The gig economy has become a significant part of the modern workforce, with millions of workers relying on casual contract jobs to make ends meet. However, a recent study suggests that these “gig” workers may be missed in the U.S. government’s employment report, leading to potential implications for how Federal Reserve officials assess the job market and associated inflation risks.
Research conducted for a Boston Federal Reserve labor market conference revealed that many gig workers do not consider themselves “employed” or part of the labor force. This discrepancy in self-perception leads to undercounting in government survey responses, creating a statistical gap in the number of individuals working in the gig economy. Economists Anat Bracha and Mary A. Burke found that this undercount could range from a few hundred thousand to as many as 13 million workers, potentially impacting the share of the adult population working part-time.
The implications of this undercount are significant, as it suggests that the labor market may be tighter than previously thought. Despite the presence of hidden informal work, inflation has not accelerated as expected. This challenges the traditional notion that low unemployment rates lead to rising wages and inflation. The researchers argue that the economy may have more room to increase work and production without generating inflation, prompting the Fed to reconsider its approach to monetary policy.
The study analyzed responses to a New York Fed survey on informal work from 2015 to 2022, highlighting the discrepancies between survey questions related to online platform work and contract jobs. This discrepancy suggests that millions of gig workers may be slipping through the cracks of official employment estimates, posing a challenge for economists trying to understand the relationship between unemployment, inflation, and labor market dynamics.
The evolving nature of the gig economy raises questions about how policymakers should interpret labor market data and adjust their strategies accordingly. Fed officials, including Chair Jerome Powell, continue to emphasize the importance of labor market slack in controlling inflation. However, the shifting dynamics of the job market, accelerated by the pandemic, have led to a reevaluation of traditional metrics like the unemployment rate.
As the economy adapts to new work-from-home trends and automation technologies, researchers at the Boston conference suggest that women, individuals with criminal records, and gig workers could contribute significantly to the labor supply. By tapping into these untapped resources, the economy may have greater potential for growth and productivity than previously estimated.
In conclusion, the accurate measurement of employment is crucial for the Fed to fulfill its dual mandate of stable inflation and maximum employment. Understanding the nuances of the gig economy and informal work is essential for policymakers to make informed decisions about monetary policy and economic growth. By recognizing the contributions of gig workers and other marginalized groups, the economy can strive towards a more inclusive and vibrant future for all.
