Key Job Facts About the Gig Economy

Key Job Facts About the Gig Economy

The workplace has transformed from one where many workers had the same employer for most of their working life to one where job changes are much more frequent, and where many workers choose short-term gigs over permanent long-term employment.

Being a self-employed worker without the restrictions of a boss has traditionally been an aspiration for many American workers. What’s better than being able to set your own hours, and to work where and when you want?

For every person that chose to work in the gig economy though, there are others who ended up there through no choice of their own. Some workers have been thrust into self-employment as employers have relied on contract workers to avoid the costs of healthcare and other benefits associated with carrying full-time employees. Also, many older workers were displaced during the great recession and have opted for self-employment as a last resort, since they were unable to reacquire traditional employment.

The result has been the emergence of a gig economy where workers are tapped by employers to work on a project basis without the status (or benefits) of a permanent employee. Individuals like actors, musicians, film production workers, and seasonal farm hands have always migrated from gig to gig, but now the trend has expanded into many other areas especially within service industries. 

Overall Trends in Self-Employment

The Bureau of Labor Statistics (BLS) reports that self-employment actually trended downward from 1994 to 2015. In 1994 the self-employment rate was 12.1 percent, and by 2015 the figure had declined to 10.1 percent of the workforce. This decline can be explained in part by the sharp reduction in agricultural employment during that period, since many farm workers either owned farms and worked for themselves, or were migrant workers. In addition, fewer small retail establishments now exist with the dominance of mall and big box stores.

However, The Harvard Business Review (HBR) reports that though the number of incorporated self-employed workers as reported by the government has remained relatively constant since 2000, the actual number of independent workers has increased. HBR attributes the difference to a more restrictive definition of self-employment used by the BLS.

The government requires survey respondents to declare only one category of employment from three options: private sector, government, or self-employment. Temporary laborers, individuals who were work for themselves on a part-time basis, and contract workers all are likely undercounted in the government surveys.

The Mckinsey Global Institute surveyed 8,000 individuals in the United States and Europe and estimated that 20 percent — 30 percent of workers were engaged in "some form of independent work."

Industry Trends in the Gig Economy

Opportunities for self-employment trended quite differently in various industries. According to LinkedIn, contractors who changed industry during the past 12 months gravitated towards:

• Healthcare (+11 percent)
• Real Estate (+10 percent)
• Construction (+8 percent)
• Finance (+8 percent)
• Software/IT Services (+5 percent)

  Some industries showed a reduction in the number of self-employed workers:

• Public Safety (-16 percent)
• Retail (-12 percent)
• Arts (-11 percent)
• Recreation/Travel (-9 percent)
• Agriculture (-8 percent)

Common Occupations for Freelance Employment

According to Upwork, a leading online network linking freelancers to employers, popular freelance occupations include: designers and creatives, web, mobile and software developers, administrative support specialists, writers and translators, accounting/finance/consulting professionals, IT and networking professionals, sales/marketing/customer service professionals, lawyers/paralegals, engineers and architects, and data science/analytics specialists.

Careercast also lists home health aides, occupational therapists, and delivery drivers as other occupations with growth opportunities for freelancers.

Where the Jobs Are — and Aren’t

According to the BLS, 21 states had higher rates of self-employment than the national average of 10.1 percent in 2015. The states with the highest rates include:

• Montana 16.1 percent
• Maine 15.4 percent
• Vermont 14.4 percent
• South Dakota 14.2 percent

Twenty-nine state states had lower rates of self-employment. The lowest include:

• District of Columbia 7.1 percent
• Delaware 7.2 percent
• Alabama 7.5 percent

Self-Employment By Age

Individuals 65 years old and older had the highest level of self-employment at 24.1 percent, followed by those aged 55 to 64 at 14.7 percent, 45 to 54 years old at 11.8 percent, 35 to 44 years old at 10.1 percent, 25 to 34 years old at 5.7 percent, and 16 to 24 years old at 2.2 percent.

Self-Employment By Gender

Men were much more likely to be self-employed at 12.3 percent, while only 7.5 percent of women were self-employed.

Self-Employment By Educational Level

Levels of self-employment varied somewhat, but not dramatically, by the level of educational attainment according to the BLS. Those workers who possessed professional or doctoral degrees were an exception and experienced much higher levels of self-employment:

• 21.3 percent of individuals with a professional degree, such as doctors, lawyers, and architects who maintain private practices, were self-employed.
• 16.6 percent of those with a doctoral degree worked independently. 
• Workers with a high school degree and those with a bachelor's degree had a self-employment rate of 11.2 percent.
• Those with a master's degree came in at 9.3 percent.

Self-Employment By Country of Origin and Race

Foreign-born workers were somewhat more likely to be self-employed than their US-born counterparts. The self-employment rate for foreign-born individuals was 11.2 percent and only 9.8 percent for native-born workers.

White workers (10.9 percent) were more likely to be self-employed than Black/African American (5.2 percent), Asians (9.6 percent), or Latinos (8.3 percent).

Self-Employment: By Choice or Forced?

LinkedIn ProFinder reports that of freelancers surveyed, over 50 percent had plans never to return to traditional full-time employment and wanted to work independently. Almost 20 percent say they’ll make six figures or more this year from freelancing.

The Mckinsey Global Institute survey indicated that 70 percent of self-employed workers had freely chosen that status either as a primary or supplemental source of income. The remaining 30 percent of self-employed individuals were in that situation either as "reluctants" who would prefer traditional jobs or "financially strapped" individuals who were forced to supplement their income through independent work.

Workers who were thrust into self-employment are more likely to be underemployed and many may generate little or no income from their ventures. So, unemployment figures may not fully represent this group of workers who might respond as self-employed to surveys by the government.

Future Projections for the Gig Economy

Even the BLS projects that non-agricultural self-employment will increase by close to 7 percent from 2014 — 2024. Intuit estimated a much higher level of self-employment (43 percent) by 2020. This trend will be impacted by the availability of reasonably priced and portable healthcare for workers who aren't affiliated with employers on a full-time basis.

In another survey of 2700 United States workers by FreshBooks, the number of self-employed workers will increase to 42 million by 2020. Millennials appear to be particularly predisposed towards freelance work, and are projected in this study to comprise 42% of the additional self-employed workers.