With more and more businesses slowly returning to a sense of normality after the onslaught of the COVID-19 pandemic, it’s becoming apparent that the way in which we work might have been altered for good. The worldwide health crisis accelerated the future of work, and it also impacted the shift to freelancing and remote work.
According to a new study from Upwork, a freelance job platform, as many as two million Americans started freelancing over the last year. Before the pandemic, in a 2018 Upwork study, the majority of individuals chose to freelance as a personal preference and not out of necessity. But today, freelancing offers more than just flexibility and variety. It supplements income, and in many cases, makes up for lost income due to job losses caused by the pandemic.
The Rise of Freelancing Accelerated by COVID
In 2018, the Upwork Freelancing in America report cited the critical role of freelancers in the evolution of work in America. The Upwork report estimated that 57 million U.S. workers freelanced by 2019, contributing as much as $1 trillion to America’s GDP. According to the Intuit 2020 Report, which was published in 2011, it was estimated that more than 40% of the U.S. workforce would work on a freelance, contract, or temporary contracts by 2020.
But the pandemic injected a sense of urgency in the global economy. Upwork CEO Hayden Brown reported explosive growth in new freelancer registrations since the outbreak of the virus. Where some businesses started moving toward a leaner workforce, they accelerated their efforts due to necessity. Companies that were previously resistant to remote work discovered that a remote workforce could be just as effective as an office-based team, albeit with some diaper changes in the new “office environment”.
The latest report from Upwork estimates that 45% of hiring managers expect a hiring freeze as the world emerges from the pandemic. But 73% of hiring managers plan on maintaining (and even increasing) their hiring of freelance workers.
Trends toward a project-based and freelance workforce are expected to persist in a post-pandemic world, and it will be driven by the larger digital transformation movement as well as the maturation of online services that match professionals with businesses in need of their skills and experience.
The primary reasons why most businesses will continue to hire freelance contractors include:
Online platforms like Upwork are much more sophisticated than ever before and make it effortless to find the right person for a project. The talent pool is also much more significant than it used to be. Organizations now have access to highly technical professionals and designers, and writers who are the staples of the freelance community.
Benefits and payroll taxes (along with many other long-term employment costs) go out the window when businesses work with freelancers. So do office space costs. Organizations can save a lot of money if they choose to focus on short-term hires that are project-specific.
By definition, professional freelancers are agile. Due to their experience in working with various clients and projects, they tend to be better at getting started and churning out results than in-house employees.
Instead of hiring from a pool of candidates within a specific geographical location, companies now have global reach as far as talent goes. By vetting candidates from anywhere in the world, businesses aren’t limited in terms of talent any longer.
There is no denying that the freelance economy was huge before the pandemic. We also know that it continues to grow. In fact, Upwork says freelancing now contributes $1.2 trillion to the U.S. economy, which is 22% more than in 2019. The latest Upwork study also claims that 60% of post-COVID-19 freelancers won’t retake a traditional job, regardless of how attractive the salary might be.
The rapid rise in the freelancing economy was partly dueled by an influx of younger, highly skilled professionals seeking alternatives to traditional employment. The majority of the rest joined the world of freelancing due to necessity. Of those who quit (or lost) their full-time jobs to start freelancing, 75% say they now earn the same or more compared to their previous, office-based positions.
Adam Ozimek, Upwork Chief Economist, says that they saw many professionals entering the freelance workforce for the first time as a result of the pandemic. Simultaneously, the shift towards greater flexibility in the workforce and the necessity to maintain continuity accelerated the demand for independent professionals from organizations. Ozimek notes that the pandemic highlighted the value that freelancing offers to both businesses and workers.
Why People Choose to Freelance
Although there are various reasons why individuals choose to pursue freelancing, there are seven key reasons that stand out. These include:
- Schedule flexibility
- Working from anywhere in the world
- Independence from office dynamics
- Freedom from working for a boss
- More opportunities to pursue personal passions
- Extra income
- The ability to choose which projects to work on
The Freelance Workforce is Getting Younger
The latest Upwork report indicated that individuals aged 55 and older found freelancing to be a great way to meet financial needs as they grow older. 65% of Boomers that freelance full time admitted that independent contracting was an excellent way for them to transition into retirement.
Interestingly, the composition of the freelance workforce is getting younger. 50% of Gen Z (individuals between 18 and 22 years of age) now work as freelancers. 44% of Millennials (23-38 years old) prefer freelancing over traditional office-based employment. 30% of Gen X (age 39-54) freelance, and just 26% of Boomers freelance in the modern workforce.
Is Freelancing Creating a Major Shift in the Labor Market?
Upwork reported that 12% of the U.S. workforce started freelancing during the pandemic for the first time. 48% of those that started freelancing already saw it as a full-time and long-term career opportunity. 67% of freelancers said that freelancing prepared them to cope with uncertainties in the workplace if something like the COVID-19 pandemic should arise again in the future.
73% of individuals new to remote work and those that don’t freelance say they’re considering freelancing because it can make them more productive. And to cope with the impact of the pandemic on their personal finances, 85% of individuals that aren’t currently freelancing full time are considering it to earn extra income.
The Future of Work Might Be a Hybrid Model
Perhaps freelancing offered millions of individuals a way of securing an income during the most uncertain of times, but the fact is that the world will not be in lockdown forever. The future of the workforce will likely consist of a combination of freelance and full-time employees. It is predicted that modern and future businesses will hire more freelancers to fill skills gaps that their full-time teams lack.
For employers, the rise of freelancers creates an opportunity for companies to leverage remote teams and hire specific skills as needed for specialized projects.
MBO Partners also issued a report titled the State of Independence (freelancing) in America. According to their report, the numbers aren’t as impressive as those from the Upwork report, but they do have similarities.
MBO’s report indicates that:
- Freelancing is on the rise, but it will not replace traditional jobs.
- Full-time freelancing is viable and an attractive option to many employees.
- The demand for and interest in freelancing continues to grow in relation to economic factors and technological advancements.
Independent workers and freelancers have contributed more than a trillion dollars to the U.S. economy every year over the past decade. Although the freelancing workforce will probably never totally replace traditional office-based jobs, it certainly brings an abundance of benefits to the table, both for employers and employees.
The 9-5 setup might become less preferable in the near future, but many businesses will continue to use its principles along with freelancing talent to maintain a hybrid workforce that delivers optimal results.