Empowering the Freelance Economy

Freelancers have this awesome trait, says McKinsey

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Isn’t it about time governments on both sides of the Atlantic started recognising and celebrating freelancers, who according to a McKinsey study, have a distinctive characteristic that the average worker doesn’t?

The rising cost of living in the UK and the US will give people little choice but to look for additional ways to bring in income to make ends meet. That means the number of people taking on side hustles, gig jobs and freelancing could reach new highs over the next 12 months.

Because independent work does not fit neatly into official labour statistics, it tends to be an underreported and understudied segment of the economy., yet freelancers make a huge contribution to the economy and small businesses/ Photo by Gustavo Fring via Pexels

In a McKinsey survey of 25,062 Americans, the 5,280 respondents who identified themselves as independent workers revealed a distinctive characteristic: they are far more optimistic, both about their own futures and the outlook for the economy, than the average American worker. And that’s despite having more hardships than the average person, too.

More than a third of them say that in 12 months they expect to have more economic opportunities, compared with a fifth of workers overall who say the same.

More than 40 per cent of independent workers say that they think it’s more likely in five years that there will be continuous economic growth, compared with about a third of all respondents.

Independent workers’ optimism is even more remarkable considering the hardships they encounter, said the McKinsey report.

“Many lack access to basics including affordable healthcare and nutritious food, respondents tell us. A majority (54 per cent) report being concerned about the stability of their employment, compared with 35 per cent of permanent workers,” the report stated.

Because independent work does not fit neatly into official labour statistics, it tends to be an underreported and understudied segment of the economy.

McKinsey’s research revealed a seismic shift in how Americans work and support themselves: 36 per cent of employed respondents said they work as independent workers up from our estimate of 27 percent in 2016. Though the total percentage includes people who engage in some independent work on top of permanent employment, 72 per cent of independent workers say they have only one job.

The independent workforce enables companies, government agencies, and not-for-profit organizations of all sizes to expand their workforces during periods of peak demand—such as holiday seasons for retailers—and then revert to a leaner core team when workloads return to normal.

The ability to call in specialised help on an as-needed basis has great value, particularly for small businesses and start-ups, the report highlighted.

“Smaller enterprises may need specialised help at times—say, a marketing specialist to help during a product launch—but may be unable to afford having those people on staff full-time. The availability of freelance labour vastly reduces the cost and lowers the barriers to starting a business,” said the report.

The increase in the percentage of the working population identifying themselves as independents may be due to several factors. Digital platforms such as Airbnb, Uber, and Upwork have allowed a larger pool of workers to be matched with consumers.

To weather volatility during the COVID-19 pandemic, many companies have shifted to a more agile workforce made up of more independent workers.

Finally, layoffs during the pandemic and cost-of-living issues may have pushed a larger number of workers to become independent workers, either because they have been unable to find permanent employment or because the pay they received in their primary employment has been insufficient.

With rising inflation and interest rates, we could see renewed layoffs in certain sectors, such as tech, retail, entertainment and hospitality as people cut back on non-essential spending. Policymakers on both sides of the Atlantic would be wise to ensure labour laws do not hinder an individual’s ability to become an independent worker in these uncertain times.

Are British freelancers, like their American counterparts, more optimistic than the average worker? Leave your thoughts in the comments section.

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