The PJ Tatler

One Third of American Workers Considered 'Freelance'

According to a report from the Freelancer’s Union and freelance markeplaces oDesk and eLance, 53 million American workers, or 34%, are now considered “freelance.”

As you will see, there are several definitions of freelancer, some traditional, some less so, but familiar to many who struggle with their personal finances. Nevertheless, it’s hard to argue with this statement from the report; that the move to freelancing by so many millions represents “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.”

Hit and Run:

The first and last time anyone looked at the freelance worker population in the U.S. was 2004, in a report from the Government Accountability Office (GAO). Back then the GAO turned up about 42 million “contingent workers,” a group that included folks we would normally think of as freelancers but also all part-time workers. “It was a solid, if not particularly nuanced, effort,” as the writers of the new report put it. For their purposes, they defined freelancers as “individuals who have engaged in supplemental, temporary, or project- or contract-based work in the past 12 months” and further broke the group down into five categories:

  • Independent contractors (21 million). This group hews closest to our “traditional” idea of freelancing: individuals whose main source of employment involves working on a project-to-project basis in their field. They make up about 40 percent of freelancers.
  • Moonlighters (14.3 million). These are individuals who work regular full-time jobs and also do some amount of freelance work. This group includes 27 percent of freelancers.
  • Diversified workers (9.3 million). These are our serious hustlers, the folks pulling in income from multiple sources, including traditional employment and freelance work. A diversified worker may have a 20-hour per week bartending or retail job and supplement her income with freelance graphic design work and some time as an Uber driver. This group makes up about 18 percent of freelancers.
  • Temp workers (5.5 million). Temp workers are those working with a single employer, client, job, or project but on a temporary basis. This could be “a business strategy consultant working for one startup client” (the report’s example) or a recent college graduate doing grunt or admin work for different companies each week through a temp agency. They make up about one-tenth of freelancers.
  • Freelance business owners (2.8 million). This group includes people employ between one and five others and who consider themselves both freelancers and business owners. They make up 5 percent of the freelance economy.

A few more key findings about the freelance population in general:

  • 77 percent say they make as much or more money now than they did before becoming a freelancer
  • About half (53 percent) say going freelance was totally their preference; the rest say it was out of necessity.
  • The main reason people take on freelance work is to earn extra money (68 percent), followed by the ability to have a flexible schedule (42 percent).

There have always been people who “moonlighted” to earn extra cash, or took a particular part-time job because the hours were flexible. But that was almost always a result of necessity; child care duties or simply not making enough in one’s 9-5 job to make ends meet.

Today’s freelancer would seem to be more interested in freedom of action and making an impact on the world, according to the study. The fact that decent paying jobs are hard to find may also factor into a workers’ decision to try to make a living as an independent contractor.

As an independent contractor myself, I can tell you one big change that has to made; the tax code. It is rigged against independent contractors and is unnecessarily complex. The tax code actually encourages an independent contractor to pile on as many expenses as possible. This lowers your taxable income but is counterintuitive  to those who wish to save something for retirement.

Elizabeth Nolan Brown, author of the Hit and Run piece, sums up the consequences:

To its credit, the new report remains relatively agnostic about whether these updated employment realities are better or worse than the previous paradigm(s), an agnosticism I share. There’s just no use crying over a culture and economy we won’t get back. What matters is what is happening now, why it’s happening, and how adjust our political and cultural expectations to accommodate it. And to the first two points, this new report provides some valuable and long overdue data.

Why it’s happening probably has as much to do with a stumbling economy that is failing to create jobs that someone who might want a little more security would take in a heartbeat, as it does with any newfound independent spirit in the workforce. In this case, the Mother of Invention is necessity, and as long as the economy is in the doldrums, it is likely to continue that way.