Rethinking The Relationship Between Gig Economy Workers And Employers

We still aren’t exactly sure how many people are working in the gig economy. But lots of people are trying to figure it out. The Bureau of Labor Statistics (BLS) recently released its highly anticipated study on “alternative employment arrangements” and reported that freelancers comprised 10.1% of the workforce as of May 2017. This figure represents, unbelievably, about a 1% decline from the last time the survey was conducted in 2005.

Given the initial BLS study predates the invention of the iPhone in 2007, and was conducted well before gig economy-goliath Uber was founded in 2009, we’re dubious of these results, to say the least. Thankfully, we have access to real-time data of our own from the millions of employers and job seekers who use ZipRecruiter every day.

We marshaled these resources to develop a comprehensive study of both the people working in the gig economy and the companies who want to hire them. First, we launched a ZipRecruiter survey in April of this year and connected with over 9,000 active job seekers (a robust and representative sample) to take their temperature on the gig economy.

Then, ZipRecruiter’s Senior Labor Economist Mitch Downey dug into about 5 million job openings in our database and determined what drives firms to hire contract workers and where the paths of each group converge or collide.

Overall, we uncovered several frictions pointing to a mismatch between workers in the gig economy and the employers who want to hire them. We also gained some insight into how to bring them closer together.

An Anatomy Of The Gig Worker

There are lots of free agents on the job market, and most of them are in between gigs. Of the 9,000 job seekers we surveyed, 25% identified as a worker in the gig economy (far more than BLS estimates). However, when asked how many gigs they currently have, the majority of respondents (38%) said they are between gigs. An additional 35% indicated they currently only have one gig, which could mean they are working in a full-time contract position, or that they are looking for additional work.

Either way, it’s clear from our survey that the vast majority of those working in the gig economy are looking for more opportunities. When asked if they’d prefer to replace their current contract job with full-time employment, 81% said they would like to work one, full-time job. A mere 5% responded they already have a full-time job.

A synthesis of these results challenges the idea that workers are using the opportunities offered by the gig economy as a side hustle. Rather, they are approaching what is essentially part-time work as a full-time job. This becomes even more apparent when you consider that 65% of respondents said their gig economy job was their sole source of income.

More than 27% of our survey-takers reported they’re working in the gig economy because they are in between permanent jobs. But this doesn’t mean people are approaching this type of work as a last resort. Twelve percent said it is because it works great with their schedule and 10% said it allows them to pursue their passion.

The majority, however, chose “all of the above,” a result revealing mixed feelings over the tradeoffs that come with this work. Based on the narrative responses to these questions, the number one tradeoff is clear: independent contractors love the flexibility and hate the instability that comes with gig work.

Many of the freelancers we surveyed said they chose their path out of frustration with traditional employment. Two key sticking points for a number of respondents were the length of time the hiring process takes and the lack of a flexible work schedule. When asked how they feel about the gig economy, the words “freedom” and “flexibility” appeared in more than 200 of the 1,400 written responses we received.

When asked about their highest level of education, 32%—the largest segment of respondents—said they hold a graduate degree, and 31% have a 4-year degree. This could indicate that many freelancers are overqualified for the full-time positions available today, but it also reveals the large share of highly- educated workers currently untapped by traditional employers.

Companies With The Greatest Demand For Contractors

Several characteristics stood out among organizations who post the greatest share of contract positions.  They tend to be large companies with 100 or more employees, and operate in rapidly changing industries that require specialized skills and college degrees.

We compared millions of job postings for contract positions by company size and found that larger organizations hire more contractors. Broadly speaking, these companies can be split into two groups: Those with 50 or fewer employees (where 5-7% of openings are for contractors) and those with 500 or more employees (where 10-15% of openings are contract posts).

Industries with occupations where the demand for different types of skills is constantly in flux also tend to hire more contractors. To determine which industries experience more change in the skills they need from their employees, we first looked at the occupations within every industry and then calculated how these sets of occupations changed between 2012 and 2017. The industries that showed the most occupational change over time were engineering and science, energy and environment, and tourism and travel. Jobs posted to ZipRecruiter within these industries had a greater share of available contract positions when compared to the other industries, which had little to no change.

Educational attainment also stood out as a determining factor for the employee vs. contractor choice. We looked at every occupation designated by the Census Bureau and calculated the fraction of posts that specifically list a Bachelor’s degree as one of the qualifications. Then we compared rates of contractor openings and rates of Bachelor’s degree requirements across those occupations.

We discovered that jobs requiring a college degree are more likely to be filled by contractors. The occupations that rarely require a college degree are roughly half as likely to look for contractors as those which most frequently require one.

The Mismatch and Proposed Solutions

Once you hold these two respective profiles side-by-side, it’s clear that contractors have what companies want: They’re well-educated, flexible, and available to work. The mismatch arises when these companies don’t offer them what they desire most: stability.

We know that large companies pay more and offer the best benefits. Unfortunately, these same benefits are not extended to independent contractors. This cost savings is precisely why larger companies are more likely to post contract positions.

This begs the question: is this all-or-nothing approach necessary? Offering a modicum of benefits, such as access to flexible spending accounts or company-subsidized training may entice the vast majority of contractors looking for traditional employment off the sidelines. Gig economy employers who best address the desire for stability among the workforce will undoubtedly win out.

Flexibility is one confluence we found on both sides of our study. Employers operating in fast-changing industries need nimble talent and gig economy-workers enjoy having a say over where and when they work. Traditional employers have answered this call by being more liberal with work-from-home policies and offering things like unlimited paid time off. But this doesn’t typically apply to independent contractors.

Firms with constantly changing needs favor contractors because they can replace them at will. But some consideration for a stable and flexible work schedule could still apply during the terms of the contract. Just because an employer hasn’t made the commitment to full-time employment doesn’t mean they shouldn’t offer paid time off to someone who’s working a six-month project. After all, most employment is at-will anyways.

The basic equation is simple: contract employees enjoy the benefits of not being tethered to a 9-to-5, but the lack of support and stability offered by their contract employers greatly outweighs this benefit. Our survey shows there’s a large talent pool in the gig economy in search of full-time employment. Firms in need of that talent may do well to take a closer look at the stability they offer their full-time employees and consider sharing some of that wealth with the workers they wish to hire on contract.

Written by

Jeffery Marino is a Los Angeles-based writer who previously covered emerging job market trends using proprietary ZipRecruiter data.

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