What is the gig economy
The gig economy refers to
the workforce of people engaged in freelance and side-hustle work.
Working 9 to 5. Is that any way to make a living?
For an increasing percentage of American workers, the answer is no. Independent
work is hardly a new phenomenon. But according to McKinsey’s 2022 American
Opportunity Survey, a full 36 percent of employed respondents—roughly 58
million Americans—identify as independent workers. That’s a significant
increase from 2016, when McKinsey research estimated that 27 percent of the
workforce was independent.
And not all workers are happy about it. While
independent work offers flexibility and autonomy—which about a quarter of
survey respondents report prioritizing in their careers—most people working
independently would prefer a more stable form of employment. Sixty-two percent
of independent workers surveyed prefer work as a permanent or noncontract
employee. As we’ll see, given the challenges related to independent work, that
shouldn’t come as much of a surprise.
So who are these independent workers, and what are
the economic trends that are causing this workforce shift? Read on to learn
more.
What jobs are independent
workers doing?
Independent jobs run the gamut from highly paid
actors and lawyers to lower-earning delivery drivers and people who rent out
their homes on a short-term basis. Workers engaged in “side hustles” in
addition to their normal source of income also count as independent workers
according to our methodology. More independent workers are employed during
periods of peak demand, such as holiday seasons for retailers.
While independent work cuts across all ages,
education levels, and incomes, it tends to skew toward younger workers and
those with lower incomes. And nearly half of all immigrants surveyed report
being independent workers.
How much do independent
workers earn?
A third of employed respondents to McKinsey’s
American Opportunity Survey on independent work report earning more than
$150,000 per year, a category that may include lawyers, accountants, actors,
social-media influencers, traveling nurses, and other specialists.
But these respondents do not represent the majority.
Younger people, those with less training, and people who are new to the United
States tend to take on work with lower barriers to entry, such as driving
passengers or delivering take-out meals. A majority of independent workers—54
percent—report being concerned with the stability of their employment, compared
with 35 percent of permanent workers.
What are some of the
challenges that independent workers face?
Many independent workers lack access to basic human
needs, such as affordable healthcare, nutritious food, convenient housing,
transportation, and childcare. For example, half of permanent workers receive
health insurance from their employers or unions, while only 32 percent of
independent workers can say the same. Twice as many independent workers report
using government assistance programs as those who are employed full time.
But some independent workers are optimistic about
their outlooks. These are mainly first-generation immigrants, who see gigs as a
path to opportunity—and have, in all three runs of the American Opportunity
Survey, been among the most optimistic groups overall. More than a third of
independent workers surveyed say that they expect to have more economic
opportunities in a year’s time, compared with just a fifth of overall workers who
say the same. And more than 40 percent of independent workers expect continuous
economic growth over the next five years, compared with about a third of all
respondents.
What’s behind the growth of
independent work?
The increase in the number of independent workers in
the United States may be the result of several factors. First, technology has
made it easier than ever to work remotely. Ridesharing and digital food
delivery platforms have grown exponentially in recent years and match
increasingly large pools of workers with potential customers. Beyond the
platforms that connect people to work, the increased use of remote-collaboration
tools such as the improved videoconferencing services that have become ever
more popular since the pandemic make it as easy to work with a freelancer as it
is to work with a colleague working from home or another company location.
Many people who were laid off during the
pandemic—and some who weren’t—turned to freelancing, either because they needed
new income sources or because they desired greater independence and
flexibility. And more recently, inflation may have driven lower-income workers
to take on side gigs through these platforms.
For companies, especially small businesses and
start-ups, employing a workforce composed of more independent workers than
permanent employees has clear advantages. Companies may need specialized help
at times—like a marketing professional to help during a product launch—but may
not be able to afford a full-time employee for that help. The ready
availability of freelance labor reduces the cost and lowers the barriers to
starting and operating a business.
While the American Opportunity Survey does show that
a growing number of people are choosing gig work out of necessity, there is a
sustained shortage of frontline labor in the current environment—as well as low
unemployment. It remains to be seen how these dynamics will play out.
Why would someone choose
independent work over permanent employment?
More than a quarter of respondents report taking on
independent work because it’s what they have to do to survive and support their
families. Back in 2016, only 14 percent of respondents said they did
independent work out of necessity and as a primary source of income.
About a quarter of respondents report that they pursue
independent work because they enjoy what they do; this is the top reason cited
by high earners. Another quarter say they do it for the flexibility and
autonomy.
What does the shift toward
independent work mean for employers?
The fact that so many Americans would forgo the
perks of a permanent job such as guaranteed income and healthcare in exchange
for flexible work should be of great interest to employers. For organizations
in competition for top performers and digital innovators, an understanding of
how much flexibility their talent pool expects and demands is critical.
Employers that invest in technology, adaptive policies, and employee trainings
are more likely to foster workplaces inclusive of both on-site and remote
workers.
Source l
https://www.mckinsey.com
Regards!
Librarian
Rizvi Institute of Management
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