The expanding population of people who aren't working a typical 9-to-5 job is fueled less by technological change and more by a stalled labor market, according to a new report.
On Monday, McKinsey released an in-depth look at the freelancer economy across the United States and Europe. The report found that between 20 percent and 30 percent of workers today are engaged in some form of independent, nontraditional work, encompassing an estimated 162 million individuals in the U.S. and Europe combined.
The share of workers engaged in gig work has grown over time, though relatively modestly, from about 10 percent in 2005 to almost 16 percent in 2015, according to the report. Popular notions would say that this has to do with technological advancements. But the McKinsey report suggests differently. Among these gig workers, only 15 percent, a relatively small fraction, have earned income using a digital platform
. “Despite their extensive media coverage, digital “on-demand” or “sharing economy” platforms such as Uber, Lyft, TaskRabbit, Upwork, Freelancer.com, Thumbtack, Airbnb, and the like facilitate only a small fraction of independent work today,” the report states.
The rest is made up of self-employed or contracted workers primarily in fields like construction, transportation, or household/personal services, but also in the medical, legal, or creative realms. They are using traditional ads, listings or word-of-mouth means to connect with customers rather than on-demand apps.
So what accounts for the expansion of independent workers? “It's fueled by recession and bad labor markets,” said James Manyika, senior partner and director of the McKinsey Global Institute. “We found that countries like Spain or Greece, where there is high unemployment, is where we saw the highest spike percentage of gig workers.” He points to the growth in the 2000s as a symptom of the U.S. financial crisis.
The report also split gig workers into two categories: those who are freelancing by choice, and those who are working out of necessity. Across all of the countries surveyed, about 30 percent of the total number of gig workers were reluctant to be engaged in the gig economy, meaning that they would prefer a traditional job or gig work with better and more stable income. The rest were voluntarily working in it, both full-time and as a supplement to their traditional 9-to-5 jobs. In countries with slow growth economies and poorer labor markets like Italy or Poland, a much higher share of gig workers was involuntary. In Spain, more than three-quarters of these workers were categorized as reluctant.
The report also found a huge division in satisfaction among independent workers. Those who were working out of choice were much happier with their job than traditional workers, but those who were independent out of necessity reported less satisfaction and a desire for better and more stable income. “On a policy level, we need to solve these challenges for those that are forced into independent work reluctantly,” Manyika said.
Despite the relatively small impact of on-demand apps at this point, Manyika predicts technology will have a much larger impact on this class of workers in the near future. “That portion using these apps will change radically in the coming years,” he said. “Once literally everybody has a smartphone, it has the capacity to really shift things.”