In a potentially significant discrepancy affecting the United States government’s monthly employment report, millions of gig workers may be overlooked, leading to implications for Federal Reserve officials’ assessments of the job market and associated inflation risks.
Employment Report and Gig workers: Research presented at a Boston Federal Reserve labor market conference revealed that casual contract workers, whether driving for ride-hailing services like Uber or engaging in piecework during retirement, often do not consider themselves “employed” or part of the labor force. This self-perception, uncovered by economists Anat Bracha and Mary A. Burke in a research paper, may result in a substantial undercount of the total number of working individuals in government surveys.
Bracha, an associate professor at the Hebrew University Business School in Jerusalem, and Burke, a senior Boston Fed economist, estimate the undercount could range from a few hundred thousand to as many as 13 million gig workers. This discrepancy could translate to a swing of up to 5 percentage points in the share of the adult population deemed part-time workers, a crucial metric monitored closely by the U.S. central bank.
The researchers argue that despite the potential undercount, it suggests the labor market may be “tighter” than perceived, offering the economy more room for expansion in work and production without triggering inflation. They propose that the Federal Reserve should consider adjusting its benchmark for full employment upward.
Examining responses to a New York Fed survey on “informal work” from 2015 to 2022, the researchers found inconsistencies in responses related to work obtained through online platforms or contract jobs compared to the Labor Department’s monthly survey of employment status. This mismatch in the employment report could lead to millions of gig workers slipping through the statistical cracks, posing a significant data gap for economists analyzing inflation dynamics.
The research challenges the long-held notion that inflation is primarily driven by low unemployment and the subsequent rise in wages and spending. Despite falling unemployment rates throughout the 2010s, inflation did not follow suit, prompting the Fed to reconsider its monetary policy approach.
Fed officials, led by Chair Jerome Powell, continue to assert a connection between the jobless rate and inflation, emphasizing the need for increased labor market “slack” to control inflation. However, the researchers suggest that the gig economy’s impact on employment reporting may indicate more available labor supply than previously thought.
As the Federal Reserve grapples with redefining the “longer-run” unemployment rate and assessing the potential impact of pandemic-induced changes in the job market, the researchers argue that understanding the gig economy’s influence is crucial. They suggest that overlooked gig workers may contribute to a more robust labor supply, challenging previous assumptions about the economy’s capacity.
The conference also addressed the potential contributions of women to the labor supply with improved family and childcare policies, as well as explored how job training and policies for employing individuals with criminal records could enhance overall employment figures.
In her opening remarks, Boston Fed President Susan Collins emphasized the importance of accurate employment estimates in fulfilling the Fed’s dual mandate of stable inflation and maximum employment. Acknowledging the potential for higher levels of economic activity with an expanded labor market, Collins highlighted the benefits of a vibrant economy that works for all.
Source: Yahoo Finance
