Is Gen Z working? It all depends on what you consider a 'job.'
- Roughly half a million fewer 20- to 24-year-olds are in the labor force now versus pre-pandemic.
- It's taken time for Americans of all ages to return to work, but older Gen Zers are most lagging.
Last week, did you do any work for pay?
If your primary source of income is a typical 9-to-5 company job, you'd probably answer "Yes."
And those answers could partially explain a question economists are puzzled over: Where have the Gen Z workers gone?
The 20- to 24-year-old age group — whose members are older Gen Zers — has lagged more than any other as the 8.2 million Americans who stopped looking for work or working in the early days of the coronavirus pandemic have come back to the labor force. In October, 497,000 fewer workers in this age group were working or actively looking for work compared with February 2020, per Bureau of Labor Statistics data.
Labor-force participation among Americans ages 20 to 24 is down 2.4 percentage points, while participation for workers ages 25 to 54 and at least 55 are down only 0.5 and 1.4 percentage points, respectively.
Economists have debated what's keeping some Americans on the sidelines. COVID-19, childcare needs, and early retirements, for instance, are most likely keeping some middle-age and older workers out of the workforce. But these explanations typically apply less to people in their early 20s. Some experts have pointed to mental illness, intergenerational care, and an uptick in graduate-school enrollment as other answers.
But there's something else that might explain at least part of the gap: Some young people may be generating an income but not consider their hustle "work."
The changing meaning of 'work' may be resulting in a bigger undercount of Gen Z workers
When the BLS asks Americans whether they did any "work for pay" during the past week, the respondent "would have to consider what they did last week as 'work for pay' in order to answer this question 'Yes,'" Jim Borbely, a BLS senior economist, told Insider.
The question, therefore, is whether Gen Zers making money in nontraditional ways in the gig and sharing economies for instance — like as a Poshmark reseller or an Etsy seller — would answer "Yes" to the employment question. If they didn't view what they're doing as a "job" or assumed the BLS was asking only about traditional salaried employment, they might answer "No." And if they say they're not actively looking for a new job either, they'd be counted as not in the labor force at all.
While it's impossible to discern how many Gen Zers may be being missed, a 2018 BLS analysis, which examined data from the American Time Use Survey about how often Americans perform "income-generating activities" like gig work, estimated that the jobs report undercounted the age 15- to 24-year-old workforce by 499,000, though it estimated the true number could range from 300,000 to 2 million.
"Misclassification of workers has potentially the largest effect on the estimate of youth employment," the analysis said.
Not all of the "income-generating activities," measured were gig jobs, however. The analysis included things like redeeming a winning lottery ticket, shoveling snow for pay, and collecting aluminum cans to sell.
Nevertheless, the analysis suggests an undercount of young workers is real, but given it's not a new phenomenon it may not explain the recent decline in 20- to 24-year-old labor-force participation. If older Gen Zers have taken on nontraditional work in even higher numbers the past few years, however, and the size of the undercount has increased, perhaps this would explain at least part of the Gen Z mystery.
Whether there's been an uptick in nontraditional work is almost another mystery unto itself, as the BLS doesn't measure this. Citing survey data from 2020, Upwork estimated in a report last year that 59 million Americans, or 36% of the workforce, had done freelance work over the prior 12 months, 2 million more than 2019.
In June, the financial-resource platform Steady recorded a 31% increase in the share of its working users with freelance income compared with February 2020. A 2021 Pew Research survey found that among the 9% of US adults who reported earning money from a gig platform like Uber or TaskRabbit over the prior year, 31% said it was their main source of income.
Childcare doesn't count as 'work' in the US economy, but it interferes greatly with traditional jobs
Aaron Terrazas, a chief economist at Glassdoor, however, told Insider that at least over the past year, he's skeptical there'd been a recent spike in gig workers. While he says the number of unincorporated self-employed workers has "increased by nearly 600,000," it's not been in the industries "most common" for gig workers.
"The most common are construction, real estate, trucking, food service, legal, consulting, software and finance," Terrazas said, "not exactly the gig-economy types. So I suspect that this phenomenon is not being primarily driven by workers with gig hustles."
If there were a rise in gig workers being undercounted, he'd expect to see a similar rise in gig workers who answer "Yes" to the BLS' employment question — and are counted, as this would point to an overall spike in this kind of work.
While he's uncertain where the missing Gen Z workers have gone, he says childcare needs could be part of the answer.
"Since the start of 2022, there has been an increase of about 100,000 to 150,000 18- to 24-year-old women outside the labor force with young children under age 5 at home," he said.
Even if the answer to the missing-Gen Z-workers mystery was an uptick in gig work, this might not be a discovery worth celebrating. While finding that more young Americans are earning income than previously reported would be a positive economic development, many of them could still be struggling financially.
While some Gen Zers have managed to earn a steady income through the gig economy, many people still view this work as merely a source of supplementary income, not a way to make ends meet.
A 2018 Federal Reserve report, for instance, found that 58% of full-time gig workers said they would have a difficult time meeting an unexpected $400 expense, compared with 38% who didn't work in the gig economy.
If Gen Z has embraced gig work over the corporate life, it could be among the reasons many of them say they're living paycheck to paycheck.
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