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Is The Freelance Economy Not Growing As Much As We Thought?

A study from the Economic Policy Institute shows that the numbers of freelancers might not be as big as we think.

Is The Freelance Economy Not Growing As Much As We Thought?
[Photo: Thom via Unsplash]

“We have entered a new era of work in this country,” says the introduction to the second annual Freelancing in America survey. The 2015 report by the Freelancers Union and online freelancing platform Upwork (FU/U) found that over a third of U.S. workers (nearly 54 million) did some freelance work in the past year. That represents a growth of 700,000 more freelancers than the previous year.

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The study went on to report how these numbers are increasing by individuals’ choice of employment, rather than as a result of circumstances such as job loss, and the majority (60%) who left to freelance said they now earn more than they did with traditional employment.

But Lawrence Mishel, an economist and president of the Economic Policy Institute (EPI), said the study “greatly overestimates the number of people who derive their primary income from freelancing.”

In an article for the independent, nonprofit think tank titled, “Despite Freelancers Union/Upwork Claim, Freelancing is not Becoming Americans’ Main Source of Income,” he writes: “There’s no reason to believe that freelancing is a large or rapidly growing form of work. Even the Freelancers Union and Upwork data itself provides no evidence that more people are relying on freelancing as their main source of income.”

Mishel goes on to point out that the study shows a vastly different picture than data from the Bureau of Labor Statistics (BLS) that indicates only 14.8 million people reported being self-employed in 2014, which is only about 10% of U.S. workers.

“These disparate estimates can be mostly reconciled by noting that the FU/U estimate is of anyone ‘engaged in supplemental, temporary, project- or contract-based work within the past 12 months,’” Mishel writes, which he believes stretches the group “beyond recognition.” The BLS estimate only counts those whose primary income comes from self-employment.

Yet even that is misleading, according to Mishel, because the BLS includes people who themselves are employers. Taking out all of those leaves only 11.3 million self-employed freelancers, or 7.7% of the total workforce.
Here’s how the 2015 FU/U survey breaks it down:

  1. Independent contractors (36% of the independent workforce/19.3 million professionals)–These “traditional” freelancers don’t have an employer and instead do freelance, temporary, or supplemental work on a project-by-project basis.
  2. Moonlighters (25%/13.2 million)–Individuals with a primary, traditional job with an employer who also moonlight doing freelance work. For example, a corporate-employed web developer who does projects for nonprofits in the evening.
  3. Diversified workers (26%/14.1 million)–People with multiple sources of income from a mix of traditional employers and freelance work. For example, someone who works the front desk at a dentist’s office 20 hours a week, and fills out the rest of his income driving for Uber and doing freelance writing.
  4. Temporary workers (9%/4.6 million) –Individuals with a single employer, client, job, or contract project where their employment status is temporary. For example, a data entry worker employed by a staffing agency and working on a three-month assignment.
  5. Freelance business owners (5%/2.5 million) –These freelancers have one or more employees, and consider themselves both freelancers and business owners. For example, a social marketing guru who hires a team of other social marketers to build a small agency, but still identifies as a freelancer.

The gap is also due in part to the way the data was put together. The FU/U survey asks people whether they freelanced over the last 12 months. The BLS estimates the number of people self-employed on average each month. Workers might not want to report that they are illegally treated as independent contractors, such as the Uber drivers who are now suing the company for miscategorizing them as contract workers, or the construction workers on public housing projects that were the subject of an investigative report by McClatchy and ProPublica.

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What’s also very misleading, says Mishel, is that while the Freelancers Union and Upwork have been clear that only 18.1 million workers (or 12.5% of the workforce) relied primarily on freelancing to support themselves, that number is lower than it was in 2014, when there were 19.6 million self-employed.

Mishel’s aim is to point out that while freelancers are definitely a part of the overall workforce, “Based on current trends, there is no reason to believe that in the near or intermediate future, a large and growing share of people will obtain their main source of income from freelancing or doing gig work.”

Even in the FU/U survey’s broadest look, the number of workers doing any sort of freelance work is only 0.2% higher in 2015 than it was the previous year–definitely not explosive growth.

That said, he believes there are important issues regarding freelancers and their economic security. As Sara Horowitz, founder and executive director of Freelancers Union, writes: “The lack of portable benefits [health and unemployment insurance and workers compensation] is one of the biggest impediments blocking U.S. workers from thriving in the new economy, where flexibility is king.” As such, Freelancers Union signed an open letter to lawmakers calling for the creation of such benefits for all types of work. The Freelancers Union also recently supported a New York City Council Bill aimed at getting freelancers paid in a timely fashion for their work.

Mishel writes, “Freelancers definitely need an advocacy group such as the Freelancers Union,” but we should also be focusing on the rise of employee misclassification and how to generate robust wages and benefits for all workers. He adds, “Hype about freelancing and gig work limits our focus and perhaps distracts from these broader issues.”

About the author

Lydia Dishman is a business journalist writing about the intersection of tech, leadership, commerce, and innovation. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Fortune, The Guardian, Popular Science, and the New York Times, among others.

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