MBO Partners recently released its 7th Annual State of Independence in America study. This report looks at the world of independent workers, including self-employed workers, part-time independents, freelancers, contractors or temporary workers and seeks to understand the composition, motivations and perspective of this growing portion of the United States workforce. Moreover, the State of Independence Report is important because it is the only source of time series data for the gig economy which is becoming an increasingly larger and important cohort.
The US government stopped its contingent labor survey in 2005, so there are no government statistics available. Efforts have been made to try to estimate the independent workforce from 1099 data and/or self-employment data, but both approaches are problematic. (I could go into that, but it would make for a very boring blog post…) Industry players and think tanks have done research in this area and their results present very different estimates of the scale and size of the independent workforce. In fact, the McKinsey Global Institute published a report in 2016 wherein they listed 5 different studies, including their own, that estimated the size of the independent workforce in the US as a percentage of the working population. The results were very different, ranging from as little as 16% to as high as 27%. These disparities were due to differences in sampling techniques and assumptions, but nonetheless point to the problem of data around the gig economy.
The fact that we have 7 years of data from one reliable source that can provide some time series perspective is tremendous. As a researcher in this realm, my hat is off to MBO Partners for its annual effort to bring some new insights about independent workers in America. Below are some of the findings of these seven years of studies, most of which should not be a surprise to those who know this space.
First, the independent workforce is growing. It numbers nearly 41 million people and now represents about 31% of the US workforce. These numbers include everything from Uber drivers to interim CFOs. The study over the years has focused on full time independent workers, but over the years have added other critical categories, like part-time independents as well as occasional independents, frequently referred to as “sidegiggers”. These three segments represents a cross section of ages, genders and professions. As a group they have consistently over the past 7 years contributed in excess of $1 trillion to the US economy, reaching $1.2 trillion in 2017.
In the past seven years the level of satisfaction independent workers have in their work has increased, and in 2017 it reached its highest level, of 74% being satisfied with working independently. Similarly, nearly half,48%, now feel more secure as an independent than they would in traditional employment. That said, there are still challenges for most independents about the predictability of income, planning for retirement and the pipeline of work. This year, due most likely to the discussions in Washington about repealing the Affordable Care Act, the issue of Benefits rose significantly, from 32% when last cited in 2012 to 40%.
Another increase has been in the number of independents who earn in excess of $100k per year. That jumped from about 2 million in 2016 to 3.2 mil in 2017.
The composition by age has changed in the past seven years as millennials have become a greater proportion of the workforce. As you would expect, Boomers still make up a significant portion of the independent workforce,and are most represented in the high earning cohort. Millennials earn less, since they do not have the expertise of their more senior peers.
Millennials, those born in the 80’s and 90’s, are now becoming the largest and fastest growing segment of the Gig Economy workforce. As they enter the workforce, more and more boomers are retiring and exiting. In the 2017 MBO partners study, Millennials made up 38% of the independent workforce, a significant change from years past.
It has been said that Millennials work to live, rather than live to work. Although money is important, providing something of value and, perhaps most importantly, doing what they like, is key to them. They identify with the positive side of alternative work, independence, flexibility, choice, and freedom from bureaucratic corporate environments. Flexibility has always been a hallmark of the independent worker. In the first year of the survey 46% cited flexibility as a key factor. By 2017, that factor had risen to 74%. Part of that can also be the increasing size of the Millennial cohort.
Also, many Millennials came of age during the financial crisis, when finding a traditional full-time position was difficult, so migrated to independent work as a matter of course. They often worked as an intern or contract worker as an audition for a full time role, so developed an early familiarity with the notion of short term gigs. As the economy has rebounded, many in this age group view the Gig Economy as a way to explore career alternatives. Not unsurprisingly then, 90% of them do not plan to stay at any one job for more than 3 years.
Since it may take them awhile to find the perfect fulfilling job, Millennials are the most adept at “side-gigging”, figuring out other ways to make money aside from “regular” work. My daughter is actually a great example of a sidegigger. She holds a master’s degree in Fine Arts, works for a major art auction house in NYC, and moonlights as a dog sitter through a Gig Economy digital matching firm, DogVacay, that pairs dog owners with would-be dog sitters. Though the extra money is a bonus, especially since the art world is notoriously low paying, she is really getting a “dog fix”. She loves dogs and needs to do what she loves. DogVacay helps her do that. That said, my guess is she doesn’t see herself as a gig worker. She is using the digital matching platform to spend time with a dog, not to have a job. She is that Occasional Independent, even if she doesn’t know it. That said, I am not sure if she would show up in the MBO Partners data or not…
That said, Millennials do have a different view of alternative work, than the older cohorts. Since they are less experienced by definition and often do not have the professional networking opportunities of more accomplished independent workers, it is harder for them to find work. They also feel more isolated as an independent than the older segments and are more concerned about the lack of benefits. None the less, their desire for freedom and autonomy, suggests that this demographic group will continue to be an important part of the growth in the Gig Economy. 21% of millennials see independent work as a viable career path.
The 2017 study was the first to explore the rise in digital talent programs as a source of business. Few used these sites as the primary source of business, but many regarded them an another channel form which to secure new gigs. Not unsurprisingly, usage varied by age segment, with millennials more likely to use digital talent platforms (34%) than either GenXers ((14%) and Boomers. (11%).
The fact that MBO Partners chose to include this dimension points to the increasing penetration of the online talent marketplaces. Although many think only of Uber or TaskRabbit, there are a plethora of companies dealing with very unique segments of the independent workforce. Experfy, for example, is a platform for data scientists. At the other end of the spectrum, the GlamApp is a digital platform for make-up artists and Coach.me for athletic coaches.
The study this year also made the observation that workers will rotate from traditional employment to gig work and back again. This is due in part to economic factors; as the unemployment rate goes down, there is more leverage for skilled workers of all sorts. Some independents will be able to command higher fees, and others may be lured back to traditional work. This is a regular cycle in the independent work market. Back in the day when I was running M Squared, one of our top consultants shared that he had decided to accept a a full time job. When I asked why he decided to stop consulting, he said that he hadn’t and that this was just a one or maybe two year gig. My guess is that is a regular occurrence in the independent workforce.