The rise of new gig economy platforms like Uber and Lyft has led many observers to assume that self-employment is also increasing. However, major labor force surveys like the Current Population Survey (CPS) show no increase in the self-employment rate since 2000. How can this be? One plausible explanation is that many gig workers do not perceive themselves as contractors; likewise, such work is not well-captured by standard questionnaires.
At first glance, tax records appear to tell a different story. In sharp contrast to trends in the CPS, the percent of individuals reporting self-employment income to the Internal Revenue Service (IRS) on their tax returns rose dramatically between 2000 and 2014. (See Figure 1.) Is the administrative data collected by the IRS detecting a deep change in the labor market that major surveys currently miss? This key question motivates this new research into the gig economy’s impact on labor markets.
To address this phenomenon, the authors draw directly on the IRS information returns issued by firms to self-employed independent contractors (of which online-platform-based, or “gig” workers are a subset) to find:
While the authors caution against trusting trends in administrative data over trends in survey data by default, their work shows that tax data can be a powerful tool for measuring labor-market trends so long as reporting incentives are kept in mind. To that end, the authors’ new self-employment series adjusted for reporting trends, as well as their new series on third-party-reported gig work, should prove valuable to other researchers in this area.