Data from the Bureau of Labor Statistics (BLS) indicates that the U.S. unemployment rate was holding steady at 3.7% as of May 2019. That’s a historic low, indicating a promising employment landscape on the surface, but those numbers aren’t even close to the whole picture. The unemployed, as defined by the BLS, are those who are actively looking for a job while collecting unemployment checks. So if you don’t have a job or receive unemployment checks, you are not counted in BLS unemployment rates — even though you are, for all practical purposes, unemployed.
America’s unemployment numbers also don’t account for those who are underemployed, meaning those within the labor force who are employed less than full time or whose job does not reflect their experience and/or educational level. The United Health Foundation put the rate of U.S. underemployment in 2017 at 8.5%. Those most affected by underemployment include young people and racial and ethnic minorities.
Underemployment is affecting the job market in a number of ways. An August 2018 study by economists from both the U.S. and U.K. concluded that underemployment is a much bigger drain on the economy than unemployment and is also a significant driver of income inequality. The study claims wages are stagnant primarily due to underemployment because desperate workers will take what they are offered and don’t have the flexibility to ask for more money. Those in today’s ever-growing gig economy often fall into the category of the underemployed and struggle to make a living.
Living Wages and Job Market Misconceptions
According to the aforementioned BLS data, 5.9 million Americans were unemployed in May, and 1.3 million of those individuals fall into the “long-term unemployed” category. That means they have been out of a job for 27 weeks or more.
Those among the long-term unemployed are those most at risk of receiving low wages once they finally secure employment, as they are more likely to take any wage offered, even the national minimum, which remains $7.25 per hour. And while a number of organizations and politicians have advocated for a $15 per hour minimum wage in recent years, the Trump administration continues to fight for corporate, rather than working class, rights.
The minimum wage isn’t enough to live on. For example, the federal poverty level according to the Department of Health and Human Services was $25,750 for a family of four in 2019. That’s equal to about $12 needed per hour for a full-time worker — a significantly higher cost than the minimum wage in many U.S. states. To help determine the living wage in your city of residence, workers can use the MIT living wage calculator, first created in 2004 and updated yearly.
The MIT living wage calculator accounts for necessary expenses such as housing and utility costs, food, and taxes. Even in the cheapest city to live in the U.S. (which the calculator determined to be McAllen, Texas) $10.31 per hour is considered a livable wage. Yet the national job market isn’t keeping up with livable wages, and while many experts agree that we’re currently in a candidates’ job market, a large chunk of the labor market is falling behind. Generally speaking, job seekers remain at the whim of employers. Further, 45% of job seekers claim that it’s harder to find a job in 2019 than it was in the previous year.
Considering the Gig Economy
For many, the gig economy offers a solution to both an increasingly difficult job search process and the threat of low wages. Within the gig economy, there exists three primary components: the workers who are paid by gig or project rather than an hourly wage; the company that acts as a sort of middleman between worker and consumer; and the consumer, who requires a particular product or service. Ridesharing platforms such as Uber and Lyft are a prime example of the gig economy in action.
In general, gig or contract workers enjoy a greater sense of freedom and autonomy than those who are traditionally employed. These workers can set their own hours and work as little or as much as possible. In some cases, workers can utilize their own existing resources or assets, including their home and/or vehicle, to make money on various digital platforms.
Studies show that the gig economy, which requires technology as well as willing workers in order to adequately function, continues to rise in popularity. In 2016, 24% of Americans reported making at least a small amount of money via the gig economy. Many of those workers turn to side gigs to supplement their income, but 15.8 million Americans are full-time independent workers.
Of course, there are plenty of disadvantages to a job force that’s increasingly relying on the gig economy in order to make ends meet:
- Gig workers are classified as independent contractors, and as such, are not entitled to health insurance, vacation pay, and other benefits, even if they work full time.
- There’s no job security in the gig economy. What happens if work dries up or there are too many workers vying for the same number of gigs, for instance?
- At the end of the day, independent contractors may not even make minimum wage, but they’re not entitled to that either.
Employment Laws and Discrimination
Just because a worker has a traditional salaried or per-hour job, he or she is not immune to economic changes or job loss. Many areas have “at will” employment laws in place, meaning that a worker can be fired or laid off for any reason at any time, unless there is an employment contract in place that states otherwise. Whether due to a corporate restructuring scheme or used as a cover for discriminatory hiring practices, at-will employment can leave formerly loyal workers in the dust.
There are few exceptions to at-will employment policies. You can’t be fired on the basis of age, for example, nor will you lose your job if you refuse to perform an illegal act. But even if you think that you were fired for one of those reasons, proving the underlying intention behind your termination can be difficult, and you may end up in a lengthy legal battle. In many cases, it may be best for terminated at-will workers to simply move on and find more secure employment. Unfortunately, in the current gig-focused job landscape, that’s easier said than done.
It’s rough out there in the U.S. job market. Between 1998 and 2018, the number of manufacturing jobs fell by 27% in the U.S., while the private sector, non-agricultural workforce grew by nearly 26%. As the number of available manufacturing and trade jobs continue to dwindle, more and more workers will look to digital channels and the gig economy for gainful employment. Some may end up making a better living as independent contractors than they did as traditional workers, but others may not find the gig economy to be as kind.
Noah Rue is a journalist and a digital nomad, fascinated with the intersection between global health, personal wellness, and modern technology. When he isn't frantically updating his news feeds, Noah likes to shut off his devices, head to the beach and read detective novels from the 1930s.