“Current labor markets remain virtually unchanged since the Industrial Revolution despite the fact that the jobs that people do have changed radically in the last 50 years,” says Kasriel. “I see inflexible labor contracts tied to benefits going away and being replaced by a superfluid approach that matches supply and demand in real-time and completely irrespective of where workers are based.” This will necessitate changes in how companies build and grow their people brands (the attractiveness of a company’s brand or image to current and prospective workers).
Contracting with individuals to perform work—back to the future
If markets were perfect, individual specialists could be hired to perform every task. But markets aren’t perfect. Market participation comes with transaction costs. In the past, companies hired large, permanent and generalist workforces as a way to help reduce these costs.
But fast forward to today and transaction costs have fallen dramatically. Stephane Kasriel, CEO of Upwork, a prominent freelancing website, explains what this means. “The downside of contracting with freelancers is being mitigated,” he says, “whereas the upside that was always there — hiring specialists to complete specific tasks over specific timeframes —remains. What this means is that companies and workers are now more likely to choose freelancing as an engagement model because the transaction costs are so much lower than they used to be and the benefits greater.”
Technology makes it easier but people are increasingly choosing to freelance
There are three drivers behind the increased corporate uptake of freelance labor models:
- Technology. Technologies—broadband, videoconferencing, PC webcams, cloud computing and more—have made remote work and off-site collaboration possible. Technology advances have also contributed to the subdivision or atomization of work into tasks, making it easier to distribute work across different categories of specialists.
- Company need. To compete and to satisfy shareholders, today’s organizations need to innovate and be agile while also improving the bottom line. Moving from siloed work models to flexible, project-based work is one way to accomplish these objectives. Across industries, the search for talent continues to be relentless. Most companies find it impossible to source all of the talent they need locally, which is another reason freelancing work models are gaining in popularity.
- Worker preferences. Workers increasingly prefer to work independently rather than as traditional employees. Freelancing in America, an annual report conducted by an independent research firm and commissioned by Upwork and the Freelancers Union, shows that 55 million people, or 35% of the total U.S. workforce, now freelance in some capacity. But what really stands out in the research is that the majority (63%) of freelancers across all age categories are voluntarily choosing this mode of working. From a motivational standpoint, the biggest reasons for selecting to work in this fashion are the freedom and flexibility the freelance model affords.
Will the traditional employment model be missed?
Kasriel also suggests that the oft-cited benefits of the traditional employment model may be overblown. “We tend to have a very romantic view of the value companies provide to employees. But every study I’ve seen, including ours, shows that freelancers are much happier than employees. And that’s true across the spectrum. It’s true for the high-end talent—about 80% of freelancers that use our website have a college degree or above. On average, those who have made the leap to freelancing from a traditional job tend to be happier than they were when they were employees.” One obvious reason is that freelancers tend to get paid more than traditional employees.