things like time-reference periods; and (3) covering different outcomes associated with various work arrangements, such as worker safety measures, not all of which are within the purview of a single survey.

Nonsurvey data, both public and private, are also valuable sources of information. Reflecting the potential of a multipronged data strategy, researchers have used surveys, data from the Internal Revenue Service and Social Security Administration, and data on individual-level bank transactions to measure participation in online platform work and to shed light on the range of jobs from which individuals and households earn income.

While there are valid concerns about nonsurvey data—for example, regarding the representativeness of the people who are covered—such data also have some distinct advantages over survey data. Some commercial data sources feature administrative-level quality for measures of income, spending, and liquid assets. Also, such data are often continuous and high-frequency, based on transactions posted daily, which means that trends can be ascertained on a weekly or monthly basis rather than for a single reference period. This is critical in the case of online platform work, where individuals have been shown to participate sporadically. Both commercial and public administrative data offer perspectives unfiltered by low (and falling) survey response rates and respondents’ interpretations.

As numerous reports have documented—most recently and prominently the report of the Commission on Evidence-Based Policymaking (2017)—the use of administrative data can improve the overall efficiency of data programs by reducing agency expenditures, lowering respondent burden, encouraging the sharing of information across agencies, and potentially increasing the accuracy of the information collected. In some cases, administrative data may be used to replace survey data (NASEM, 2019).

Insights have been gleaned from research using data generated from tax records capturing payments by organizations to unincorporated individuals for nonemployee services. Tax data based on individual returns have generated evidence of significant numbers of workers combining W-2 and

1099/sole proprietor income. Among other findings based on such data, the expansion of independent contractor work in recent years appears to be driven primarily by online platform economy work—at least among tax-compliant workers.

The capacity to improve the measurement of AWAs, as well as other economic statistics, will be influenced by how effectively multiple data sources can be drawn from and combined. The limitations of any single information source underscore the value of commercial and administrative data as complements to government surveys. Their contribution consists not only in providing additional estimates with which to triangulate the measurement of contingent and alternative work arrangements, but also in informing efforts to improve the design of government surveys.