Federal Reserve Redefines ‘Employment’ to Include Freelance Gigs

The strength of today’s gig economy and freelance world is forcing many federal economists to reconsider how they define “work” in the modern age.

Federal Reserve Board governor Lael Brainard spoke at a conference on the evolution of work at the Federal Reserve Bank of New York recently, commenting on the “sharp increase” in contract work that has been growing over the past decade or so.

Brainard has been a vocal proponent of further delaying the inevitable interest rate hikes in order to spur further job growth. After an all-time high in national unemployment rates of 10% in 2009, today’s figures hover around 4.9%, a number which may be further skewed by the hard-to-track figures of freelancers, contractors, and part-time giggers for growing companies like Uber, TaskRabbit, and other tech-fueled work opportunities.

“If market forces and technology are driving the growing prevalence of gig work, these trends will likely continue, and policymakers must better understand these changes,” Brainard said. “…We should be attuned to the possibility that the growth in flexible work arrangements may alter the natural rate of employment and how the labor market reacts to shocks.”

While many manufacturing and data-entry jobs have largely been taken over by automated machines and software, some industries simply can’t function without human hands. Roofing contractors, for example, earned about $46 billion in revenue in 2014, and Uber contends that their drivers can make around $40,000 a year working full-time hours.

However, many contracting positions don’t offer the security or benefits that typically come with more traditional forms of employment. The Feds will likely need to factor in that lack of security, as well as the need for additional expenses like out-of-pocket healthcare or self-funded retirement funds, when calculating “full employment” rates for the future.

“Taking into account the potentially varied effects of the rising prevalence of gig work on household welfare, public policy should strive to maximize the benefits of the greater flexibility and lower entry barriers provided by advances in technology, while addressing the risks that currently accompany many forms of gig employment,” Brainard said. “The effects on the labor market could be long lasting and significant.”

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