Why our employment figures are wrong
By Sara Horowitz
The opinions expressed are her own.
The national employment figures are an economic bellwether. They profoundly affect U.S. markets, consumer spending, and even the fate of national elections. With so much at stake, you’d think we would be counting the workforce accurately. Unfortunately, we’re not.
The United States treats jobs as something turned on or off—employed or unemployed—but that binary view no longer reflects how Americans really work. Whereas in the middle of the 20th century industrial employees worked one job for one company, today, there are 42 million consultants, independent contractors, entrepreneurs and freelancers working multiple gigs for multiple clients.
Although independent workers were a full one-third of the U.S. workforce at last count (which was 6 years ago), they aren’t counted by the Bureau of Labor Statistics in a consistent and ongoing way. Current statistics tend to lump workers into one of three classes: private wage and salary workers, government workers, and the self-employed. But these groupings don’t account for the nuances in how people work now and the overlap between groups. For example, on-call or contract workers might be lumped in with wage and salary workers, when really they’re independent workers. As a result, our outdated numbers have led to outdated policies that no longer meet the needs of America’s 21st century workforce.
Take, for example, the issue of nonpayment. W-2 employees know that their paycheck will be directly deposited into their checking account every two weeks, and don’t have to worry about chasing down their employer for payment. In fact, the Department of Labor could fine your employer—or send them to jail—if they don’t pay you. Independent workers, however, have no such protection from nonpayment, late payment, or partial payment, leaving freelancers with only two options: sue or walk away. According to Freelancers Union member survey data, that’s a gamble many companies are willing to make: 77% of freelancers report having trouble collecting payment at some point in their career.
In a way, we’re going back to the future. When the U.S. economy began to shift from farms to factories in the mid- to late-nineteenth century, the state of the nascent workforce was largely unknown: there was no national unemployment rate, consumer price index, or average household income. In 1884, President Chester Arthur signed a bill creating the Bureau of Labor Statistics. The BLS produced numbers, and policies soon followed, including many we take for granted today: the eight-hour workday, child labor bans, and unpaid wage claims.
Just like back then, reliable government figures on today’s workforce would make it harder to ignore the many hurdles that freelancers face. Mirabai Knight, a self-employed stenographer for the deaf, found herself drawing on emergency funds just to scrape by when one of her major clients fell four months and $9,000 behind. Without the support of the Department of Labor, she had to ask herself—was it worth the time, energy, and expense of hiring a lawyer and suing her client in court?
Freelancers are also excluded from affordable, group-rate health insurance and retirement plans. Deborah Lattimore, an author-illustrator who has published 40 books, pays an unbelievable $32,000 a year for health insurance, and still may have to sell her house after racking up over $150,000 in medical fees over the last five years. What’s worse, as a freelancer working in a slow economy, she has not been able to collect a dime of unemployment insurance despite her history of accomplishments and steady work.
With more reliable data on independent workers like Mirabai and Deborah, we’ll have a better understanding of the impact these 42 million workers have on the economy, and the extent of the challenges they face. We’ll also be able to create sound policies that meet the needs of 2011’s entrepreneurial workforce—not the 1940’s industrial workforce. There doesn’t seem to be any economic argument for not accurately counting independent workers, but rather inertia and perceived lack of urgency.
President Obama has taken a crucial step in allocating a modest $1.6 million to count independent workers, who have not been surveyed since 2005. Economists across the political spectrum agree that reporting regularly and in more specific ways on this important sector is critical to understanding our evolving economy. It’s crucial that Congress keep this money in the budget.
The founding chief of the Bureau of Labor Statistics, Carroll Wright, went on to win world acclaim and the French Legion of Honor for pioneering the fields of practical economics and sociology to document the rise of the Industrial Age. More than a century later, Congress must approve funding so the BLS can innovate again. Today, well into the Information Age, it only makes sense to accurately collect the information.