We're Turning Into a Freelance Nation. Here's What That Looks Like. Technology has facilitated a global market shift that provides more options for freelance employees.

By Russ Fujioka

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With more than 53.7 million freelancers working the United States, the group now makes up about one third of the nation's labor force. It's a number which signals just how much the U.S. job market has changed in the years following the Global Financial Crisis.

Researcher Bill Tancer said recently: "We believe there has been a fundamental shift in the U.S. job market. Incomes have stagnated and the size of the total labor pool has contracted."

As of November 2015 there were 149.4 million full-time workers employed in the U.S. labor force, unemployment was hovering around 5 percent and the labor participation rate had dropped from a high of 66.4 percent in December 2006, to its current level of 62.5 percent.

"It means people are looking at how they can supplement their income, a trend we're particularly seeing in the millennial age group," Tancer said.

According to research commissioned by my company, Xero, that change is still relatively new with 41 percent of respondents reporting they've been freelancing for a year or less, and just 24 percent reporting to have freelanced for more than two years.

Related: The 15 Best Freelance Websites to Find Jobs

A transformation in the labor force is something leaders need to be aware of, especially when hiring. If millennials value flexibility over job stability, it can completely change the way you staff your organization.

The average freelancer in the U.S. is likely to be a millennial aged between 18 and 34 (45 percent), female (69 percent), a Democrat (41 percent), living with someone else who has a full-time job (52 percent) and works between 20 and 40 hours a week.

For a whopping 96 percent of those surveyed, freelancing is a way to supplement either their existing income, or their spouse's. According to the study, the majority (48 percent) earned between $2,000 and $50,000 a year freelancing, and just 4 percent brought home more than $50,000 a year. Just a third say they have the right amount of work.

Related: Hacking Elance: How to Make Money Freelancing

Despite the number of on-demand platforms that service major cities, freelancers are likely to be split pretty evenly between suburban (43 percent) and urban (42 percent) areas.

Going it alone means you often forego the job security which comes with working for someone else. However, as World Economic Forum Chair, Anders Borg pointed out recently: job security is currently being "undermined by global competition, digitalisation and robotisation."

By far, the most frequently used freelance marketplace in the past 12 months was Uber with 34 percent of those surveyed reporting that as their platform of choice, competing ride hailing platform Lyft came in equal third place with 13 percent of respondents listing it as their freelance platform of choice.

And while many drivers report to work for several competing platforms, our data shows freelancers usually focus on specific sites with 44 percent reporting to only work for one platform.

For professional services, Freelancer.com was the most used site with 14 percent of those surveyed reporting to use the site, followed by Upwork with 10 percent.

With the plethora of freelancing platforms gaining notoriety around the world, technology is facilitating a global workforce shift. It also means it has never been easier to find work as a freelancer. But in many cases it has also increased the amount of competition, particularly in the services sector, where jobs can potentially be completed from almost anywhere in the world.

Increased competition isn't the only problem freelancers reported facing. Lack of income security, managing tax and financial affairs, not receiving vacation or healthcare benefits, tracking expenses and working solo were all listed as the greatest challenges which come with freelancing.

Going it alone means you've got to look after your own costs. Almost half of those surveyed reported they struggled to keep work and personal expenses separate and as a result many are missing out on claiming valuable deductions like mobile or internet expenses. Which is surprising considering earnings of the on-demand workforce are still minimal.

As the number of online marketplaces grows, their broad appeal––reaching across multiple demographic categories––suggests that as long as there are freelance opportunities available via these platforms, there will be no shortage of people willing to compete for them.

This new generation of worker isn't going away and it presents significant opportunities for those already in business. But to harness it, you need to understand it.

Russ Fujioka

President, US division of Xero

Russ Fujioka is president of Xero in the US. He has more than 25 years’ experience providing strategic and operational leadership to cloud, Software as a Service and technology providers with a focus on sales, marketing and operational management of high growth businesses. Fujioka has held senior executive roles at Dell, Bessemer Venture Partners, J. Walter Thompson and Adobe Systems.

 

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