Two weeks ago the American Freelancers Union and Elance-oDesk co-published a study on the growth of the freelance/independent workforce. Their eye-popping finding is that 34% of the American workforce, some 53 million people, are working as freelancers. Of these, more than half or 29.1 million people freelance to supplement income from part-time jobs. This study rightfully traces the decline of job security back to the 2008 recession, and the rise of the freelance economy back to internet and social networking, which have changed the way people find work today.
Much of the study provides insight into the many exciting opportunities this changing world of work has to offer. For example, more than 40% of the respondents said they found and completed new projects online; 69% said that social networking dramatically changed the dynamics of meeting new clients; 43% said they expected to earn more money in the following year. The study generally celebrates the rise of the new workforce and quotes several freelancers who say they value the flexibility, creativity, and personal growth that they have found from working this way.
There is no doubt that the workforce is in a state of dramatic change, and there is much to appreciate about the opportunities this is creating. However, as more companies convert full-time jobs to temporary, part-time, or contract positions, we can’t help wondering if there is another side to this story that requires more discussion. Traditionally when companies employ people they commit to paying them through the inevitable peaks and valleys of business. They provide steady and predictable incomes, paid vacations, and often (but not always) benefits, including retirement savings plans and coverage for periods of illness. Employers bear the risks, and employees—as long as they do the jobs for which they were hired—live their lives reasonably securely.
In the world of self-employment this picture is quite different. Individuals must find their own work, plan their finances for stretches of unemployment, and work or stop earning during periods of illness. In other words, they bear all of the risks. Not surprisingly, companies have been slow to add back full-time employees for just this reason. In a highly competitive global environment there are distinct business advantages to retaining a lean, core workforce and bringing on people only as needed. In a survey conducted by the Human Capital Institute companies reported that temporary and contract labour is among the fastest growing budget item in their operating statements. And while the U.S. economic recovery has created a lot of new jobs, part-time work has been expanding at a faster rate than full-time work.
Interestingly, it’s not just traditional companies that are shifting risk to the new pool of unattached workers. Business startups that use crowdsourcing to operate have been found to do the same thing. A great example is the recent legislative battle involving ride-sharing businesses Lyft and Uber. When they began their operations, drivers were instructed to submit insurance claims for on-the-job accidents to their personal insurance carriers. Both companies had a backup policy in place that would only go into effect if a driver’s personal insurance company denied the original claim. At the beginning of this year, a tragic accident in California involving an Uber driver led the California State Assembly to introduce a bill that would require ride-sharing companies to have proper commercial insurance. While Uber changed its policy in July—drivers are no longer required to use their own insurance—there has been a nasty dispute about the point at which the required coverage should kick in, at the time of picking up a customer or earlier, when drivers are looking for customers. After much lobbying against it, a law was passed that covers the full period of work. The congresswoman who introduced the legislation reported that she had never seen any person or entity fight so hard for something in her whole career.
What does this all mean for the freelance economy? It means that while we can and should acknowledge the new work model for today’s workforce, we can’t ignore the real risks that individuals take on within it. The excellent and growing support structures springing up—the Freelancers Union calls this movement “New Mutualism”—is definitely part of the solution. So too are debates and new laws protecting workers and the public, like the recent one in California. Better information is also required. In both Canada and the U.S. reliable information on the size, composition, and incomes of the freelance workforce is very hard to come by. Yet without information it is almost impossible to identify the real problems and potential solutions.
If more people are working independently, the fair distribution of risks and thoughtful adjustments of laws must be considered with real urgency. Only then can we be sure that the “new normal” is not a life of insecurity, and that we have not devolved to a place where it’s every person for themselves. For those who can thrive as independent workers because they have the education, resourcefulness and social supports to be successful, the growing industry of services for freelancers may be enough. But we also can’t forget about the people who find that this way of working results in lower incomes and endless anxiety. As the study itself says, the freelance economy is not just a change in how people work, it is also “a cultural and social shift that will have major impacts on how Americans conceive of and organize their lives, their communities, and their economic power.” We have to keep our eyes wide open to all of the implications of a freelance economy and make sure that Canadian workers do not end up worse off because of it.
Image source: Michele Catania