The Unemployment Numbers as Sham: Where Are the Freelancers?

BY Sara Horowitz  September 6, 2013 at 3:54 PM EDT

Freelancers, like new members of Freelancers Union, above, are left out of the official employment figures. Photo courtesy of Freelancers Union’s Flickr account.

Here at the Making Sen$e Business Desk, the first Friday morning of each month is busy. Sure, we count down the seconds until the release of the Bureau of Labor Statistics’ monthly jobs report at 8:30 a.m., but analyzing the official unemployment number, the “U3,” is just the beginning of our day. We then use the BLS data to calculate our own more inclusive unemployment number, arriving at a figure, which we call the “Solman Scale U7,” that we think is a much more accurate representation of just how many people in this country are without jobs.

That August’s more inclusive U7 (15.9 percent) was about 8.4 percentage points higher than the official U3 (7.3 percent) reinforced for us that the BLS isn’t asking the right questions of the right people in the household surveys used to calculate the U3.

We’re not the only ones who think the BLS data doesn’t tell the whole story. Sara Horowitz, the founder and executive director of Freelancers Union, who writes the Dispatches blog and appeared in this 2009 Making Sen$e segment, has been a vocal critic, and we were curious to know more about her reasoning.

We asked her to weigh in on what our “Solman Scale U7″ adds to the official rate. But more inclusivity, it turns out, doesn’t address the issue freelancers have with the BLS data. “While your calculation definitely includes more people, and may give a more accurate assessment of who is working and who is not,” Horowitz said, “we’re interested in how people are working and what it looks like to be employed at a sustainable level — which is different than what’s being measured now.”

To hear more about what questions the BLS needs to ask, we asked Horowitz to elaborate on what she finds problematic with their data.

Sara Horowitz: When the unemployment numbers are released the first Friday of each month, they drive headlines. Retailers cross their fingers. The business world looks for signs that interest rates may rise again.

The problem is that the unemployment numbers are wrong. They just aren’t keeping up with the changes we’re seeing in the new workforce. The Bureau of Labor Statistics’ employment surveys were designed (back in the 1940s) to keep track of who has a full-time job, who doesn’t, and who’s looking.

But the way we work has changed dramatically since then. People are abandoning the 40-hour workweek — some by choice, some by circumstance — and becoming freelancers, working gig to gig, project to project. At last count, in 2006, more than 42 million people were considered independent workers. That’s nearly one-third of the workforce.

The BLS surveys haven’t kept up. They don’t capture this type of independent, variable employment because they’re not asking the right questions. The baseline question in the household survey is, “Last week, did you do any work for either pay or profit?”

Imagine Caroline, a freelance web designer who just finished a project a week ago and has a gig with a new client starting in a few days. Last week, she did not “work for pay or profit,” but she wasn’t exactly unemployed, either; she had a job lined up. What would the BLS make of her?

The BLS still uses a standard workweek as the measure of employment, but there’s a whole workforce out there that doesn’t fit easily into that box. For many freelancers, full-time employment is really a series of short-term (or part-time) gigs and projects.

Imagine Marcus, an independent anesthesiologist who works 20 hours a week for a doctors’ group, teaches as an adjunct professor at a local medical school and is a serious amateur photographer, selling photos on Etsy.

His BLS interview would go off the rails at the question, “What is the main reason you do not want to work full-time?” Marcus has crafted the flexible work-life he wants, but the BLS assumes that he (and all Americans) should want to work one, full-time job.

Traditional work is being replaced by fractional work and micro-gigs, and the BLS isn’t capturing this massive economic movement. It’s impossible to know how many people are being miscounted, undercounted or left out entirely. With freelancing on the rise, we can’t just leave this new workforce out of our economic data. The BLS surveys need to be updated to reflect the way people work now.

The issue isn’t really about whether the official unemployment number would go up or down, but about rethinking what it means to be “employed” to address whether your income provides a sustainable life. The unemployment numbers currently tell us whether a person is or is not going to a job, but they don’t tell us much about the quality of that job — from an economic or social viewpoint — which is important information to have to understand the economy and the labor force.

Instead of focusing on whether someone’s job is full-time or part-time, how about asking if they have enough work to sustain a life?

We do have an employment problem in this country, but we’re not going to figure out what it is until we start asking the right questions.


This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions