Free-Lancers And Technology Are Leading The Workforce Revolution
This article originally appeared on Forbes, written by AND CO co-founder Martin Strutz (via The Berlin School Of Creative Leadership)
Globalization and technology are powerful forces shaping the job market in the U.S. and most other western economies. We are currently witnessing a major shift away from full-time employment, as the single source of income, toward a more diversified income structure that usually involves some sort of freelance activity. A recent McKinsey study estimates that the group of independent workers already accounts for up to 162 million people in the United States and Europe (30 percent of the workforce).
This tectonic change is fueled from two sides: Lean Organizations and Modern Careers.
Lean Organizations
Advanced economies are becoming more and more service-oriented. The share of the manufacturing sector has been declining for decades. Why are we still working by the same outdated rules and structures that were put in place to organize factory workers a century ago? The standard 5 day/40-hour work week introduced by Henry Ford back in 1926 (!) exemplifies such a regime.
The benefits many employees enjoy today, like health insurance, unemployment insurance, pensions, guaranteed wage increases, paid overtime, vacation and parental leave have increased the cost of labor significantly. With new work models emerging, these benefits create an incentive for companies to minimize their headcount.
Thanks to technological advancements, it is much easier and efficient today to manage distributed teams, remote workers and contractors. What is the point in housing thousands of workers, often in some of the most expensive areas of our cities, when communication is mostly done through email, phone or Slack anyways? These new work models allow companies to develop agile structures required to develop leading edge products and services.
Many fields and industries are advancing so quickly that traditional training and development cannot keep up. The ability to integrate independent talent into an organization will make the difference between success and failure. It allows companies to tap into specific expertises, bring in outside perspectives, increase the speed to market and engage with the brightest of minds, and not just those nearby.
The Intuit 2020 Report predicts that “the long-term trend of hiring contingent workers will continue to accelerate with more than 80 percent of large corporations planning to substantially increase their use of a flexible workforce.”
But finding the required talent is a challenge. According to Harvard Business Review, almost 40 percent of company executives asked in a recent Deloitte survey stated, that, “they are ‘barely able’ or ‘unable’ to find the talent their firms require.”
The soaring demand for such talent provides a window of opportunity that decimates the risk in turning freelance. And rates of pay are indeed rising as a result. In a study by the Freelancers Union nearly half of full-time freelancers (46 percent) say they raised their rates in the past year, and more than half (54 percent) say they plan to raise them next year.”
The Modern Career
Work has developed into such an integral part of our lives that it impacts our health and overall well-being, while also defining a significant part of our personality — of who we are.
Therefore the way young people look at jobs has changed. They often judge wealth not only by the state of their finances, but by the quality of life. The sense of contributing to something meaningful feels more rewarding than just monetary compensation. They are more often looking for something beyond money and status that glues all their activities together: purpose.
This young talent often prefers a lack of dependence, over the vague promise of middle-class comfort: health, unemployment and pension benefits. According to Freelance in America 2016 the group of the 18–24 year old is much more open to freelance (47 percent) than the Baby Boomers (28 percent). And about 50 percent of the freelancers surveyed by the Freelancers Union say that “there’s no amount of money that would get them to take a traditional job and stop freelancing.”
Knowing that they likely won’t retire in the same company they start at (like their grandparents probably could), they set them selves up to pursue more meaningful and self-controlled careers. McKinsey reports that over 70 percent of freelancers are not freelancing out of necessity, but because they chose to.
Getting a traditional job feels limiting: Why only work for one great company, when they can choose to work for all of them? On their own terms? And even remotely?
By layering multiple jobs, gigs and projects, freelancers are diversifying their income and remove the dependency on a single employer. It also allows them to explore multiple interests and to continuously learn rather than be stuck in the same job position for decades.
Freelancing has already become a more respected career path and the social stigma of not having a ‘real job’ is fading. With the constantly growing U.S. workforce (from 100 Million in 1978 to almost 160 Million in 2016) this trend will accelerate as even more people will look for new ways of making their living.
True, traditional jobs will continue to matter and key positions like managerial roles will likely not be held by freelancers anytime soon. But it’s important to recognize, that the part of our workforce pursuing modern careers is growing. Intuit’s latest report estimates, that 40 percent of the US workforce will be freelance by 2020.
The Organizational Gap
Not without risk, though. By turning away from the traditional career path, these workers are not only losing access to corporate tools and structures, but they are also losing benefits that unions have fought for vigorously.
The disappearance of large employment organizations creates a structural and regulatory gap that needs to be bridged. Some issues like taxation policy, pension plans and state benefits won’t be fixed overnight. These regulatory changes will take time and require persistent advocacy.
But by harnessing technology and design, we can make the organizational benefits of large corporations accessible to the independent worker and fix the most urgent needs.
The Freelance OS
To achieve that, we need to standardize the way we operate and interact with freelance businesses.
If everyone runs on the same standard, we can add industrial strengths of scale, and resources to independent businesses. We can streamline workflows, put efficient processes in place, connect users seamlessly and share knowledge among them.
This universal layer of business operations, or “Freelance OS,” will help the freelancer to manage a plethora of working relationships effortlessly. Once freed from the time consuming admin tasks, independent workers can focus on growing their businesses, improving their skills and delivering smarter.
We also need to establish a set of fair legal documents and business ethics that govern the relationship between companies and independent workers. A fair, easy to understand, and mutually accepted freelance contract, for example, will remove a lot of friction and pain that both sides currently face.
Setting the right expectations from the get go of a project will avoid a large amount of sometimes costly and nerve-wrecking misunderstandings that can be harmful to independent workers as well as to the small businesses working with them.
Reducing the risk of engaging for both sides and speeding up the process, will result in more work being assigned to independent talent.
Lastly, we need to share knowledge among all freelancers who, traditionally, had no leverage over the companies hiring them. Mostly because they were not organized, like full time employees. If a freelancer wasn’t paid in time, not treated well, or forced to sign rigid contracts, there was no way for other freelancers to know about it. And if a company was treating a freelancer overly well, few people would know about it either.
If we run freelance businesses on a universal system, using the same data structure, we can automatically share information among all freelancers. This creates a incentive for companies to treat independent workers well, because being known as a freelancer-friendly company will increase the chance of hiring rare top talent.
Leading the Way
Building the Freelance OS is a crucial step of serving the immediate needs of a young generation of skilled freelancers. But technology cannot fix all shortcomings of our policymakers. The protests and political maneuvering to limit Airbnb and Uber are prominent examples of how regulators are limiting the full potential of innovation.
When it comes to our workforce, there is no way around changing the rules and regulations that were put in place decades ago, based on the assumption that everyone is in full time employment all the time.
With already one third of our workforce seizing the opportunity to work independently, governments can no longer place the responsibility of providing social insurance on companies. Policy makers have to address these problems.
Only when the private and the public sector are working together, and continue pushing from both sides, will we be able to prevent the fatal consequences of a regulatory system that disregards so many millions in our workforce today.
AND CO
In 2015 my Co-Founder Leif and I started AND CO, a tech start-up based in New York City, to build a support structure for independent workers.
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Martin Strutz is an EMBA alumnus of The Berlin School of Creative Leadership and co-founder of AND CO, a tech start-up based in New York City, that aims to build a support structure for independent workers.
