Who Is the Freelance Economy Hurting?
These days, it’s all about the freelance economy—or what many experts envision as the new economic normal. As the economy makes its bland recovery, flexible (no-benefits and low-cost) freelance (a.k.a. “shared,” a.ka. “contingency”) work is all the rage.
But who benefits from this supposed freelance boom? This growth of contract employees, such as the ride-sharing and taxi-obliterating Uber, along with its competitor and policy partner-in-sector Lyft, has already sparked some good old-fashioned turf wars over innovation. And while the fever-pitched combat between traditional taxis and ride-share services might seem like just another nose-breaking scrap between rivals in a market space, there’s even more to it than that. The outcome promises to radically and forever reshape what it means to be a worker.
The Freelancers Union excitedly sneezed out its “National Survey of the New Workforce” last September, boasting about the 53 million workers disrupting the typical economic model. Gone are the days when like Ward Cleaver strolls through the front door after a 9-to-5 white collar grind. First add June to that equation—she’s working, too, while the Beav and Wally are left latch-keyed to their own smartphone-fueled devices because their parents’ freelance work comes without the benefit of regular hours. The generational impact of the “freelance revolution” doesn’t stop at the nuclear family—imagine Millennials hunched over laptops in the local Starbucks or overwhelmed Gen-X’ing parents hustling for both paycheck and flexibility.
Let the numbers tell it, and it’s all good—advantage innovators. Popular freelance economy pioneers like Uber enjoy eye-popping valuations of $40 billion or more, thereby validating an emerging freelance ideology. Freelancers, according to the Freelance Union, are also contributing more than $700 billion of productivity to our $14 trillion economy, which is solid and respectable. As the economy rapidly reconfigures and technology pushes us further into automation, the segment of the workforce that’s contracted will also rise from today’s 34 percent to an astonishing 50 percent by 2020. Hence, the trend shows no sign of reversing, but rather more signs of metastasizing. It’s reasonable to assume that, in our collective lifetimes, freelance or contractual work will be the fundamental core of our global labor market. There will be way more freelancers than full-time permanents. A world of full-timers and full-time-nots looms just over the horizon—and for some workers, it’s already here.
Not only does that make the Affordable Care Act convenient in terms of its timing, but also rather prescient. Permanent non-freelance jobs won’t be an economic staple in 10 years. Instead, they’ll be something of a highly-prized and rather rare privilege.
From a white-collar perspective, freelancing seems like an efficient fit. Philosophically, it appears to thrive off the notion of high-octane entrepreneurship, an attractive social construct where we control our own agency.
But the freelance economy is troubling given the unbending and unforgiving realities of today’s economic environment. Among traditionally underserved populations, who face income inequality, stagnant wages, and underemployment, disrupting tech enthusiasts prompt more anxious questions than giddy answers. A ballooning freelance workforce means a permanent state of non-permanent wages, adding more uncertainty to an economic environment saddled by stuck income. As Pew found recently, “the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.” While poverty is at 15 percent, economic inequality in the United States is obscene, a place where the top 20 percent own 84 percent of … well … everything.
The question of who benefits becomes more pressing with each passing year the freelance economy grows. Interestingly enough, the decline of purchasing power since 1973 seems to mirror the upward trend of the “contingent” economy during that same period. And, along with the recession, it also means—eventually—that large segments of the population are getting left behind or will remain behind. Already, as Prospect’s Virginia Durivage pointed out some time ago, “most contingent workers are women and minorities clustered in low-wage jobs with no benefits or opportunities for advancement.”
Official unemployment rates released each month by the Bureau of Labor Statistics make recovery feel as fresh as a detergent commercial, but these reports slickly ignore other indicators such as underemployment or diminished labor force participation rates that actually show joblessness is much higher than we think. One factor, perhaps, could be a rising freelance mindset as fed-up workers tap out of traditional models in a bid to make it on their own.
Another obvious factor is a society still largely discriminating on the basis of race and perceived status, a condition for which the freelance economy may have no solution – especially if, as USA Today showed in a recent analysis, “top universities turn out black and Hispanic computer science and computer engineering graduates at twice the rate that leading technology companies hire them.” Would embracing a dominant freelance economy make that situation worse? It’s unclear at the moment. What we can see, for example, is that freelance pioneers like Uber are disrupting taxi industries largely populated by drivers of color: while 32 percent of tax drivers are black, less than 20 percent of Uber drivers are the same compared to more than 40 percent who are white. Asian and Latino Uber driver rates are, however, nearly identical to their proportions as taxi drivers, even while still low (17 percent each, respectively) when compared to white Uber drivers.
That probably doesn’t hint at any pattern of hiring discrimination on that part of Uber when it clears and selects contracted drivers. But, what is clear is that companies reliant on outsourcing as their primary operational model have more incentive to circumvent (or altogether neglect) worker rights than when industries were more reliant on permanent positions.