Empowering the Freelance Economy

What’s holding back the largest freelance economy?

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It is projected that in 2027, 86.5 million people will be freelancing in the United States and will make up 50.9 per cent of the total US workforce. However, there is a growing number of contract, freelance, and temporary workers there that would prefer full-time employment, according to a McKinsey survey. What’s got the US freelance economy so worried?

Of the 25,000 people surveyed, 27 per cent were either a contract, freelance, or temporary worker. This shift in preference towards permanent employment is despite 70 per cent of executives in a recent survey saying that they expect to use more freelance, temp and contract workers.

This lack of confidence in temporary or freelance work was most pronounced among first-generation immigrant (76 per cent), Hispanic/Latino (72 per cent), Asian American (71 per cent), and Black (68 per cent) respondents. This is consistent with previous McKinsey research that highlights that only about 30 per cent of workers actively choose independent work as their full-time occupation.

A higher proportion of Black and Hispanic/Latino respondents, first- and second-generation immigrants, and those with less than a high-school education were contract, freelance, or temporary workers, compared with the overall average of all respondents in our survey.

This would likely put them in what constitutes the gig economy, rather than consultants or highly skilled freelancers in the professional service industries that can dictate day rates in the hundreds of dollars.

Has the pandemic or US healthcare system tarnished the gig economy?

The uncertainty that the pandemic has brought salaried, temporary and self-employed workers alike should be no surprise to readers. But could the fly in the US freelance economy’s ointment be its private healthcare system?

The preference for permanent work is perhaps unsurprising given that contract, freelance, or temporary workers were more likely than other respondents to say that they have suffered decreased income over the past 12 months, said McKinsey.

That said, these workers were also nearly twice as likely than others to say that they could not afford health insurance (22 per cent, compared with 13 per cent for all) and more likely to cite access to affordable healthcare and insurance as barriers to their well-being.

On the other side of the Atlantic, where nationalised health insurance is prevalent across Europe, the cost of healthcare is not such an underlying factor when it comes to going freelance.

Nevertheless, the survey found that as of spring 2021, US contract, freelance, or temporary workers were more optimistic than others about the American economy, as reflected in their higher Economic Opportunity scores.

In part, the authors of the McKinsey report said this could be due to the higher proportion of these workers who are first- and second-generation immigrants and people of colour (groups that appeared more opti­mistic than others).

Thirty-seven per cent of first-generation-immigrant respondents, 39 per cent of Black respondents, and 36 per cent of Hispanic/Latino respondents reported working as temporary, contract, or freelance workers, compared with 27 per cent of all respondents.

Previous McKinsey research has also found that independent workers are, in general, happier and healthier than other workers, although that may be because the independent workforce is somewhat younger than the workforce overall.

Notably, nearly one-third of contract, freelance, or temporary workers said that they had enrolled in training or educational opportunities—more than twice the proportion of other respondents. And two-thirds of these workers said that they were interested in pursuing training in the future, more than double the share of other respondents.

Are you on the fence about whether to be a salaried or independent worker? Feel free to start a discussion in our comments section no matter where you live in the world.

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