What will the U.S. workforce look like in the next 10 to 12 years?
It depends on who you ask, but almost everyone sees a shift in work arrangements and attitudes for both employers and employees.
Post-pandemic workers are seeking not only flexibility, but a better work-life balance. Gone are the live-to-work days of 9-to-5 schedules and 40-hour workweeks. The millennial generation has more of a work-to-live mindset, said Katie Dykstra, president of KD Workforce, a Chicago-based human resources consulting firm. This shift, among other factors, has created an environment ripe for a gig economy.
The 2022-2023 Mercer Global Talent Trends study hails the “rise of the relatable organization,” noting that companies are challenging long-held ideas in favor of innovative ways of working and connecting to employees.
The study, which surveyed more than 11,000 executives, human resources leaders and employees, points to a shift toward partnering with employees. One outcropping of that shift is gig and contract work. Six out of 10 executives — 60% — said they expect gig workers to substantially replace full-time employees with their company in 2024.
A recent Society for Human Resources Management article states that the gig — or contract — workforce will outnumber the traditional full-time workforce by 2027. Some predictions put the percentage of contract workers at 50% by 2034.
Predictions aside, so-called gig workers are becoming more prevalent in the United States. The government’s 1099 data on non-employment income shows that the number of people who collected money from a gig platform like Lyft or Grubhub tripled between 2017 and 2021.
The time period for this 1099 data includes the global pandemic’s prime, when many were forced to find new sources of income, so it could skew a little higher than what we would see today.
On the other hand, these numbers don’t include freelance professionals and others paid directly by companies, so it doesn’t accurately capture all freelance and contract workers.
What is a gig economy, and do we have one?
Is America headed for a primarily gig economy? Again, it depends on who you ask, but let’s first define the term. A gig economy is a labor market that relies heavily on workers often referred to as contractors, freelancers or part-time staffers, rather than traditional full-time workers who collect either salary or hourly pay and commit to working for one company.
Much like a musician or actor is hired for a “gig” that lasts one night or for a series of performances, these contactors take on temporary jobs, typically with no health care or retirement benefits, but also with no long-term commitments and some flexibility in work assignments, scheduling and the ability to work remotely.
Often, but not always, these contractors find work through online platforms like Upwork and Fiverr.
It can be difficult to fully account for the prevalence of freelance workers because of the, well, freelance nature of it. Some workers take gigs on the side, in addition to full-time jobs. Others take temporary assignments while looking for full-time work. Still others make a living solely from one or more contingent positions. What’s more, the Bureau of Labor Statistics hasn’t officially tracked those with alternate work arrangements since 2017.
That said, 3-in-10 surveyed gig workers said gig work has been their main job in the last year, according to The State of Gig Work in 2021 by Pew Research Center. Also, McKinsey’s 2022 American Opportunity Survey reported 36% of respondents identifying as independent workers, up from McKinsey’s 2016 estimate of 27%. In the same survey, 72% of independent workers said they have only one job.
The McKinsey survey showed that immigrants, younger workers and others on the lower end of the income scale are more likely to be independent workers. For example, 50% of respondents were 24 years old or younger, and 50% had no high school diploma.
However, a third of employed McKinsey survey respondents who earn more than $150,000 a year said they work independently. This category may include lawyers, accountants, successful actors, writers and other creatives, influencers, traveling nurses, and a variety of advisers and specialists.
Are we headed for a gig economy, where contract and freelance workers outnumber full-time traditional ones? Some say yes and some say no, but most agree contingent work is on the rise.
“I see a lot of people becoming interested in gig work,” said Lauren Winans, CEO and principal HR consultant for Next Level Benefits. Her Pittsburgh-based company specializes in providing interim and short-term human resources experts, and companies interested in human resources consultants are on the rise, she said.
“There are definitely people getting more creative” on both the employer and employee side, Winans said. “We’ve all gotten more resourceful.”
It’s not surprising, though, that smaller companies have led the way in seeking out contingent work arrangements.
“Small organizations have been doing it for years,” said Dykstra. Now, more medium- and large-sized companies are open to the idea, she said.
Many companies are piloting contingent work arrangements to solve problems, said Dykstra. Case in point: a heating, ventilation and air conditioning company she works with had a great employee handling its finances. When that employee went away to college, rather than train someone else for the job, they decided to pilot the finance role as contingent, allowing the college student to do the books part-time and remotely. So far, it’s working, Dykstra said.
The gig attraction for employees
The shift toward gig work arrangements comes from a combination of global health, generational and technological factors. The most obvious is the pandemic, which not only put many Americans out of work, but forced a shift in mindsets about work and the work-life balance.
“The pandemic was the first time you broke out of your patterns and reflected on what is now the best routine for life,” explained James Reid, partner and employment attorney for Honigman LLP. There was also a mental health focus, which caused people to re-evaluate the way they work and their attitude toward work, he said.
The global pandemic also forced many out of the workforce, either because of childcare issues, health concerns or COVID regulations. Many looked to part-time continent work as an alternative to their full-time positions. Others simply chose contingent work because of the flexibility and independence it offered.
Also at play is the millennial generation’s mindset, which is more “work to live” than “live to work.”
The current generation is wary and not as trusting as the previous one, said Elizabeth Williams, principal for HR solutions at Rehmann. This generation saw their parents get laid off in 2008, after many years of loyalty, she pointed out.
If the old “American dream” was financial stability — a 9 to 5 job, long-term housing, car, family — today’s dream involves flexibility and independence, Williams explained.
“These days, workers are realizing the need to be independent,” said Reid. They don’t want to rely on one company for their livelihood, nor be tied to certain work hours. They also may be looking to avoid burnout from doing one job for too long. Gig work fits the bill perfectly.
Advancing technology has also helped bring gig work to fruition. Not only are there myriad work platforms designed to make getting gig work easier, but Wi-Fi is almost everywhere, which makes remote work almost an expectation, said Winans. “It’s just much more normal” to be on video calls regularly and do business that way, she said.
Social media platforms also contribute. “It’s a lot easier to get the word out about your services because of advances in social media,” said Reid.
Add to that the advancement of artificial intelligence, which is replacing many jobs and sending people looking for new types of work, and you’ve got the right technological conditions for a gig economy.
Benefits for employers
To make a gig economy work, the arrangement must benefit employers as well as employees, and it does. First, it broadens the work field. The birth rate
is low and workers are in demand, so being open to freelance workers benefits employers.
“This opens the door for talent and also brings diversity and inclusiveness to the workforce,” said Dykstra.
The gig economy can also help employers control their costs, said Reid. “You might only need 1,000 hours per year for that expert,” he explained. Freelance arrangements enable companies to save money they would otherwise spend on year-round employment and probably get a higher level of expertise, he explained.
Winans echoed Reid’s sentiments.
“An employee is more than just a base salary,” she said. “There are taxes, benefits, space and supplies that go along with that. Employers are seeing that they can hire contingent workers and pay less for them. They can get laser-focused expertise for less.”
Gig workers also spread work responsibilities among several workers instead of having one employee hold all the keys, which can be a huge risk, said Reid.
“You can’t put all your eggs in one basket,” warned Williams, who told a story about a client who had one employee fully responsible for a major piece of technology. When that employee got sick, the company had to scramble to keep operations going.
Gig economy challenges
A gig economy does pose some challenges, the most obvious being a lack of health insurance, paid time off, retirement and other benefits for workers. These, along with the stability of a full-time job, are the tradeoffs for the flexibility and variety of contingent work.
While many gig workers lean on spouses with full-time arrangements for insurance benefits and others are young enough to remain on their parents’ insurance plans, there are plenty who don’t have these opportunities. They’re left to seek plans on the Health Insurance Marketplace or go without insurance.
Reid foresees changes in insurance and other systems to accommodate this expanding portion of the workforce.
“The gig concept is ahead of the law,” he said, noting that insurance and other systems have not yet caught up to it, but they will eventually.
Employers face the challenge of how to manage and motivate these temporary workers. “You can’t treat them like employees,” Winans said. “You have to manage them as you would a vendor.”
That means doing your research on who you’re contracting, setting clear expectations, and setting aside time to get updates and provide feedback.
On the flip side, contractors should receive onboarding and training just like a regular employee, noted Winans. You also need to integrate them into your team, even if they’re the only non-employee on it, she said. “Introduce them as a member of your team, regardless of what their work arrangement is,” she advised.
“In most cases, you’re signing a contract with them, so you can decide how much you want to involve them in your company,” Winans said. For example, will you invite contingent workers to your employee appreciation event? Which meetings will they attend? You’ll need to decide these on a case-by-case basis. “Be strategic about hiring contingents,” Winans summarized.
There are also legal challenges to contingent arrangements. Contracts need to reflect the exact work arrangement, or companies can be held liable for not paying overtime, terminating the work arrangement and more.
Williams gave one example that she said is not uncommon.
“If a temporary employee files for unemployment after finishing a job or being let go, it could pull the thread of what else that employer should have paid for,” she explained. Sick leave, health insurance, paid time off and other benefits come into question, which can cost a company in back payments and legal fees.
This situation is easily avoided with a clear contract that spells out the nature of the work arrangement, said Reid. “Make it look right on paper,” he said.
Reid advised drawing up a contract that puts the burden on the worker and waives liability for the company. And it’s a good idea to hire or contract a lawyer to draft or at least review these agreements, he said.
Williams provided another point of caution: “Employers should be wary of hiring contactors directly,” she said. “Rather, contract through a company name.”
This practice helps protect workers as well, she noted. “The most important thing for gig workers is either go through a third party or set up their own LLC,” she said. “They need to protect themselves.”
Advice for companies
So if this gig economy is already here or at least in the works, what should employers do to prepare themselves for it? The 2022-2023 Mercer Global Talent Trends study suggests a need to shift the “social contract” of gig work.
The study notes a change in attitudes toward freelance work. In 2019, survey respondents said the biggest reason for considering freelance work was job loss (22% versus just 2% in 2022), whereas the current survey showed the biggest reasons being increased earning potential (48%) and greater flexibility and freedom (42%).
As flexibility, including remote work and flexible schedules, becomes more prominent in permanent positions, the study said, workers will likely gravitate toward them for their stability. Luring these workers into the gig arena will involve change.
“Making gig working more attractive will require evolving the social contract, but so far, fewer than one in five companies is reviewing its gig working terms and benefits,” the Mercer study said. The point: organizations that favor gig arrangements must re-evaluate and re-structure their benefits for this segment of the workforce.
Another necessity is defining company culture, said Reid. “Most companies don’t have a clear culture,” he said. “You really need the leader to be clear on what the culture is, so everyone is rowing the boat together.” That includes both employees and contingent workers.
Organizations also need to shift their thinking about employees’ development, Reid said. He noted that employees change positions a lot more often than they did in the past. “I hire employees knowing that if they leave in four years, it’s part of their trajectory in life and not a reflection on me,” he said.
Today’s employees are seeking not only flexibility, but job satisfaction, which includes professional development. “Focus on how you can help employees achieve their goals,” Reid said.
A manager’s fear of investing in professional development for an employee and having to replace them in a year or so only goes so far, said Reid. “People ask, ‘what happens if I invest in them and they leave?’ On the flip side, what happens if you don’t invest in them and they stay?”
A dissatisfied employee is mostly likely a disengaged employee, and disengaged employees are not productive and can damage company morale.
Finally, organizations of the future need to be innovative about how they get work done. “You have to have that innovative mindset,” said Dykstra.
Part of that innovation involves moving away from specific education and experience requirements for positions and instead focusing on transferable skill sets, Dykstra said. For example, many hospitality workers who changed jobs during the pandemic put their skills to work in sales positions, she said. Other industries share skillsets, too, and organizations that look for them will have a wider field of candidates to choose from, she said.
“In the future, I think we’ll see fewer requirements for jobs and more focus on transferrable skills.”
