[Summary] Independent Work: Choice, Necessity, and the Gig Economy

McKinsey Authors: James Manyika | San FranciscoSusan Lund | WashingtonJacques Bughin | BrusselsKelsey Robinson | San FranciscoJan Mischke | ZurichDeepa Mahajan | San Francisco

Anyone who has ever felt trapped in a cubicle, annoyed by a micromanaging boss, or fed up with office politics has probably dreamed of leaving it all behind and going it alone.

The powerful opening line from the 148 page report (published in 2014) sets the tone of the report and shows one of the underlying reasons the freelancer market has grown double-digits since then.

In this article, I’ll summarize the most important points and statistics of the report. I’ll also give some quotes. You can see the original document here. The report is based on 8000 participants of a McKinsey survey.

You can scroll through some major statistics in the interactive story:

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Definition Independent Work

Work From Home

The report gives three criteria to determine if a person can be considered an independent worker:

  • A high degree of autonomy
  • Payment by gig or sales
  • Short-term relationship between worker and client

In 2015, 162 million individuals in the US and in Europe match these criteria. Many don’t appear in official “employment statistics” because they are partially employed and supplement their income through freelancing. This group makes up 50% of all those independent workers.

Let’s dive into some essential statistics that show the relevance of independent work and freelancing for the US and European economies.

Statistics

Statistics

The report states the following statistics (highlights by me):

  • 20 to 30 percent of the working-age population in the United States and the EU-15, or up to 162 million individuals, engage in independent work
  • The Freelancers Union estimates that 54 million Americans (22 percent of the working-age population) are freelancers or self-employed in their primary or secondary jobs.
  • At least 15 percent of workers use online platforms such as Uber and Upwork (in 2015)
  • 30 percent are “free agents,” who actively choose independent work and derive their primary income from it.
  • Approximately 40 percent are “casual earners,” who use independent work for supplemental income and do so by choice
  • “Reluctants,” who make their primary living from independent work but would prefer traditional jobs, make up 14 percent.
  • The “financially strapped,” who do supplemental independent work out of necessity, account for 16 percent.
  • Approximately 70 percent of Etsy sellers and 60 percent of Uber drivers in the United States have some other form of primary income.
  • 10 to 15 percent of the working-age population engages in independent work for supplemental income. The vast majority do so by providing services.
  • 2 to 3 percent of the working-age population in the US and Europe sell goods.
  • 1 percent of the working-age population in the US and Europe rent out assets.
  • A 2016 survey by Lawrence Katz and Alan Krueger found that the share of the US workforce engaged in “alternative work arrangementsgrew from 10 percent in 2005 to 16 percent in 2015.
  • 40 to 55 percent of low-income households engage in independent work.
  • Low-income households make up less than 25 percent of all independent earners.
  • Medium- to High-Income households make up more than 75 percent of all independent earners.
  • 1 in 6 workers in traditional jobs would like to become primary independent earners.
  • 50 million Americans and Europeans are independent out of necessity.
  • For every primary independent worker who would prefer a traditional job, more than two traditional workers hope to shift in the opposite direction.
  • Platforms for offering services, such as Uber, TaskRabbit, and Upwork, were used by only 6 percent of independent earners in the United States and the EU-15.
  • 232 million adults in the United States and the EU-15 are inactive, unemployed, or work less than full-time.
  • At least 100 million of them would like to start working or increase their hours (20 million in the United States, and 84 million in the EU-15).
  • Free agents have an average overall satisfaction rating of 4.9, the highest of any group, compared to a 4.6 average for those doing traditional work by choice. This result holds across income and age groups, suggesting that freedom itself has real value for free agents.
  • If everyone had the opportunity to pursue their preferred working style, roughly 40 to 50 percent of the working-age population in the United States and the EU-15 would be independent.

Quotes

I See Light in the Darkness Text

If you chose to be a freelancer, you’re happier:

Those who do independent work by choice (free agents and casual earners) report greater satisfaction with their work lives than those who do it out of necessity (reluctants and the financially strapped), a finding that holds across countries, age, income, and education.

Interestingly, independent workers are more satisfied with their jobs than employees—even if you compare both groups who chose their professions:

Free agents report even higher levels of satisfaction than those in traditional jobs by choice.

This also means that if you work in a job you don’t like, you should consider replacing it with a self-employment you actively chose. This will not only make you more successful and passionate about what you do, you’ll also become happier in the process.

A general rule is that you should avoid working in a job you don’t like, it’s a negative spiral towards under-performance and dissatisfaction:

Those working out of necessity, whether as independent workers or in traditional jobs, report similar levels of dissatisfaction with their work.

Free agents cite higher satisfaction than traditional workers across issues ranging from the creativity they can express to opportunities for learning and recognition. They are happier with their overall level of income and are just as satisfied as traditional workers on income security and benefits. These observations hold regardless of gender, age, education level, or household income.

In bold, I’ve highlighted that it’s a myth that independent workers don’t feel secure and are not happy with their income and benefits. Instead, all statistics show that independent workers score better for the majority of those variables.

Casual earners also rate their satisfaction higher than those who solely hold traditional jobs on five of the 14 dimensions we measured and are equally satisfied on the others. Some may have turned hobbies into paying assignments, or they simply enjoy work that provides a change of pace from their primary activities.

Why is it that independent workers score better along many of these dimensions? Let’s see:

Independent work enables people to specialize in doing what they do best and what makes them feel engaged. Engagement typically has the effect of increasing productivity, although this effect must be balanced against the fact that many independent workers have to spend time on administrative and marketing tasks.

The gig economy has a huge potential to transform how we organize the world’s talents:

We estimate that 6.2 billion hours of additional household work per year in the United States and 8.5 billion in Europe could potentially be done by independent workers, creating millions of new opportunities for independent workers.

For companies, too, there is room for further growth in using independent workers. We analyzed more than 150 occupational categories to assess which types of work could most easily be performed independently and found ample opportunity for growth in corporate demand.

Where we come from…

As recently as 1900, the United States was still largely an agrarian economy, and nearly half of the US workforce was self-employed. The Second Industrial Revolution upended that way of working, ushering large numbers of people off the family farm, onto factory floors, and into the kind of traditional employer-employee relationships that look familiar today.

… and where we go:

Digital platforms represent a potentially transformative business model when applied to the labor market. By using sophisticated search tools to connect customers with individual workers willing to perform a service, they enable independent earners to find customers, contracts, and assignments. Because they are powered by algorithms, they allow users to interact without human intervention, lowering transaction costs.

Okay, let’s dive into some concrete findings and statistics proving that independent workers enjoy significant larger work satisfaction than employees:

Happiness Results

Happy

Here are the main results of the study:

  • Independent Workers love the topics in their work more than employees.
  • Independent Workers are more satisfied with their work life overall than employees.
  • Independent Workers are more satisfied with the number of hours they work than employees.
  • Independent Workers feel more, well, independent and self-reliant than employees.
  • Independent Workers significantly enjoy their work atmosphere more than employees.
  • Independent Workers feel more empowered than employees.
  • Independent Workers are much more satisfied with the creativity they can express—compared to employees.
  • Independent Workers love to be able to choose the hours they work.
  • Independent Workers are more satisfied with their opportunities to learn and grow compared to employees (this is interesting considering that one of the main arguments of many employees is that they get to do some free educational program paid by their employer).
  • Independent Workers are more flexible than employees.
  • Independent Workers are more satisfied with the recognition they receive.
  • Independent Workers are more satisfied with their income.

Wow! Only in job security and benefits, employees were slightly more satisfied (but it’s not really significant). Essentially, employees give up income, health, life quality, recognition, and even time for a very minute improvement of security and benefits. Yet, independent workers are more satisfied with their income and, objectively, tend to be more secure than employees.

Also note that this comparison is between self-employed and employed persons who are so by choice. If you compare an employee who doesn’t enjoy their job and a self-employed person who does what fulfills them, the advantage of self-employment against employment becomes even more proliferated!

Where to Go From Here

Independent workers are happier, more satisfied with their work, enjoy their topics more, feel more empowered and self-reliant, are more flexible and spend more time with their families and friends. They also earn more and receive more recognition.

Many independent workers do some freelancing gigs on the side—such as solving IT problems and writing code for clients. This helps them grow and get paid for learning and improvement.

If you want to join the upcoming disruption of the workforce through online freelancing platforms, check out my free webinar “How to Build Your High-Income Skill Python Programming“.

Also check out the FINXTER Python Freelancer Course that shows you everything you need to know to go from $0 per hour to $50 per hour and more by coding Python projects of your choosing!