Who Makes Up the Freelance Economy?

economy (1)We’ve already established that the best and biggest perk of working for yourself is work flexibility. You say how you work, when you work, if you work and why you work. It’s extremely liberating and also as scary as it sounds. As a freelancer and independent worker I had no idea until I joined this community and settled in that there were even really people like me. I’d spent nearly 10 years in the corporate world until it had other plans for me. Explaining to my family members, particularly my parents, was a hard one. They didn’t understand why I would want to work for myself. I had a stable job, but it just wasn’t fulfilling.

This balance between my personal and professional self is one that I have struggled with and continue to as a freelancer but I feel like for the first time I’ve really come into my own. Having navigated these waters without a business coach, mentor or even a business plan, I didn’t really understand that these experiences, feelings and just pure chaos were a normal part of the process for others like me.

Who is the Freelance Economy?

But even saying “others like me” almost raises more questions than it provides answers. So, who are we and by we, I mean the freelance economy. There are millions of us and you might be surprised at who all is considered a part of the “contingent” workforce, as defined by the IRS. Not only is this group highly diverse and span all facets of society, but they are growing and along with that, the idea of what it means to be a part of the freelance economy is evolving too.

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According to Forbes magazine, the IRS statistics break down a little like this.

  • 1.3% of us are Agency temps
  • 3.5% of us are On-call workers (they work only when needed)
  • 3.0% are working on company contract
  • 12.9 % are independent contractors who serve their own clients directly
  • 3.3% are self-employed workers such as shop and restaurant owners, etc.
  • 16.2% are standard part-time workers

If you are quick with math, you know that this is over 40% of all American workers, or nearly half! Our tribe is big and growing rapidly! In fact, many are concerned that the death of the traditional “job” cannot be far behind. So, who are my fellow pioneers of the new labor frontier, and what are some of the challenges we face?

Part time and short term workers

Temp workers, part time employees and those who work on-call in fill in positions face some common enemies. First, being fully employed in these situations is tough. It can mean navigating the mine field of balancing more than one job, or taking on side work, or applying for benefits just to make ends meet. Nearly 1/3 of them live with abject poverty, with incomes under $20,000 a year, a rate nearly three times that of their full time employee counterparts.

They are faced with an ever shifting job landscape, where demands can change from day to day, depending on the needs of the employer. Their job security is anything but certain and this, coupled with the lack of benefits makes their position incredibly challenging. Some may hope to move from temp to permanent hire, but most will simply tighten the belt, take on more jobs, or give up altogether. When asked, nearly half of workers in this category said they would prefer other work if they could find it.

Self employed workers and business owners

For the self-employed, not only is the work uncertain and ever changing, but these members of the freelance economy also often have others depending on them to provide employment. Faced with an ever increasing burden to provide benefits and weave through regulations, legal obligations, tax issues and the rigors of business ownership, these workers are often viewed as having some level of success, while many of them work far too many hours for shrinking profits.

By and large they are more content with their lot in life than any other segment of the freelance economy, with only 7.5% of them saying they would rather have other employment. They are also less likely to live in poverty. They are almost entirely dependent on their own efforts, however, and in most cases, make no income in the event they are unable to work.

One major drawback is the lack of support from employment law and societal infrastructure for the small business owner. Most employment law is written to protect employees, not employers. They are often expected to carry the entire load themselves, unable to take on shareholders as larger corporations do, but unable to qualify for other forms of financing. This coupled with the fact that many have invested everything they have to start their company, contribute greatly to the nearly 50% failure among the self-employed.

Independent contractors and company contract workers

With company contracts, workers may often find themselves in familiar surroundings with a situation that feels very much like a traditional job. The drawbacks are the same as for all freelancers. They rarely receive benefits and, as outsiders, their positions may end at any time. If they are fortunate enough to work for a company that is stable and requires their services long term, this may turn out to be an excellent position for some workers.

Independent contractors are often viewed as the “true freelancers”. They are among the least likely to experience poverty but their dissatisfaction rate is a little higher than those self employed in more traditional businesses at 9,4%. Unless they outsource, they typically handle everything from prospecting, to sales, to fulfilling contracts for clients. The variety of these challenges is part of what draws many of us to this type of work.

So, what does it all mean?

For people like me, it is a mixed bag. As the number of workers with alternative employment grows, it is becoming a more accepted situation. But with increasing demands, such as the health care mandate on employers and workers across the board, there are new challenges that will need to be addressed.

One can hope that as the freelance economy grows to include nearly half of all American workers, the conversations we need to have about the tough issues we face, will become more of a priority than they have been in the past. As we reach the tipping point, there is a lot of potential to create a more flexible economy for workers of all sorts. One thing is for sure, the freelance economy is not the flash in the pan that some predicted. It is growing and it is likely to continue to grow for the foreseeable future.

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Jessica Miller-Merrell
Jessica Miller-Merrell is workplace technologist and marketing strategist. She's the founder of Blogging4Jobs.com and proud member of the independent workforce 5 years and counting. Follow her on Twitter, @jmillermerrell.
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