The Independent Workforce in America:
The Economics of an Increasingly Flexible Labor Market
By Paul Oyer, Stanford University Graduate School of Business
New study helps policymakers gauge the impact of changing workforce
While self-employment has long existed, technology is creating new opportunities for the self-employed and their clients to connect and get more done.
By tapping into the connective power of the Internet, more Americans than ever are now able to start and grow their own independent businesses and participate in the independent workforce (IW). The economic realities of this diverse workforce are an important measure of how U.S. policy should react in the upcoming years.
Seeking to provide a clearer understanding for policymakers, Stanford University Professor Paul Oyer conducted this groundbreaking study, which examines the economic drivers and impacts of America’s IW. Commissioned by Upwork, the largest freelancing website for professional skills, the study analyzed recent IW data and research, including the “Freelancing in America” survey of the general U.S. population and significant transaction data from Upwork.
Key findings:
- The majority of America’s IW started self-employment by choice, seeking a combination of flexibility and extra earnings.
- A smaller segment uses time in the IW as a safety net, participating in the IW to stay financially afloat between traditional jobs.
- The IW earns a higher premium as compared to the traditional workforce, earning 15% more per hour.
- Sites connecting the IW with opportunities are additive to the U.S. economy. These sites create a “thicker” labor market that enables the IW to find more clients, especially outside their local area. 96% of transactions through the Upwork marketplace happen between parties more than 50 miles apart, spreading wealth within the U.S. from relatively affluent areas to more typically middle-class areas.
- Technology increases opportunities by reducing search costs. The average time to contract on Upwork is just three days, enabling businesses — especially small businesses and startups — to access specialized skills quickly when project needs arise.
- As many as 20 million members of the American IW say that they have found clients online.
Author’s summary:
“Policymakers should focus their efforts on enhancing the value and benefits of the IW without hurting the flexibility these workers seek or making the IW too expensive for firms to use relative to other options (including the option of not hiring anyone at all and, as a result, passing up an efficient use of labor inputs). The diversity and wide reach of the IW, as demonstrated by this and other studies, imply that “one-size-fits-all” policy reforms may have unintended consequences, even if they are proposed with the best of intentions.”
