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The Future of Work

How Protecting Freelancers Could Boost The U.S. Economy

Freelancers could help reduce the rising cost of living in major cities while boosting the economies of those in decline.

How Protecting Freelancers Could Boost The U.S. Economy

[Photo: Unsplash user iDriss Fettoul]

The era of industrialization set many of the workplace standards—and conflicts—that linger today. More than 100 years later, many of those practices are gradually evolving, but some believe that enabling new forms of work could ultimately solve some of the U.S.’s most pressing economic issues.

"A lot of the growth in jobs has been knowledge work, and this idea that people need to work from nine to five, in one specific place, for one employer, doesn't make as much sense," suggests Stephane Kasriel, CEO of Upwork, a global freelancing platform.

At the turn of the century, when manufacturing was the primary driver of the U.S. economy, it was necessary for large groups of people to arrive to work at the same location and work the same hours. As a result, towns and cities sprung up around these manufacturing hubs.

Cities and towns that were initially built around factories and plants have since gone in one of two directions: They declined when manufacturing jobs started to disappear, or they evolved into major cities, where the cost of living today is reaching unsustainable levels.

"If you look at the last 40 years or so, GDP has become more concentrated in a smaller number of cities," says Kasriel. "There are about 100 cities in the world that do about 50% of the world's GDP." As a result, most cities in the U.S. today are either in decline or booming at an unsustainable rate.

One clear indicator of this is the price of housing. In Arkansas, for example, you can find a spacious six-bedroom, five-bathroom home for $300,000, whereas that same budget would hardly cover a 304-square-foot studio in Los Angeles.

One potential solution for both the rapidly declining and unsustainably growing U.S. cities, suggests Kasriel, is by enabling more remote and freelance work. "A lot of people who live [in cities like San Francisco and New York] live there because the job demands it," he says. "If you, as an employer, could relax that constraint and say, 'You can work from anywhere around the country, either as a freelancer or an employee,'" he explains, "you'd see a lot of people move out."

According to the 2016 Freelancing in America study by Upwork and the Freelancers Union, 47% of American freelancers live in the suburbs, and 18% work in rural areas. If more people are able to take their big-city paycheck back to their local community, not only will their money go further, but it will help support their local economy while the rising cost of living could begin to slow in the big cities they leave behind.

According to the 2016 Freelancing in America study, 70% of freelancers believe that there needs to be more discussion by lawmakers on how to empower the independent workforce.

One state, however, has moved forward with improving conditions for freelancers. The State of New York recently passed a wage protection bill for independent workers, known as the Freelance Isn’t Free Act. While some see this as a sign that lawmakers are beginning to understand the importance of the freelance economy, others believe the passage of the bill in New York may have been a result of unique circumstances that don’t necessarily exist elsewhere.

"Freelancers are an important part of the economy nationwide," says Shane Snow, cofounder of Contently, an online marketplace for freelance writers. "I think they get more attention in places like New York that is more creative and media-focused, where more businesses are actively relying on local freelance talent."

Outside of New York, freelancers regularly struggle with nonpayment and late-payment issues. According to the Freelancing in America survey, seven out of 10 freelancers have encountered issues related to getting paid on time.

"Gizmodo still owes me $500," jokes Snow. "That happens when you're a freelancer."

In lieu of government protection, freelancers are increasingly turning to platforms like Contently and Upwork, which pay their freelancers within a few days of work submission. Upwork accomplishes this by being registered in the State of California as an escrow agent, giving them the ability to guarantee on-time payments to freelancers, but also provide employers with a grace period to dispute any charges.

Allegheny Mountains of West Virginia [Photo: Flickr user Arvind Govindaraj]

Contently, on the other hand, has been able to negotiate some of its larger clients into paying some or all of their annual estimated freelancer fees upfront, providing enough cash flow to allow the company to pay freelancers for their work upon submission.

But outside of these platforms, many freelancers are paid 60 or 90 days after submitting their work, and about half of freelancers surveyed in 2014 reported issues with getting paid, citing an average loss of $6,390 as a result of nonpayment. That's money that isn't being put back into their local economies.

Both Kasriel and Snow believe that protecting freelancers ultimately benefits everyone, not just the freelancers themselves, as it can help move incomes away from cities that are quickly becoming unaffordable and toward those that are in decline.

"You talk to the people in Congress that represent the big cities, and they struggle with the cost of living, then you talk to other people from Congress that represent the cities that struggle with unemployment—well, I have a solution for you," says Kasriel, suggesting that more protection for freelancers would encourage more to enter the freelance economy, improve unemployment in some areas, and congestion and the rising cost of living in others. "We haven't missed the boat," he points out, "but I would say, Let's not wait 10 years, because the boat is moving."

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