So what is driving this disruption and why has the labor market changed? The immediate answer is advancements in technology. Technology has revolutionized everything from how we travel to how we communicate. WEF points to cloud technology and the mobile internet, as well as the sharing economy and crowdsourcing as two technological trends driving the fourth industrial revolution. In the United States, two factors have come together to make the gig economy stronger than ever before: the introduction of the Affordable Care Act (ACA, colloquially known as Obamacare), and the rise of talent platforms.
The Affordable Care Act
With the ACA, many Americans who had previously not had health insurance found themselves covered – and many other Americans who had been insured through their employers suddenly found new freedom in not having their health insurance tied to their jobs. That made many of them take the plunge into freelance work. The ACA freed many Americans from “job lock,” where the fear of being uninsured made them stay at jobs they didn’t want to be in. The ACA instead allowed them to choose how and where they wanted to work and some employees chose to move on to different jobs that they enjoyed more while others chose to work for themselves. The Congressional Budget Office actually predicted this effect in its 2014 study of the ACA, stating “… the ACA could influence labor productivity indirectly by making it easier for some employees to obtain health insurance outside the workplace and thereby prompting those workers to take jobs that better match their skills, regardless of whether those jobs offered employment-based insurance.” That same year, a graduate student named James Bailey tested a hypothesis about the Affordable Care Act; he examined whether 19- to 25-year-olds were more likely to work as freelancers if they were able to stay on their parents’ health insurance plans. His research showed that those with coverage were 2-3 times more likely to go into business for themselves than those without coverage. Also, after the ACA was implemented, it made more financial sense for companies to hire freelancers rather than provide insurance to full-time employees. In our 2016 research report The Rise of Blended Workforce in the New Gig Economy, we found that 74% of 600 HR decision makers said they would contract more freelancers as a result of the ACA. Further, an astounding 28% responded that they intend to hire a greater number of freelancers than full-time employees by 2020. The ACA is simultaneously triggering companies to turn to freelancers, while also freeing many Americans to pursue their passions in their new independent careers. The result is the blended workforce – a perfect marriage of companies and freelancers, each satisfied with their arrangement.
The Rise of Talent Platforms
In addition to the ACA, the rise of talent platforms has made it easier than ever for companies to find the freelancers they need. Websites such as LinkedIn paved the way for more niche sites to match freelancers with work opportunities, and the online marketplace of the new gig economy is growing rapidly. As our 2016 study found, 38% of freelancers are now being sourced through freelance management and talent platforms. While general online job boards are still more popular at 43%, freelance management platforms are quickly narrowing that gap. Such sites make it easy for companies to quickly find freelancers with the skills they need. Many outline the freelancer’s specialties, provide a portfolio of past work and include reviews from previous clients. This makes it quicker and easier than ever before for companies to find freelancers they can feel confident in hiring. A McKinsey Global Institute report on the labor market outlines the many reasons that talent platforms are good for freelancers, companies, and the labor market. McKinsey estimates that by 2025, such platforms may add $2.7 trillion to global GDP and begin to improve many of the problems today’s labor markets face. How will these platforms add so much value to the economy? The McKinsey report suggests:
Talent platforms give job markets a boost. As these platforms grow, “they will become faster and more effective clearinghouses that can inject new momentum and transparency” to stalled job markets. Talent platforms show which skills are in demand. This transparency may even inform people’s educational choices, steering them into in-demand professions. According to McKinsey, more effective spending on university education “could reduce some of the $89 billion misallocation we find in Brazil, China, Germany, India, Japan, the United Kingdom, and the United States.”
The freelance trend shows no signs of stopping, which demonstrates the ongoing need for talent platforms. As our 2016 research report found, one in five top performing firms say 40% of their labor force is already composed of freelancers and nearly half of top-performing firms intend to increase their hiring of freelancers by 30%. Successful companies are already hiring freelancers in droves and more companies are sure to follow – which makes talent platforms an invaluable resource. This is no blip – the ACA and talent platforms have helped ensure the rise of the professional freelancer. If your company hasn’t already considered hiring freelancers, what are you waiting for? Featured photo credit: Shutterstock via image.shutterstock.com
