NCCI Looks at WC and the Gig Economy

Boca Raton, FL (WorkersCompensation.com) - Ridesharing and other ‘nontraditional’ types of work may be attracting lots of attention, but they are not having much if any impact on the workers’ compensation system. That could change if workers move out of traditional wage and salary employment into the gig economy, which would decrease payroll in the workers’ compensation system.  But so far, that is not happening.

“Electronically mediated work is still mostly done for supplemental income and accounts for less than 1 percent of total income,” said Patrick Coate, an economist for NCCI. “Nontraditional work arrangements have not displaced much traditional work with respect to primary employment.”

Coate and his colleague Laura Kersey looked into nontraditional work arrangements and the gig economy to see if and how it might be affecting the workers’ compensation system, since most workers involved don’t receive benefits that are available in more traditional jobs. They found that while about 30 percent of U.S. adults do some sort of nontraditional work, the proportion that do it exclusively has not increased in the last 15 years. Instead, most workers in nontraditional work arrangements do so to earn supplemental income, usually than less one-quarter of their annual pay.

“We hear a lot about Uber and Lyft and these types of work arrangements,” Coate said. “It was interesting to learn that as people have studied that, we haven’t really measured an increase in people’s primary employment. That was surprising.”

What it Means

Also surprising to the authors were the myriad definitions and descriptions of nontraditional work.  The Bureau of Labor Statistics, for example, categorizes nontraditional work as either contingent — those who don’t expect the job to last for longer than a year, if that; or alternative work arrangements — including independent contractors, on-call workers and those employed by contract firms or temp agencies. These definitions overlap with self-employment and include some wage and salary employees.

Electronically mediated work, also called platform work, matches workers to tasks through a website or app, and pays them through the company with the platform. These include what many consider the ‘gig economy,’ such as Uber and Lyft as well as online tasks, such as Upwork and Amazon Mechanical Turk.  These workers are considered independent contractors, although some jurisdictions have or are considering whether they should be provided benefits such as workers’ compensation.  NCCI is monitoring 45 bills this year alone that address the issue.

Then there is ‘informal work,’ defined as any one-time task that earns money such as ride-sharing, property maintenance and child care, as well as selling items through eBay.  

The variety of descriptions makes analyzing the metrics that much more complicated.

“We have this idea of what the gig economy means, but there are very different results that people see using different types of data or different definitions which don’t seem like they should make a difference, but they do,” Coate said. “Trying to be precise, it’s trickier and you get different answers.”

Impact on WC

Regardless of what definition is used, the authors found there has not been a mass exodus of workers from traditional employment. And they expect that trend will likely continue.

“It’s certainly plausible there will be some who move from that,” Coate said, “but from the last 10 years, we don’t expect it to be a really rapid change. It’s more likely that it will increase slowly.”

What could generate a change — and cause workers’ compensation leakage — would be a recession.  Electronically mediated work was not a factor during the Great Recession, as it was brand new.  But if the traditional labor market were to dry up, that could lead workers to nontraditional work during and after the next recession.

“If firms and at least some workers favor new arrangements, then payroll lost in a recession is likely to shift to nontraditional work during recovery,” the authors wrote.

In the meantime, they do not expect “a rapid change in covered wage and salary employment.” However, “the proportion of independent work that falls outside of traditional workers compensation will likely increase in coming years.”

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