Measuring the Gig Economy in Canada Using Administrative Data (Excerpts)- Statistics Canada - Executive Summary [ ] Gig workers are usually not employed on a long-term basis by a single firm; instead, they enter into various contracts with firms or individuals (task requesters) to complete a specific task or to work for a specific period of time for which they are paid a negotiated sum. This includes independent contractors or freelancers with particular qualifications and on-demand workers hired for jobs mediated through the growing number of online platforms. [ ] When the work arrangement typology developed in previous studies is applied, gig workers can be viewed as unincorporated self-employed workers (sole proprietors) who report business, professional or commission self-employment income, and whose future business activity is uncertain or expected to be minor or occasional. This study found that, from 2005 to 2016, the percentage of gig workers in Canada generally rose from 5.5% to 8.2%. The increase was observed for both men (from 4.8% in 2005 to 7.2% in 2016) and women (from 6.2% in 2005 to 9.1% in 2016), and driven by the growth in the percentage both of gig workers who earned no wages or salaries (T4 income) and of gig workers who combined gig work with wages or salaries. The results showed that the annual income of a typical gig worker was usually low. The median net gig income in 2016 was only $4,303. Workers in the bottom 40% of the annual income distribution were about twice as likely to be involved in gig work as other workers. For most gig workers, gig work was only a temporary activity. Roughly one-half of those who entered gig work in a given year had no gig income the next year. However, a non-negligible share of gig work entrants-about one-quarter-remained gig workers for three or more years. Workers whose main occupations were in arts, entertainment and recreation were about four times more likely to be gig workers than workers whose main occupations were in management of companies and enterprises. Those whose main occupations were in manufacturing and utilities were least likely to be gig workers. The study also found that gig work was more prevalent among immigrants than among Canadian born people. In fact, 10.8% of male immigrant workers who had been in Canada for less than five years were gig workers in 2016, compared with 6.1% of male Canadian-born workers. 1 Introduction The gig economy is a much-discussed global phenomenon. Although there is no widely accepted definition of the gig economy, the term broadly refers to less structured and non-traditional work arrangements. Gig workers are usually not employed on a long-term basis by a single firm; instead, they enter into various contracts with firms or individuals (task requesters) to complete a specific task or to work for a specific period of time for which they are paid a negotiated sum. This includes independent contractors or freelancers with particular qualifications and on-demand workers hired for jobs that are mediated through the growing number of online platforms and crowdsourcing marketplaces, such as Uber, Lyft, TaskRabbit, Upwork, Guru, Fiverr and Freelancer. [...] A recent survey found that 9% of Greater Toronto Area residents worked through online platforms (Block and Hennessy 2017). However, people who work through online platforms are only part of the gig economy since not all gig workers do. This present study introduces a clearly defined methodological framework for identifying gig workers in Canada based on various Canadian administrative sources, including individual and corporate income tax returns. [...] The definition of a gig worker in this study [...] is based on the typology (systematic classification of types) of work arrangements. [...] It includes, but is not limited to, individuals working through online platforms. Similar to gig workers in the United States, gig workers in Canada are likely to be unincorporated self-employed workers who report business, professional or commission income on their income tax returns. The methodological approach used in this present study allows gig workers to be distinguished from traditional employees who receive wages or salaries, incorporated self-employed workers, sole proprietors who own established businesses and partners in partnerships. (Statscan recognizes four types of business structures in Canada: sole proprietorships, partnerships, corporations and co-operatives.) [...] Workers are defined as all individuals who: (a) reported any employment income from T4 slips or other employment income such as tips, gratuities or director's fees on their T1 forms, (b) reported any unincorporated self-employment income, or (c) were identified as owners of incorporated businesses through corporate tax returns. [...] Workers are classified into several categories in the LFS (Labour Force Survey): private and public employees, incorporated self-employed workers with and without employees, unincorporated self-employed workers with and without employees, and private employees working in family businesses without pay. [...] The proliferation of online platforms and crowdsourcing marketplaces connecting workers with employers through very flexible-and often minimally binding-work arrangements has resulted in renewed interest in the "gig" aspect of the modern economy and has motivated new attempts to identify and quantify the gig economy. [...] Abraham et al. (2018) introduced a methodological framework for identifying gig workers based on the characteristics of their work arrangements and how these are reported in tax data. This typology of work arrangements is based on several characteristics that help distinguish between various work arrangements, including whether the person is paid a wage or salary, the work relationship can be expected to continue, or the person's work schedule and earnings are predictable. Abraham et al. (2018) also note that gig workers are not wage employees, do not have a long-term contract with any employer, do not have a predictable work schedule and do not have predictable earnings. Therefore, gig workers are unincorporated self-employed freelancers, day labourers, or on-demand or platform workers according to this typology. In administrative data, gig workers can be identified (at least partially) depending on how the workers report their work arrangements to tax authorities. [...] Grekou and Liu (2018) found that the median business income of unincorporated self-employed workers was $10,000 in 2013. [...] A key element of the gig worker definition based on the typology of work arrangement characteristics introduced by Abraham et al. (2018) is that gig workers are among unincorporated self-employed workers. [...] Less than 4% of unincorporated self-employed workers in the CEEDD (Canadian Employer-Employee Dynamics Database) had employees, compared with 26.4% of those in the census data and 12% in the LFS. This result was consistent with the notion that self-employment work is a relatively minor activity for many individuals identified as unincorporated self-employed workers with tax data. Therefore, the prevalence of employers among this group was much lower than the prevalence of employers among those who reported self-employment as their main labour market activity in the census. Table 1 shows that the share of unincorporated self-employed workers in 2016 who satisfy the definition of gig workers was about 8.2%. [...] The study computed the net total annual gig income for each gig worker in 2016. [...] The median line corresponds with $4,303-a very small amount. [...] Among gig workers, 48.6% had no wage-earning job and reported no employment income, while 36.3% had one wage job and about 15.1% had multiple wage jobs. Therefore, gig workers were split almost evenly between those who had no other earnings except for their gig earnings and those who supplemented their wages and salaries with the earnings from their gig activities. For some idea about the relative importance of gig work among those identified as gig workers, the share of earnings derived from gig work among the total earnings for each individual and various percentiles of the resulting distribution were computed. The computations show that the median share of gig income in total earnings was 76%, meaning that for about half of all gig workers, gig earnings represented more than three-quarters of their total annual earnings. [...] For more than one-quarter of all gig workers, their gig earnings represented all of their earnings and more than 89% of their total income. [...] The share of gig workers among all workers in Canada rose from 5.5% in 2005 to about 8.2% in 2016. A closer inspection of the gig worker trend reveals two sharp increases between 2005 and 2016 (Chart 2). The first increase corresponds with the 2008/2009 recession, and it was somewhat sharper for men than for women. The timing of the increase suggests that the growth in the share of gig workers during those years can be largely attributed to push factors such as declining employment prospects. While the share of female gig workers continued to increase immediately after the recession (from 2009 to 2012), the share of male gig workers slightly declined during that period. The second sharp increase was observed around 2012/2013, but the reason why is less intuitive and may be related to the proliferation of online platforms in Canada that started around that time. After 2012, growth in the share of gig workers was higher for women than for men. The key feature of Chart 2 is that, in all years, the share of gig workers was substantially higher among women than among men-and this gap widened over time. In 2016, the share of female gig workers was about 9.1%, while the share of male gig workers was about 7.2%. These percentages translate into about 991,320 gig workers in 2005 and 1,666,061 gig workers in 2016. In terms of the duration of gig work, 53.1% of gig workers who entered in 2006 (i.e., those who were gig workers in 2006 but not in 2005) remained gig workers for at least one year, while 35.2% remained gig workers for two consecutive years and 25.9% remained gig workers for three consecutive years. The corresponding numbers were slightly lower for the 2010 entry cohort (50.0%, 31.1% and 22.8%, respectively) but higher for the 2013 cohort (56.4%, 39.1% and 29.8%, respectively). For instance, 2012 was the year that Uber started its operations in Canada. [...] In Chart 3, the trends in the shares of gig workers are shown separately for gig workers with and without wages or salaries (T4 slips). The trends in the left-hand panel (gig workers with no wage or salary earnings) spiked around the recession in 2008/2009, but remained relatively stable until another spike in 2012/2013. In contrast, the shares in the right-hand panel (gig workers with wage or salary earnings) increased virtually linearly from 2006 to 2016, with only minor bumps around 2008/2009. The linear trend was particularly apparent among female gig workers with wage or salary earnings. The trends in Chart 3 seem to suggest that although gig work has become more prevalent from 2005 to 2016, gig workers with no wage earnings responded more strongly to both push factors (recession) and pull factors (proliferation of online platforms). Overall, however, Chart 3 suggests that an increasing share of workers do gig work in addition to their main wage-earning jobs, but also that an increasing share of gig workers do not earn any wages or salaries. Using the event study technique, Koustas (2019) showed that entry into gig work in the United States is generally preceded by a decline in non-gig income. A similar pattern was found in Canada. Chart 4 shows that T4 earnings dropped dramatically in the year an individual entered gig work (year 0), and that this drop in the T4 earnings was larger for men than for women. The T4 earnings partially recovered in subsequent years, while the gig earnings steadily declined. Chart 4 also shows that employment insurance (EI) benefits rose before the entry into gig work and dropped sharply in year 0. For women, this pattern was observed for both regular and special EI benefits. Koustas (2019) asked whether the decline in wages and salaries before year 0 represented a deliberate strategy of "gearing up" for gig work, or whether it was the consequence of outside shocks such as job loss or wage cuts. Given the EI eligibility rules, the rise in EI benefits before entry into gig work seems to suggest that outside shocks are important contributors to the decision to enter gig work. Finally, the present study looked into whether the increase in the share of gig workers between 2005 and 2016 was associated with any changes in the patterns of filing T2125 income during the same period. (Statscan notes: Unincorporated self-employed workers use the T1 form to report their self-employment income from five principal activities: fishing, farming, professional, business and commission income. Unincorporated self-employed workers who report professional, business or commission income (e.g., Uber drivers) attach a T2125 Statement of Business and Professional Activities to their T1 forms. The T2125 form details all revenues and expenses related to the individual's unincorporated business and professional activities. Self-employed owners of unincorporated businesses may request a business number (BN) for their business (or businesses) from the CRA. If they have a BN, they must report it on the T2125 form.) With the overall stability of unincorporated self-employment rates from 2005 to 2016, the rising shares of gig workers among all Canadian workers implies that an increasing share of unincorporated self-employed workers file at least one T2125 form with no BN. Did gig work replace or supplement less precarious forms of unincorporated self-employment that are associated with a formal business? There are at least two possible scenarios. First, unincorporated self-employed workers continued to file T2125 forms at the same rate, but were increasingly less likely to report a BN. In this scenario, gig work replaced more stable forms of self-employment that required stronger commitment and possibly larger initial investment. In the second scenario, unincorporated self-employed workers filed the same number of T2125 forms with a BN but, in addition to filing T2125 forms with BNs, they also filed an increasing number of T2125 forms with no BN. In this scenario, self-employed workers increasingly took on gig work in addition to steady self-employment that continued to be their main activity. (Statscan notes: It is also possible that more gig activities are now reported to the CRA because more gig work is done through online platforms, unlike in the past, where most of it was done through informal referrals from friends, neighbours, etc.) [Online platforms refuse to issue T4 slips as part of the fraud that the workers providing the service through the platform are self-employed. This means the online business does not have to meet any federal or provincial standards regarding terms of employment such as overtime, paid statutory holidays and vacations, EI and Workers' Compensation payroll taxes etc. -- TML Ed. Note.] [...] This finding further supports the idea that the increase in the share of gig workers observed in Chart 2 represents both a decline in the share of unincorporated self-employed workers with a steady business and an increase in the number of self-employed workers who do gig work in addition to their main business activity. The results (from a study of tax data) suggest that no age group dominated the age distribution of gig workers, and that gig workers were spread more or less evenly across the entire age spectrum. However, the prevalence of gig workers was especially high in the category for those aged 65 and older because fewer individuals in this age category worked and, when they did, they were more likely to be gig workers than younger workers. [...] The shares of gig workers among all workers were higher where opportunities for gig work were greater, specifically in the three regions that have major Canadian urban centres-Quebec (Montréal), Ontario (Toronto) and British Columbia (Vancouver). [...] In Montréal, the growth rate of the share of gig workers was similar to that of the overall share in Canada until 2012, but increased faster thereafter. In Toronto, the growth rate in the share of gig workers was higher than in other large urban centres until 2009. However, the spikes in the shares of gig workers (around 2008 and 2012) were followed by relatively flat and even downward trends, even though the share of gig workers in Toronto was well above the overall share in Canada in 2016. 49.8% of male gig workers and 45.2% of female gig workers belonged to the lowest two quintiles of the total income distribution. Among both men and women, the prevalence of gig workers in the top income quintile was roughly half the prevalence of gig workers in the bottom income quintile (Table 2). Table 3 shows that most male gig workers worked in professional, scientific and technical services (19.0%); construction (12.4%); and administrative and support, waste management and remediation services (10.6%). (This category includes activities such as administration, hiring and placing personnel, preparing documents, providing cleaning services, and arranging travel.) Female gig workers concentrated primarily in health care and social assistance (20.2%) and professional, scientific and technical services (17.4%). Table 3 also shows that the industrial distribution of gig workers based on the industry of their gig work was very similar to the industrial distribution of gig workers based on the industry of their main job, as recorded in census data (third and fourth columns). For the prevalence of gig workers among all workers (last two columns), the industry with the highest share of male gig workers was arts, entertainment and recreation (15.6%), which is the industry that originated the term "gig work." (Oxford Music Online defines "gig" as "a term commonly applied to a music engagement of one night's duration only"). A high prevalence of gig workers was also observed in health care and social assistance (13.3%), educational services (11.3%) and real estate and rental and leasing (10.8%). Among women, the industry with the highest share of gig workers was other services (except public administration) (20.1%), a broad category that includes personal care providers, cooks, maids, caretakers and nannies. A recent study found that much of the recent increase in independent contracting in the United States was driven by rapid growth in the transportation sector that can be directly linked to Uber and similar online platforms.... There was a sharp increase in the share of gig workers in taxi and limousine services in the mid-2010s. Yet even in 2016, when the share of male gig workers in taxi and limousine services almost doubled compared with 2014, this share did not exceed 3% of all male gig workers. [...] Over one-third of all male gig workers (36.0%) had a university degree, while a similar percentage of male gig workers had only a high school diploma or less (Table 2). However, university graduates were much more likely to be gig workers than other men. There was a particularly high prevalence of gig workers among men (13.7%) and women (16.5%) who held graduate degrees (master's degree and higher). In contrast, only 5.8% of men and 7.0% of women with a high school diploma or less were gig workers. It is likely that the proliferation of supply-driven crowdsourcing marketplaces such as Upwork and Freelancer has given highly specialized skilled workers (suppliers) a better opportunity to connect with potential employers. (Statscan notes: Workers in the upper quintiles of the income distribution were less likely to be gig workers than those in the lower income quintiles.) [...] More than one-third of all male gig workers and more than one-quarter of all female gig workers had only a high school diploma or less, and just over one-third of both male and female gig workers had a university degree. Given the high prevalence of immigrants in the Canadian labour force, the involvement of immigrants in the gig economy is an important issue. [...] Table 2 shows that the shares of gig workers were considerably higher among immigrants, especially recent immigrants, than among Canadian-born workers. More than one-third of all male gig workers were immigrants-a far larger share than the share of immigrants in the Canadian labour force (about 24% in 2016). Even immigrants who had been in Canada for 20 years or more were more likely to be identified as gig workers than Canadian-born workers. Among recent immigrants, immigrant men were more likely to be gig workers than immigrant women but the opposite was true for immigrants who had been in Canada for 20 years or more [...] 19.6% of male gig workers were individuals with main occupations as trades, transport and equipment operators and related occupations. Female gig workers concentrated in sales and service occupations (22.1%) and occupations in education, law and social, community and government services (20.3%). However, the shares of gig workers among all workers were the highest among workers with main occupations in art, culture, recreation and sport (24.2% for men and 26.6% for women). About 8.6% of male gig workers and 9.8% of female gig workers reported not working in either 2015 or 2016 in the census. [...] 24.7% of all male gig workers were workers whose main occupations were professional. Among women, however, many gig workers (22.8%) were in personal and customer information services. The highest prevalence of gig workers was observed among men and women in professional and technical and paraprofessional occupations. Conclusions This study found that from 2005 to 2016, the percentage of gig workers in Canada generally rose from 5.5% to 8.2%. The increase was observed for both men (from 4.8% to 7.2%) and women (from 6.2% to 9.1%). The increase was driven by the growth in both the percentage of gig workers who earned no (additional) wage or salary (T4 income) and the percentage of gig workers who combined gig work with a wage or salary. The results indicate that the annual income of a typical gig worker is usually low: the median net gig income was only $4,303 in 2016. Workers in the bottom 40% of the annual income distribution were about twice as likely to be involved in gig work as other workers. For most gig workers, gig work is only a temporary activity. Roughly half of the people who enter gig work in a given year have no gig income the next year. However, a non-negligible share of gig work entrants-about one-quarter-remain gig workers for three or more years. Workers whose main occupations are in arts, entertainment and recreation were about four times more likely to be gig workers than workers whose main occupations are in management of companies and enterprises. Workers whose main occupations are in manufacturing and utilities were least likely to be gig workers. This study also found that gig work was more prevalent among immigrants than among Canadian-born people. In fact, 10.8% of male immigrant workers who had been in Canada for less than five years were gig workers in 2016, compared with 6.1% of male Canadian-born workers. Admittedly, the methodology of the study is unlikely to capture activities such as occasional babysitting, dog walking, lawn mowing or similar informal activities usually settled between family members, friends and neighbours. These activities have always been part of daily life, but are not usually considered labour market activities, and are therefore a lesser priority for researchers interested in labour market dynamics. [...] According to a recent Canadian study based on data from the Canadian Survey of Consumer Expectations, about 30% of respondents reported that they participated in some form of paid informal activity. However, when those who participated in such activities for fun were excluded, the share dropped to 18% (Kostyshyna and Luu 2019). The measure of gig work used by Kostyshyna and Luu (2019) includes babysitting, house-sitting, dog walking, lawn care and housecleaning, of which housecleaning was the most frequently mentioned activity (9.2% of respondents).  Website: www.cpcml.ca Email: editor@cpcml.ca |