Pedro Pereira worked as a news editor at CRN, a technology publication, for seven years before he found himself collecting severance in the wake of the dot-com bubble burst. To support himself while job hunting, he began taking on temporary gigs writing white papers and blog articles.
“Freelance work was more lucrative than I could have expected,” he says. After a few stints, Pereira took self-employment full time, working for a stable of clients and doing his own taxes.
Contingent worker, freelancer, contractor, temp, solopreneur — a variety of aliases serve the growing ranks of Americans who brave the economy with their own umbrellas. Pereira is a drop in a flood of independent workers that makes up as much as a third of America’s workforce, some of whom have been forced from salaries to 1099s, but many of whom choose freelance as a lifestyle.
Because definitions are fuzzy, various studies estimate the percentage of independent workers and sole proprietors at 31 percent, 7.4 percent, and 14.5 percent. No matter how it’s tallied, the freelance tide is rising.
Perhaps most optimistically, business services company MBO Partners claims independent workers will outnumber salaried employees by 2020, and freelance marketplace Elance predicts 54 percent of small business employees will be online contractors by 2017. Both figures could be wishful thinking on the part of the businesses running the studies, but there’s little doubt a large portion of the labor market is moving in that direction.
Studies already indicate that much of the recovery has been fueled by Americans taking their careers into their own hands. Entrepreneurship is at a high: BLS reports that “1 in 9 workers was self-employed in 2009,” and the Kauffman Foundation reports half a million new businesses were created each month in 2010, the highest percentage in a decade. A 2009 report by Littler Mendelson, P.C., based on an MIT study co-authored by Robert J. Laubacher, says that “‘contingent workers’ will constitute, on average, a full 50% of the new source of workers to whom employers will turn as the recession ends.”
“The increase in freelancers isn’t a temporary phase. It’s a systemic change,” says Sara Horowitz, founder of Freelancers Union, an insurance company and advocacy group. “The recession likely sped up a shift that was happening already.”
As presidential candidates debate about job-creation and the power of small businesses, the Pedro Pereiras powering much of the American economy are being overlooked.
With minimal infrastructure, these — America’s smallest business owners — face unique challenges in finding work, managing cash flow, filing business taxes, getting paid promptly, and navigating regulations.
Pereira says his biggest concerns come down to maintaining a steady flow of work. “There is always an excuse as to why a [client] payment is late, but that doesn’t help me pay my bills,” he says.
Part of the problem comes from the lack of government insight into the freelance movement. Federal funding to officially track this sector of the workforce ran out in 2005. (President Obama did, however, reallocate some money for it in his most recent budget.)
“The first thing we need to do is recognize that the freelancer is a real contributor to the workforce,” says Gene Zaino, MBO’s chief executive. “But they need cash flow money. I can’t begin to tell you how many people I know that tell me, ‘Hey, I have this project…. but it’s going to take me 3 or 4 months to get paid...’”
Businesses — even small ones — have an easier time handling the typical net-45 payment cycle of a corporate client than do solopreneurs surviving from month to month.
“These people don’t need a lot,” Zaino says. But “a bank cannot make any money by loaning somebody 50,000.”
Getting stiffed by clients often comes with the territory as well. Because freelancers often can’t go to state departments of labor to file complaints like salaried employees can, their only recourse can be to sue, a costly effort for a one-man or one-woman operation trying to recoup a few hundred dollars.
Work has changed, but the way the country thinks about work has not.
“A lot of our labor laws were made for a different era, one where you expected to find a job, work at it for 30 years, then retire with a gold watch,” Horowitz says. “Unemployment insurance, retirement, and especially health care are still geared toward traditional 9-to-5 workers. Those systems have to catch up to the times.”
As technology continues to optimize our ability to connect and communicate, freelance talent and expertise-seeking employers are tracking toward economic equilibrium. Internet businesses — from talent marketplaces to business services to benefits companies — are becoming the plumbing that lubricates the growing freelance economy. This in turn makes freelance attractive to more businesses.
“The nice thing about freelancers for business is it gives them flexibility,” says John Lipinski, professor of Strategic Management at Middle Tennessee State University. “When you’re in a transitional economy, it’s easier if you don’t have to worry, ‘Can I provide a career track for that person.’”
This happens to line up with what much of the labor pool wants, too: flexibility. BLS reports that 90 percent of freelancers prefer independence to being locked in a cubicle.
The freelance flood waters aren’t receding. So, what are you, Mr. Next President, going to do about them?
Shane Snow is the co-founder of Contently, a New York-based start-up that builds tools for freelance journalists and quality publishers. He regularly contributes to WIRED and Fast Company and is a member of the Young Entrepreneur Council (YEC), an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs.
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