The Freelance Economy Is Booming. But Is It Good Business?

That was enough to warrant a phone interview, after which Feinkind decided to hire him. "If he was pricing it the same as the other guys, I would have gone with one of them," Feinkind admits.

Such rock-bottom prices are de rigeur among freelancers in emerging economies such as Pakistan and Bangladesh. Feinkind has turned to Third World contractors for furniture blueprints, among other things. "Where I was paying $500 for factory drawings in the U.S., now I'm paying $50," he says. "For businesses, I think it's fantastic. I'm getting great work at a fraction of the cost [of American labor]."

Indeed, cheap digital labor may be the largest growth segment of the freelance market in coming years. There were 30 million knowledge workers globally in 2012, according to a McKinsey report issued this year on "disruptive technologies." The same report predicts there will be two to three billion more people with access to the internet by 2025.

Rosati says the trend toward contract work is accelerating, driven partly by the demographic calculus of global markets and partly by technology. "Technology is disaggregating the world of work much as iTunes did for music."

Which begs the question: Disaggregating it from what? The answer would seem to be salaries, health insurance, paid sick time, and other benefits, though also, more positively, cubicles, department staff meetings, rigid schedules, bad or ineffectual bosses and annoying coworkers.

Related: How to Get the Most Out of Employees Who Work From Home

So are Elance and other fractional-work platforms simply meeting, and capitalizing on, a need, or are they helping to drive the trend?

Because Elance connects businesses that need specialized help on projects with professionals who can do the work, "[it] is disruptive to staffing firms and agencies, not traditional employment," Rosati says. But the platform's claim to being a "global meritocracy" rings less true after speaking with freelancers and business owners who say that knowledge labor is turning into a commodity, with price often the No. 1 consideration.

In the future, other factors may further encourage outsourcing. In the U.S., a big one is Obamacare. Under the Affordable Care Act -- whose provisions affecting businesses are set to take effect in July 2014 -- a startup with at least 50 employees is required to provide health insurance coverage. There is a perception that this requirement will provoke companies to reduce some staff to part-time hours, or to rely on independent contractors rather than hiring more employees.

Feinkind is the only full-time employee of his company. For everything he can't or doesn't want to do himself, he says, he draws from a global network of freelancers "a la carte and as I need it."

Reluctant freelancers
Elance's annual report for 2013 is chock full of upbeat Elancer testimonials. But Rosati acknowledges that some freelancers "would prefer full-time employment if the right employment opportunity were available. For 'reluctant' freelancers, online fractional work is an important way to make money, meet potential employers and keep resumes current," he says.

One of those freelancers is Feinkind's own fiancée. "If she weren't living with me, she would not be able to survive doing Elance," he says. He has suggested that she "go local," maybe holding seminars to teach social-media marketing and other skills to business owners in her community, rather than trying to compete with Third World workers in a global market.

Despite seeing his fiancée's daily struggle to make a living, Feinkind continues to rely heavily on foreign contractors for his own business. He praises the outsourcing as saving both time and money, and justifies it by saying he can pass the savings on to his customers. "It's a great way to free up my time so I can concentrate on things that will really build my business that no one else can do," he says.

"A lot of the people that use Elance are looking for really inexpensive work, mostly hiring people from India," says McBride of her own attempts to find work through the platform. And then, too, the authors tend to be of lesser ability -- often self-published writers who are not looking for a full-time publicist even on a short-term basis, she says. Instead, about 90 percent of her clients have come from Twitter.

If you can find the right clients, freelancing does have its benefits, of course. In addition to the obvious -- a flexible schedule, the ability to work from home, low overhead and so on -- McBride says going into business for herself has taught her to take control of her personal finances. When she got paid as a full-time employee, "I would spend it all, because I knew that I would get another paycheck with that exact amount in another two week," she says. "Now I've learned to save a lot, because I don't know if all my clients will renew at the end of the month."

What's more, she estimates that if she can maintain 15 clients a month, she will be able to hire an assistant to help her handle the work load. And with a solid 20 clients a month, she could rent office space and turn her freelance lifestyle into a full-time business with a staff of her own.

For McBride, it's clear, freelancing is a way-station on the path to entrepreneurship. But even now, she prefers it to having a full-time job. I'm happier," she says. "I'm being challenged every day."

Related: H-P Is Asking Telecommuters to Work On-Site. What Do You Think?

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Brian Patrick Eha is a freelance journalist and former assistant editor at Entrepreneur.com. He is writing a book about the global phenomenon of Bitcoin for Portfolio, an imprint of Penguin Random House. It will be published in 2015.

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