Introduction
This year has been one filled with economic challenges and changes for nearly every industry, and Upwork’s 2020 Freelance Forward survey reveals that freelancing has not been an exception to these changing times. As drastic and rapid shifts to the workforce occurred nearly overnight, freelancers and companies alike had to adapt to a different environment with quickly evolving business needs.
However even in the midst of this uncertainty, the percent freelancing at any point over the last year has increased from 35% to 36%. Contributing nearly $1.2 trillion to the economy, freelancing remains a significant part of the economy and an important component for adapting to difficult economic times.
Despite this overall growth, however, COVID-19 and the resulting economic downturn did have profound effects on some aspects of the freelance workforce. Largely, we have seen many who are freelancing for the first time and others who paused freelancing, leading to demographic and compositional changes of the freelance workforce. This report will highlight the key driving forces that have led to shifts in the freelancer workforce composition in order to show the various ways in which freelancers have been impacted, and to shed light on the importance of freelancing as a way of working.
Compositional and Demographic Changes in the Freelance Workforce
Before we discuss the driving forces that changed the freelancer workforce, it is important to understand how and why some forces disproportionately impact some freelancers and not others. Compared to traditional employment, there is a very wide range of activities that count as freelancing. Freelance work can vary from selling goods online a few times a year to delivering groceries a few times a month to working as a full time programmer or accountant. Because of this diversity in the workforce, there is no one way that the pandemic impacted freelancing as a whole. Instead, as some forces resulted in new opportunities and demand for one type of freelancers, the same forces also decreased demand for another.
We see these forces largely at play when looking at what we identify as new freelancers and paused freelancers. Since the onset of the pandemic, we’ve seen a significant share of the labor force began freelancing for the first time in 2020. Normally, around 10% of freelancers have started freelancing sometime in the last six months. However, at the time of the survey in June-July 2020, 34% had started since the onset of COVID-19 in early March.
At the same time, 28% of freelancers, which is 10% of the labor force, have paused freelancing as a result of COVID-19. As a result of these two countervailing trends, the share of the labor force freelancing overall in 2020 has increased slightly compared to last year, from 35% to 36%, but the composition of this workforce has significantly changed.
Although this analysis will focus on Upwork’s Freelance Forward results and, in certain cases, results of the Freelancing in America study by Upwork and Freelancer’s Union for annual comparison, the same trends we observe are apparent in other data sources. Importantly, that many occasional freelancers have paused and many full-time freelancers have started for the first time is consistent with BLS data showing self-employment is up and multiple job holding is down as a share of employment.
In addition, Business Formation Stats show that non-employer business registrations have skyrocketed as well. Altogether, across multiple data sets it seems clear that many are turning to freelancing during this time of economic stress.
At first glance, compositional changes from Freelance Forward and this supporting data may appear as though new freelancers are simply pushing previous freelancers out, however, the data suggests that this is largely not the case. The new freelancers and paused freelancers are driven by different supply and demand factors, not correlative factors of each other.
The Demographics New and Paused Freelancers
Knowing that new and paused freelancers are driven by different factors, it is also important to identify why this is the case. What we found is that the new and paused freelancer groups vary significantly in both who they are and how they work.
Our survey shows us that in summary new freelancers are largely:
In contrast, paused freelancers are:
To understand what is driving both groups, we must dig into the supply and demand trends that are affecting freelancing in the post-pandemic world. These factors not only shed light on the shifting demographics of the freelance workforce, but also highlights freelancing as a way of working that is valuable to both workers and businesses.
Driving Forces Impacting the Freelance Workforce during COVID-19
Among the many changes that COVID-19 has had on the world and economy, from Freelance Forward, we identify four key drivers that have impacted the freelance workforce. Through this analysis we show the overall impacts of each driver on the freelance workforce and how each has contributed to demographic and compositional shifts by changing supply and demand for new and paused freelancers.
Driver 1: Industry Demand and Occupation Mix
Overall, COVID-19 has had varying impacts on industries. Some, like the Hospitality Industry, have greatly suffered due to shut downs, social distancing orders, and travel restrictions, while others, like IT & Network security have been in high demand with the switch to remote. Given that freelancers exist across nearly every industry sector, it is no surprise that supply and demand for freelancers in certain occupations would also vary across different industries.
When analyzing the two groups of freelancers, new and paused, we find that the two groups have differences in their occupation mix. For example, the top two occupations for new freelancers are computers/mathematics (computer programmers, software engineers, etc) and finance/business operations, while the most common for paused freelancers are education and construction.
Consistent with this, we also find that occupations seeing stronger demand are experiencing a net increase in demand for freelancers, while those with weaker demand are seeing a net decline. To see how this breaks down for new and paused freelancers, we look at the five occupations that on net skew the most towards paused freelancers vs new, the unemployment rate has increased by 15 percentage points. For the five that skew the most towards new freelancers versus paused, the unemployment rate increase averages 4.5 percentage points.
In short, changes in the overall industry demand resulted in new freelancers disproportionately entering occupations that are doing better, while paused freelancers exited occupations that are doing worse. This suggests that there is a changing mix of freelancers to meet the shift in demand, not simply a matter of crowd-out from newcomers.
Driver 2: Shift to Remote Work
Another key trend that has impacted freelancing this year is around the growth in remote work. Online platforms like Upwork, as well as freelancers’ frequent need to interact with multiple clients quickly and easily, mean freelancers have always been disproportionately remote. Even before COVID-19, FIA data shows that 26% of freelancers were entirely remote, and 46% worked remotely more than half of the time. In contrast, 9% of non-freelancers were fully remote, and 13% were remote more than half of the time.
As businesses suddenly shifted to remote, freelancers' valuable experience working this way was also advantageous for clients. During the pandemic, 40% of freelancers report that they have consulted or trained clients on how to work remotely, 27% have taught clients how to use online tools, and another 29% have taught clients how to manage projects online. Working remotely requires learning-by-doing, and many freelancers had this value know-how prior to the pandemic.
Due to this propensity for remote work, many businesses turned to freelancers knowing that many are highly skilled and also experienced in this way of work.
Although there was a greater demand for remote workers overall, again, we saw that this shift had uneven effects on new and paused freelancers and added to the compositional and demographic changes of the freelancer workforce.
When looking at the two groups, we see that new freelancers were more likely than freelancers overall to be remote workers before COVID. In fact, they were more likely to be remote pre-COVID than workers overall were post-COVID. As such, it is no surprise they have been able to find freelancing work.
In contrast, paused freelancers tended to not work remotely prior to COVID-19. The share of paused freelancers who did no remote work before COVID was 58%, which is lower than freelancers overall and more than three times the share for new freelancers.
The greater propensity of new freelancers to work remote likely reflects both supply and demand factors. On the demand side, when companies are looking to hire remotely post-COVID, they are more likely to find those who already specialized in working remotely. For example, they will flock to online platforms like Upwork where they can find remote freelancers.
On the supply side, many new professionals have flocked to freelancing because it is remote, which is the only way that they can work during the pandemic. The demand for remote freelancing work is clear at Upwork, where weekly freelancer registrations rose above 50% of normal in the early period of the pandemic. Indeed, this preceded the influx of clients by several weeks, suggesting that freelancers were not simply responding to higher demand, but were more interested in working this way.
Altogether, the different way that the shift to remote work has affected the supply and demand of freelancers is more evidence that the changes in freelancing are not simply about new freelancers crowding out older freelancers. Instead, there is stronger demand for some types of freelancers, and weaker demand for others. In addition, some are more experienced in working remotely, while others are not.
Driver 3: Business Uncertainty
Another driver that impacted the freelancer workforce during COVID-19 was uncertainty. Businesses largely faced two separate forms of uncertainty: the virus risk and the resulting economic/business impacts of the response to the virus. Since the onset of the pandemic, the path of the virus has been unclear thanks to the uncertain science of epidemiology and the unknown nature of the virus. For example, whether the virus would disappear during the summer was unknown earlier in the year, and whether it will see a major resurgence in the fall still is unknown. As a result, businesses' near-term and medium-term planning is highly contingent.
For many businesses, this impacted hiring decisions. They understood the increased risks and cost of making full-time hiring decisions amid changing business needs. As a result, many businesses turned to highly skilled freelancers. By engaging freelancers, businesses could scale up and down their workforce to meet changing business needs.
At the same time there was a lift in demand for freelancers, uncertainty also likely drove many to start freelancing. Full-time traditional employment means having one employer. This is risky because a full job can be harder to find, and because if you lose that job you lose 100% of your pay. In contrast, freelancers tend to work for a variety of clients instead of one employer. This means that one does not need to find a full-time, long-term position in order to start working. Instead, a freelancer simply needs a single project. FIA found that in 2020, the median number of clients that a freelancer had in the past six months was 6. To begin earning via freelancing, only one client needs to be found. And if one client is lost, there are more to continue working for. Freelancing is both a lower bar to start working and less risk from an individual client, both of which are valuable when economic uncertainty is high.
The uncertainty in the economy has affected the freelancer economy as a whole, and certainly the demand and supply for freelancing. That freelancing has seen both many new entrants and many who have paused reflects the dynamic nature of freelancing. For many firms, freelancers are both first in and first out, and the economy today is marked by both urgent needs and also intense economic strains.
Driver 4: Flexibility
The final key driver that impacted the freelance workforce is flexibility. The pandemic economy has created fast turnaround challenges for some businesses that require quick adaptation and sometimes even around the clock production. Indeed, while businesses have scaled back a variety of face-to-face operations in light of the pandemic, other activities have required quick scaling. For example, one client on Upwork was attempting to quickly build a COVID-19 tracking app. To do this, they created a team of freelancers around the globe across time zones, so that someone could be working on the project essentially around the clock.
As a result, after the onset of COVID-19 there was strong demand for freelancers on Upwork, specifically in categories of work that related to business disruptions, COVID-19 response projects, or in ways to adapt to this new way or work. This includes a burst of demand for customer services and a sustained increase in demand for e-commerce development and web and mobile design.
At the same time that we saw flexibility play a part in increased demand, it also had consequences for the freelancers as well. For example, as schools and daycares closed and household duties increased, flexibility became essential to many people. Given that freelancers can choose their own hours and clients, many saw the flexibility that freelancing offers as more advantageous than ever before.
The importance of this flexibility to new freelancers during the pandemic is clear, as they are twice as likely significantly more likely to be a caregiver to a child than freelancers overall, and more than twice as likely than non-freelancers. They are also more likely to be caregivers to a parent, relative, or someone else. In other words, the ability to have more flexibility resulted in an increase of new freelancers.
Alternatively, many paused freelancers are taking advantage of the flexibility that allows freelancers to stop working if they don’t have the time. This is clearly the case for many paused freelancers, 41% of whom freelanced on a monthly basis or less. Only 19% of paused freelancers did so on a daily basis before COVID compared to 47% of those new freelancers do it on a daily basis.
The data also shows that many of those who have paused freelancing were doing it as a supplemental income. One in four paused freelancers was a moonlighter, meaning they did freelancing on the side while having another traditional full-time job. In addition, 51% report that while they have paused freelancing, they are still employed part-time or full-time elsewhere. Another 28% are full-time students, homemakers, or retirees.
Altogether, the flexibility of freelancing led to an overall increase in demand for freelancers, but shifted the composition and demographics of the workforce.
Going Forward
While freelancing on net has increased only slightly this year, the dynamics of 2020 suggest the share of the labor force engaging in freelancing in the future may be higher. The key drivers in demand for the freelance workforce also shifted who is freelancing, and also how they view freelancing long term.
Among the new freelancers that entered during the pandemic, 96% say they will do more freelancing in the future. Even among paused freelancers, 88% also agree that they are likely to do freelancing in the future. With this steady supply of freelancers, we also see that on the demand side the businesses for whom remote work has gone best are planning to utilize more freelancers in the future.
While it is unclear whether this increase will come to bear, it is certainly true that freelancing has always been a feature of the modern economy and likely will remain so in the future. It provides value to the freelancers and the businesses who hire them. The adaptability and variety helps provide flexibility and makes freelancing an important component of a dynamic economy today and moving forward.
About Freelance Forward: 2020
To see further insights, please visit https://www.upwork.com/i/freelance-forward for access to the full results deck and other materials. The study is conducted by independent research firm Edelman Intelligence. 6,001 U.S. working adults over the age of 18 were surveyed for it online between June 15, 2020 – July 7, 2020. Of those, 2,132 were freelancers and 3,869 were non-freelancers. Results were weighted to ensure demographic representation in line with the United States Bureau of Labor Statistics’ 2019 Labor Force Statistics from the Current Population Survey and the American Community Survey.
The study has an overall margin of error of ±1.2% at the 95% level of confidence.
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