The Force Awakens: Freelance Workers Will Soon Outnumber Employees

A long time ago, in a galaxy far, far, away …

All right, not that long ago in a country right here in the U.S. …

Freelancing and temporary work was the norm up until the late 19th century. Most employment outside farming was in manufacturing, and it was mainly temporary. In 1910 half the workers in production jobs were independent contractors.

Starting around the 1880s, companies started to bring together large workforces, and created more structured jobs. Wage controls during the world wars resulted in large benefit programs being created. With unions a rising force, laws were created to promote stability. It was all one big happy family until the 1970s, when globalization and economic downturns forced companies to seek more flexibility and better control of labor costs. Unions had gone the way of the Sith at the end of Episode VI, so there wasn’t much resistance to the outsourcing of work.

There are now over 54 million freelance workers in America. The number increased by 700,000 from 2014 to 2015. One in three Americans has done some freelance work in the last year. A study by Intuit estimates that by 2020 the number of freelancers will grow to about 60 million — or about 40 percent of the private workforce. Freelancers cover a wide spectrum — from unskilled labor to high-level professionals. An article in Harvard Business Review describes “Supertemps” — freelancers who manage high-powered projects for Fortune 500 companies and advise executives on operational issues, change management, and mergers.   

A New Hope

Given current trends, freelancers will exceed employees in another 20 years. What’s driving this shift to a world where freelancers dominate are two factors. The first is the ease of finding freelance work. The second is economic reality — a survey by the Freelancers Union found that the majority (60 percent) of freelancers who left traditional employment now earn more than they did as employees.

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The gig economy is thriving because it’s increasingly easy for freelancers to connect with those who need their services. Sites like Guru and eLance have been around for a while, but more recently sites like HourlyNerd have emerged to match companies with freelancers. Specialized sites like Handy connect customers with home help. Contently matches writers with businesses and Tongal does the same for video makers. Amazon’s Mechanical Turk allows businesses to find workers to complete specific tasks not easily handled by technology — such as flagging objectionable content on websites or composing text messages. Students are finding summer jobs using sites like TaskRabbit, Instacart, and Postmates to deliver groceries or do tech work, instead of working for neighbors.

Freelance work can be very satisfying. The survey by the Freelancers Union found that for half of freelancers, no amount of money could make them quit freelancing for a traditional job with an employer. As one respondent put it: “Because it’s a job on my terms, I can do it at all times of the day, on weekends … I am not bound by a single location.” The tradeoff is security, but with employment-at-will, job security doesn’t mean much anyway. Given the ease with which an employee can lose their job, the concept of having a “permanent” job is somewhat illusory. The growth of the freelance workforce is just wider acknowledgement and acceptance of that fact.

The Phantom Menace

There’s a lot of hand wringing going on about the growth of freelancing work. Politicians are claiming that the increasing popularity of freelancing work is endangering stability for all workers and demanding more regulation. Might as well start a petition for Disney to bring Jar Jar Binks back. Their lack of faith is disturbing. The trends driving these changes in the workforce will not be reversed. Globalization will not stop, and technology will only make it easier to bring together talent with the demands of business on an as-needed basis. The movie industry has been operating this way for over 50 years. What’s needed is a change in laws that allow freelancers to have the same rights and benefits as employees, mainly healthcare and retirement.

Continue to grow, the freelance workforce will. But if there are more people happier with their work and making more money, then what’s not to like?

Raghav Singh, director of analytics at Korn Ferry Futurestep, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.

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3 Comments on “The Force Awakens: Freelance Workers Will Soon Outnumber Employees

  1. This always happens as a way to offset the costs of human capital. It depends on the country though. In the US, there was a huge migration in the early-mid 1990’s during that recession. People were cut from companies and hired back as consultants. Thus cutting about 45% of the true cost of the labor as that is how much the cost was increased on top of salary to account for the cost of benefits-such as paid leave, health insurance, etc. The most expensive cost to any company is usually human capital. Having the ability to put everyone on a 1099 seriously reduces the cost and allows for many benefits to both…the “contracted” employee actually gets to supplement by doing work for others…often if free-lance can also dictate hours, location, etc. The Free-Lancer can deduct some of the costs of doing business, which otherwise would not be tax deductible. The Employer can get away with not offering health care and other benefits such as 401K matching, etc. As the US has been having such political and emotional debates about labor…the US seems to be moving towards something of the nature of some Asian countries….where many are independent workers. Or perhaps the US go in an opposite direction (the extremist political opposite) and will mimic Singapore’s CDC system and create a massive tax pool to cover: healthcare, unemployment, housing, retirement,etc. in which ALL must contribute 20% of income and employers must kick in an additional 16%….then everyone individually funds their own lives and costs. Seems a tad draconian for the US to take away choice …it was how this country was founded…to do such would seem to take us back to the days of Colonialism. But this type of offloading of labor force is a common reaction to most recessions in the US…or at least during my entire lifetime. Many people are not suited for the freedom of free-lance work or contract work. The administrative burden of being a sole proprietor is often just too taxing for some. There might be some form of hybrid system, where employees are employees, but benefits are up to an individual to purchase and administer. The imploding of pensions is something that will trigger far more people into individual responsibility for these.

    1. All good points. The need for a system where benefits are available for purchase is very much needed. Otherwise we’re creating a class system of employees and freelancers, with the latter often being the underclass. The Singaporean system is certainly a model for this. It may appear draconian in the US, but it’s essentially just an extension of what social security currently offers. Freelance work has it’s appeal but given a choice many people would opt for the stability of employment, however illusory that might be.

      1. Perhaps…I have been my own gig since grad school….I prefer it; I have to say even under these tough economic times, the idea of working in a company feels just soul stifling to me. I felt I had sold my soul years ago working for a Fortune 2 (at that time) Making my own business was tough but ever so rewarding. I was never so creative, intellectually stimulated, or happy working for a company. I am also not sure the Sinaporean solution will work. The idea that the government limits your ability to invest your own money to earn potential far greater than its system will never fly here. Take the 529 accounts…the returns are abysmal….so in order to get the tax deduction for savings for your child’s education…you are forced into horrible rates of return…better to invest in something more effective and pay the income tax. You will still get a deduction when you child goes to school. But at least you have had the chance to earn far greater on your savings than any government system offers.

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