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Are we ready for more on-demand freelance work?

by Eric Hazan

Work structures our society and, for many of us, our very lives. It’s hardly surprising, then, that changes in the nature of work cause controversy. The rise of independent work via digital platforms is one such change that inspires conflicting opinions. A recent McKinsey Global Institute report brings some useful facts and figures to the debate. It shows that independent work is gaining ground everywhere in the major developed economies. It also suggests that a very significant proportion of tomorrow’s work will be on-demand, holding out the prospect of opportunities for individuals and businesses, and creating serious challenges for society.

Let’s start by glancing in the rearview mirror. Clearly, a full-time salaried job is currently considered the norm. But in the long view of history, it is a form of work organization that originated at a particular point in time, with the advent of the big corporation and mass production. Before that and up until the 1930s in most Western countries, independent work predominated: crafts, small trades, family farms, day laborer jobs, etc. From that point on, such forms of income continued to decline steadily, until the 2000s.

Around the turn of this century, the emergence of digital technologies marked the beginning of a comeback for independent work and a diversification of its forms. Some of the effects of digital technologies certainly helped facilitate independent work. Digital technologies helped facilitate independent work in many ways. Tasks were dematerialized and fragmented. Subcontractors working outside the company walls could be integrated into processes better. Supply and demand could be matched instantly, with algorithms adjusting pricing better. And customer ratings allowed greater transparency into the quality of service providers. For all of these reasons, digital platforms play a driving role in the rise of independent work, and will continue to do so. They are multiplying in many sectors and lines of business: deliveries, personal transportation, home improvements, and even specialist services.

But it’s also important to note that digital platforms now facilitate coexistence between different forms of work. They offer individuals greater flexibility to work à la carte, so they can combine different ways of earning a living. Take a look at some of the figures in the recent McKinsey study: no fewer than 94 million people in the European Union are currently engaged in independent work in one form or another. This is much higher than the official number of 58 million that Eurostat reports, underlining the difficulty of establishing a precise measurement of using traditional statistical tools. The reason for this huge difference in numbers lies in the very broad definition of independent work used in the study. McKinsey used a combination of three criteria: autonomy, short-term contractual relationships, and payment per task or per assignment. This lumps in the sole-shareholder lawyer in private practice, the student who runs a few bike errands every month, the home help employed on an hourly basis by several different individuals, and the retired manager who rents out his apartment on Airbnb when he goes away for the summer. For 54 million of the EU’s 94 million independents workers, independent work is something they do on the side, usually in addition to a salaried job.

What we see taking shape here is a future in which the lines between these different employment statuses are blurred, and where different forms of work can overlap. The population categories that have historically struggled to get hired in a dichotomous labor market—the young, the elderly, the unqualified—could benefit from independent work being in greater supply, and even play a useful role as a stepping stone to salaried employment.

Putting the ‘free’ back into freelance

One point to note that runs contrary to popular belief is that independent work is very largely a choice (68% of the EU’s independent workers). While work in large organizations is increasingly associated with a form of loss of meaning (see “On bullshit jobs,” by David Graeber in The Economist), going independent is seen as a way of finding fulfillment in one’s work.

When asked, most freelancers say they are happy. Their satisfaction rate is equal to or higher than that of salaried workers in all 12 criteria measured: interest in their work and work/life balance of course, but also level of remuneration, recognition of work performed, and sense of security, which is more surprising. There is every reason to believe that the rise of independent work is also linked to deeper social trends, and not merely to the technological factors. In a knowledge- and creativity-based economy, some talents are more easily expressed when they are free to choose what they do. This development was described as early as 2001 by Dan Pink, who assisted Secretary of Labor Robert Reich, in his book “Free Agent Nation: The Future of Working for Yourself.” If the surveys are to be believed, millions of salaried workers in Europe are planning to take the plunge and opt for independence.

This is not to ignore the difficulties faced by some independent workers, for whom the gig economy is the only option, and who represent just under a third of the EU’s independent workforce. Nonetheless, even for them, the satisfaction rate is no worse than for salaried workers performing comparable tasks, which implies that they are confronted by other problems than the way their work is organized: problems such as thankless tasks, poor remuneration, and limited prospects for development.

The questions that arise

I began by asking “Are we ready?” After all, the convergence of technological factors and individual expectations is one thing; social structures are another. What might be the impact of a massive increase in independent work?

Firstly, the spread of independent work might stimulate growth, as the McKinsey Global Institute report describes. By boosting competition, independent work drives down prices and drives up demand. The result is market growth. One example is the growth of Uber-style services in suburbs where traditional taxis rarely operated.

The influence of independent work on productivity is more of a mixed bag. Capital productivity certainly comes out well from the on-demand economy: anyone can now optimize his or her material assets, be they cars, tools or real estate. In the case of labor productivity, things are less clear-cut. It seems reasonable to assume that a fulfilled freelancer, performing a chosen line of work, will be more productive than a worn-out middle manager. As will a large company that can call on a pool of freelancers for backup to deal with peaks in its business cycle.

But, on the downside, will freelancers be able to invest in their own training, and in updating their own skills in years to come, as demand for high qualifications continues to intensify in every sector? And when the economy dips, will they be able to absorb the pain? Or would it result in a wholesale destruction of human capital?

As these questions demonstrate, if there is a dramatic increase in this type of self-entrepreneur, we need to totally reinvent our social structures.

Extended enterprises will need to devise new ways of managing human resources, a growing number of which will be outsourced even though they contribute to mission-critical processes and, in some cases be in direct contact with the customer.

Governments will have to adjust social safety nets that currently are employer-based, such as retirement schemes and other benefits. In this respect, most European national systems, in which rights are attached to salaried jobs rather than to individual people, seem to be afflicted with unavoidable obsolescence.

Finally, individuals themselves will perhaps have to come up with new forms of solidarity. Maybe we will see a renaissance, though in a new form, of the guilds, confraternities, and mutual societies, which once enabled isolated workers to help each other through times of difficulty, including to increase knowledge and improve skills. The Freelancers Union, which was founded in the USA in 2001 and now numbers 300,000 members, may possibly herald the rebirth of such organizations.

These are key topics for society and for our future, and deserve to be more widely debated.

Eric Hazan is a senior partner in our Paris office.