The millions of freelancers, contractors, temps and on-demand workers in the American workforce all have one thing in common: They're all part of the ever-expanding gig economy.
While these independent and often short-term, temporary employment arrangements haven't quite killed the traditional 9-to-5, the number of workers voluntarily picking up gigs – either as a side job or their full-time source of income – continues to grow. Here's an overview of the current state of the American gig economy and why professionals are flocking to it.Credit: Grant Reinero / Business News Daily
What is the gig economy?
A broad definition of "gig economy" from WhatIs.com encompasses long-standing offline positions that would accurately be described as gig work: "an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements."
The U.S. Bureau of Labor Statistics' preferred term, "contingent worker," aligns well with that definition of the gig economy, referring to temporary forms of employment that have existed long before the Ubers of the world.
From 1995 to 2005, the BLS published several iterations of its Contingent Work Survey (CWS), which analyzed "contingent work" and "alternative employment arrangements." In it, the BLS defined contingent workers as those "who do not have an explicit or implicit contract for long-term employment." This definition included a wide range of alternative employment arrangements, such as workers employed by a temp agency or contract company, on-call workers, freelancers, and independent contractors.
Economists Lawrence F. Katz and Alan B. Krueger, research associates at the National Bureau of Economic Research, sought to fill the CWS void with a working paper distributed in March 2016. Katz and Krueger generally uphold the BLS' definition in their study, but expanded it to include "workers using an online intermediary," such as Uber.
How big is the gig economy?
The gig economy's growth has been remarkably rapid over the last decade. In 2005, the final year of the BLS CWS before it lost funding, the bureau estimated that alternative employment arrangements accounted for 10.1 percent of U.S. employment. The 2017 Freelancing in America study by the Freelancers Union and Upwork estimated that nearly 57.3 million Americans – or 36 percent of the nation's workforce – are now freelancing, most of whom do so by choice (63 percent).
Katz and Krueger cited increased demand for flexible hours, technological advancement and the Great Recession as potential factors driving the boom. What the economists could not infer from the data is how much of the gig economy's growth can be attributed to job losses in the traditional economy after the financial crisis of 2008. If the Great Recession was indeed a major motivator, the researchers noted, one would expect the number of alternative arrangements to dwindle over time as the effects of the recession are mitigated.
However, nearly 10 years after the start of recession, the gig economy shows few signs of slowing down. Recent research by ManpowerGroup found that 87 percent of the 9,500 global workers surveyed are open to what they call "NextGen Work" for their next or future position.
"Much of the jobs growth in the last 10 to 15 years has occurred in nontraditional, alternative ways of working," Jonas Prising, chairman and CEO of ManpowerGroup, said in a statement. "What people want is changing. They are working longer, learning more, and seeking a better balance between work and home. Not everyone wants to engage only as a full-time employee, and organizations don't always want that either."
"From the globalization of commerce, to the innovation economy, companies around the world are looking for flexible talent," added Scott Galit, CEO of Payoneer. "Everything also really points to more technology-driven needs and there is not enough talent in the places people would like to hire and not as many businesses that are looking to hire permanently. They want more flexibility to try to be faster to market and retain more flexibility in how they build their teams and their organizations."
The current state of gig work
Who works in the gig economy?
The demographics of gig workers contradict a common narrative that it's all millennials looking for a sense of freedom or simply taking the work they can get in a tough job market. Although a recent Payoneer survey of 21,000 global freelancers found that more than half of all respondents were under 30, 1 in 3 U.S. respondents was over age 50, proving that professionals of all ages are taking advantage of gig work.
Katz and Krueger's research confirms this: "Alternative work is more common among older workers and more highly educated workers, and the workforce has become older and more educated over time," they wrote.
What kind of work are they doing, and how much do they earn?
Katz and Krueger found that more than half of the gig economy's jobs come from four main industries: healthcare, education, construction, and professional and business services. Other notable categories of industry in the gig economy include computer and mathematical, community and social services, personal care, legal services, transportation and warehousing, information and communications, and public administration.
According to Payoneer's research, freelancers worldwide charge an average of $19 per hour (admin and customer support gigs have the lowest average of $11 an hour, while legal services rake in $28 an hour on average). Nearly half of those surveyed work 30 to 50 hours per week, and more than 80 percent focus on one to three jobs at once.
Why do they do it?
For professionals who freelance by choice – that is, not because they couldn't find better work elsewhere – motivations for getting into gig work vary greatly. Based on the results of surveys by ManpowerGroup, the Freelancers Union and ReportLinker, these are the most common reasons people want to join the gig economy:
- Greater flexibility
- Being their own boss
- Better work-life balance
- Less stressful work environment
- Opportunities to learn and advance their career
- More meaningful work
- Better pay/side income
- Greater respect and empowerment
Despite the downsides of the gig economy – reduced access to insurance and retirement benefits, lack of financial security, low job security, etc. – it seems that the freedom this type of work affords is enough to make professionals want to give up their traditional 9-to-5 and join the contingent workforce. A CompareCards survey found that 58 percent of people with side gigs want to turn them into a full-time career, and earlier this year, CNN reported that the gig economy is expected to include 43 percent of American workers by 2020.
"Even if the pay is less, which isn't always the case, freelancing means freedom in how you work," said freelancer Matt Inglot, host of the Freelance Transformation Podcast, in an interview with Entrepreneur. "People love that."
Additional reporting by Adam C. Uzialko.