Freelancers Multiply as Economy Struggles

BOSTON ( MainStreet) -- Throughout the jobs crisis, as unemployment rates peaked in the double digits, there was one area of growing demand: freelancers. And the ranks of the self-employed are growing.

It's a good-news, bad-news situation, however. For "free agents," working for themselves rather than for a boss, there is more work available. But those opportunities come as cost-cutting companies trim payrolls and turn to part-time and contract workers to trim payroll taxes, reduce health care costs and cut other bottom-line-eroding benefits a full-time workforce requires.
'Free agents' could eventually outnumber the traditional workforce, one study claims.

According to estimates by Kelly Services ( KELYA), an outsourcing and staffing firm that provides temporary employment to 550,000 workers annually, roughly 44% of the active workforce last year were freelancers, a 70% spike since 2008.

By the year 2020, research by MBO Partners, a leader in the $250-billion-and-growing independent consulting sector in the U.S., predicts that will be 70 million people -- more than 50% of the private workforce (which includes freelancers, independent contractors and so-called solopreneurs, independent professionals launching businesses-of-one). That shift will begin to "accelerate in 2012 as both individuals and organizations embrace new models of work," it says.

"Freelancing -- once a euphemism for unemployment -- has grown to be a dominant force in the economy, with 42 million independent workers -- more than the total number of autoworkers, teachers, and doctors combined -- driving the U.S. economy," offers a statement issued by the Freelancers Union, a 170,000-member trade organization based in New York City.

Surprisingly, the government, through the Labor Department, hasn't inventoried the independent workforce since 2005, leaving those who track and work with that demographic to offer their own estimates. MBO Partners' Independent Workforce Index, released in September, looked at the state of independent work in America and provided what the firm says is "the first national baseline to help track trends and changes in the independent workforce over time."

In a similar recent study, The New Workforce: Insights into the Free Agency Workstyle, Kelly credits much of the increase in freelancers since 2008 -- more than half -- to terminations, layoffs and "the inability to find work elsewhere," which were cited twice as frequently last year versus 2008 as the primary reason for choosing the life of a freelancer.

But some freelancers choose the lifestyle.

"Job security is being redefined as workers realize that security is now in their own hands," the study says.

The popularity of Web sites such as Craigslist, eBay ( EBAY) and Etsy have made working for yourself an option for both new careers and extra pocket money. New technology -- including videoconferencing, social media, email, instant messaging and cloud-based document sharing -- has made the logistics of off-site work less of a hurdle.

Despite a stagnant employment market in 2011, online hiring for the nontraditional workforce grew at a record pace, up more than 107% from 2010, according to Elance, a platform for such opportunities. More than 650,000 new jobs were posted on its site in 2011, with cumulative earnings set to surpass $500 million. In the U.S., earnings rose in 43 out of 50 states, including some of the hardest-hit states for unemployment, such as Michigan, Nevada and South Carolina.

"This year's job numbers suggest a structural change in traditional employment, as more businesses are adopting online and contingent work as a core business strategy," says Fabio Rosati, CEO of Elance. "Fueled by technology, work is no longer confined to the 9-to-5 and the office."

Among the jobs in greatest demand: software development, mobile technology, graphic design, content writing, Internet marketing and specialists in WordPress, Facebook and Twitter. Elance expects its market for online contingent work to again double throughout 2012.

An MBO Partners' survey of 1,144 U.S. residents found that of those who said they want to go independent, six in 10 have already taken action. Some had taken major steps such as applying for a business tax ID (13%) and building a business Web site (14%).

Kelly's report cites "attitudinal shifts" and a movement toward a more entrepreneurial mindset among workers. Flexibility in work options, lifestyle choices and increased independence all played a role.

It also sees an aging workforce driving the shift. The percentage of workers over the age of 45 has risen to 44%.

"Seeking greater freedom and flexibility, mature workers are more likely to be free agents than their younger counterparts," the Kelly study concluded. "For these workers, the definition of retirement is changing and many are looking to free agency as a flexible retirement option. Retirement employment options are increasingly important, as approximately half of those planning to retire in the next five to seven years say their retirement plans include seeking other employment."

According to Kelly, two-thirds of the free agent population are mature workers; 52% are baby boomers born between 1946-64.

"Gen Y workers are the most likely to have become free agents because of economic conditions," Kelly says. "This doesn't mean they have done so reluctantly or that they will seek out traditional roles when they again become easier to find. In fact, research shows that 38% of free agents believe economic conditions have actually enhanced their opportunities by strengthening demand for their expertise."

Also influencing increases in the free agent workforce are two-job families, in which one spouse's traditional employment allows the other to tackle free agent opportunities.

According to MBO Partners, the largest percentage of free agents (45%) are freelancers (working on their own) and independent contractors. Entrepreneurs and solo business owners account for 23% of the workforce and 21% are temporary or contract workers supported by a staffing firm. Business owners supported by a staff accounted for 11%.

Among its predictions for the months ahead is "the continued proliferation of niche, work-oriented online social communities" and cloud-based technologies that "eliminate the barriers imposed by physical work locations."

Uncle Sam may start paying more attention to the shifting employment landscape, since noticing employers paying fast and loose with the rules, sometimes looking to save a buck by converting workers into freelancers -- at least, in name only.

"As independent careers proliferate, the government will seek to collect its tax revenue with stricter laws and higher violation penalties," its study says. "In 2011, seven worker misclassification laws were passed in six states. Currently there are already 14 additional bills under review."

While independent workers may feel a risk in not having a permanent position, of the self-employed workers surveyed by MBO Partners only one in five said they would rather have a regular, permanent traditional job than be on their own.

There are, of course, challenges for those who take an alternative career path.

Among the top concerns found by MBO partners: not having enough predictable income (56%); the availability of job opportunities (46%); planning for retirement (46%); setting boundaries on work so it doesn't become a 24/7 commitment (32%); managing business details (28%); and collecting on accounts receivables (12%).

Health care coverage is a perpetual concern for the freelance workforce and something groups such as the Freelancers Union hope to address. Earlier this week, it was awarded $174 million in low- and no-interest federal loans to help it establish a "private, nonprofit, consumer-governed health insurance company" by the federal Centers for Medicare and Medicaid Services. Consumer Operated and Oriented Plans, or Co-Ops were authorized by the Affordable Care Act.

In addition to the award for the Freelancers Health Service Corporation sponsored by Freelancers Union, its other projects getting funding were the Freelancers Co-op of New Jersey ($107,213,300) and the Freelancers Co-op of Oregon ($59,487,500).

-- Written by Joe Mont in Boston.

>To contact the writer of this article, click here: Joe Mont.

>To follow the writer on Twitter, go to http://twitter.com/josephmont.

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