Freelancing in America 2017 Report

I’m happy to share highlights from the 4th annual Freelancing in America report, produced jointly and published in October 2017 by the Freelancer’s Union and Upwork, the freelance job site.  The online survey queried 6002 U.S. adults who had performed full or part-time Freelance work between August 2016 – July 2017.  Freelancing was defined as temporary, project-based, or contract work performed at a for-profit or not-for-profit organization or government agency.  There are gradations of Freelancing, described as follows:

Independent Contractors          35%  exclusively Freelancing, f/t or p/t

Freelance Business Owners      7%    exclusive Freelancers who’ve hired employees

Diversified Workers                   28%   working a mix of p/t traditional jobs + Freelancing

Moonlighters                               25%   f/t or p/t traditional employees who take side projects

Temporary Workers                   7%

See the full report here  Freelancing in America 

There are now 57.3 million Freelance workers in the U.S., representing 36% of the nation’s workforce and a 30% increase over 2016, and we contributed about $1.4 trillion to the U.S. economy in 2017.  Since 2014, the Freelance workforce has grown three times faster than the traditional workforce. At that rate of growth, most U.S. workers will be Freelancers by 2027.  The Millennial generation is leading the way, with an astonishing 47% participation rate in the Freelance workforce.

Demographically, slightly more men (54%) than women (46%) are Freelancers.  There is great diversity in educational background, with 32% having earned a high school diploma or less; 24% have earned a bachelor’s degree; and 19% have an advanced degree (those statistics are nearly identical to members of traditional employees).  Most live in the South (40%) and in the suburbs (47%); 65% are white, 11% are black, 5% are Asian and those statistics also closely mirror the traditional workforce.

The majority of Freelancers report that they chose self-employment (63%) and 79% assert that Freelancing is preferable to traditional employment; 50% say they would not accept an offer of full-time traditional employment, at any salary.  Freelancers feel respected, empowered and engaged in their work, excited to start each day.

On average, the full-time Freelancer bills 36 work hours a week.  Freelancers seek to diversify the clients with whom they work and the services they provide; 63% feel that this strategy holds more advantages than working with one (presumably steady provider of adequate billable hours) client only.  In 2017, the average full-time Freelancer worked with 4.5 clients per month and repeat clients comprise 52% of their work. Economically, some Freelancers did rather well in 2017: 36% earned more than $75,000, with 19% who earned $75,000 – $99,999; 12% earned $100,000 – $149, 999; and 5% earned more than $150,000.

Presumably to enhance their value to prospective employers, Freelancers are noticeably more likely than their traditionally employed counterparts to upgrade their skills in response to an evolving job market, 65% to 45%.  Virtual-reality related skills, natural language processing and econometrics are among the fastest-growing skill sets for Freelancers.  More than 50% of Freelancers are concerned about the potential impact of Artificial Intelligence and automation on their future income, as compared to 19% of full-time traditional employees.

Cash-flow and getting paid weighs heavily on the minds of Freelancers.  Among those who participate full-time, being paid at what is perceived as fair value (52%), income unpredictability (46%) and debt (46%) are concerns. Among part-time Freelancers, difficulty in finding work (47%) and debt (56%) are primary concerns.  Sadly, 20% of full-time Freelancers lack health insurance; affordability is an issue for those with or without health coverage.

No doubt about it, there is greater economic instability in the life of a Freelancer as compared to the traditionally employed, the result of gaps in billable hours and checks that do not arrive within 30 (or even 45) days. 63% of full-time Freelancers report that they must tap into their savings one or more times a month, while only 20% of the traditional full-time employees feel the need to do so.  56% of Freelancers have less than $5000 in savings, compared to 49% of traditional employees who have such small savings. Perhaps in response to this harsh reality, 46% of full-time participants raised their hourly rates/project fees in 2017 and 54% plan to raise their rates in 2018.

Freelancing continues to have a significant impact on working and living in the U.S. and the expansion is expected to continue.  Those who Freelance full or part-time report that they’re quite satisfied with the arrangement and a chosen few are doing well financially, at least at this time.

But the spectre of debt and an inability to amass savings loom large.  The Freelancer Survey reported that in 2017, 20% of Freelancers lacked health insurance and as reported in Forbes Magazine in November 2017, 40% lack retirement savings.  Yet, traditional employment continues to hemorrhage advantages.  That promotion may come with a fancy title, but no raise to acknowledge the additional responsibilities.  The health insurance plan costs more and covers less.  Rumors of approaching lay-offs keep people awake at night.  Getting, or holding on to, your piece of the American Dream has become more difficult.

How can you cope? Remember that the best defense is a good offense.  Identify skills that can be expected to bring value-added to you and do what you can to obtain, package, promote and leverage them, whether as a traditional employee or a Freelancer.

Thanks for reading,

Kim

Photograph: Lewis Hine (1908) courtesy of the National Archives                                     Girls at weaving machines in Evansville, IN

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The Freelancer’s Dilemma : W2 or 1099

So we continue with the get-your-house-in-order year-end organization.  This week,  you can think about your tax status in an even more elemental way:  are you a Freelance consultant who is on a very long assignment,  or are you an employee?  The federal government continues its focus on the proper classification of employees and contract workers.  Businesses are cutting back on hiring workers who must be paid benefits and the feds are snooping around.  Improper classification of workers violates the Fair Labor Standards Act (FLSA).

As you know,   Freelance consultants are not covered by federal or state wage or hour laws;  are ineligible for employee benefits such as health insurance and retirement plans; and cannot form or join a union.   Our employers are not required to make any withholding whatsoever and so we do not receive unemployment benefits and no one pays into our social security or medicare accounts,  no one deducts federal and state taxes for us.

The good thing is that we have 100%  of our money in hand when the check arrives and that has probably saved you more than once!  The downside is that we are left with a tax bill,  including self-employment  tax,  every quarter.

Businesses may be totally flummoxed about how to classify workers.  For example,  the Internal Revenue Service may classify a worker as an employee and determine that he/she is entitled to participate in the company retirement plan under the Employee Retirement Income Security Act (ERISA).  State government officials may classify that same worker as an independent contractor when determining whether or not that worker is entitled to unemployment benefits.

There are different tests for distinguishing independent contractors from employees.  A big factor is whether the worker or the company controls the manner in which the work is performed.  The more the Freelancer,  as opposed to the employer/client,  controls where,  when and how the work is performed,  the more likely that an independent contractor arrangement exists.   To further clarify,  individuals who are free to provide services to other clients and are able to sub-contract their work are more likely to be classified as independent contractors.

Other considerations include:

  • Whether the worker uses his/her own supplies and equipment to perform the work wherever it is convenient  (like on a computer in a library,  or a cell phone in a coffee shop).
  • Whether the worker can reject an assignment without  fearing termination of the work arrangement.
  • Whether the worker pays his/her own business and travel expenses.

The above conditions would incline that worker toward classification as an independent contractor.  Whether or not a worker has independent contractor or employee status has huge economic implications for both the employer/client and the W2/1099 worker.  Unfortunately,  in today’s job market,  workers are in a vulnerable position,  regardless of the government’s heightened scrutiny of possible mis-classification.

Very few Freelancers who ought to be classified as employees will turn in an employer who is offering steady work,  particularly if the hourly rate is considered acceptable.   We will put up with a few things to get a reliable check.  If you suspect that you are really a W2 who is treated as a 1099 by a business that wants  (or maybe really needs)  to save money,  look at the big picture.

Are you happy working there?  Is the money good?  Is the work good for your CV and the name good for your client list? Are you able to squeeze in work for other clients  (with or without that employer’s knowledge)?

Without exactly letting on that you know the employer is breaking the law,  you might be able to bargain for a few perks,  such as less face time in the office,  or perhaps a shot at working on better projects.  It’s a touchy situation and you don’t want to kill the golden goose.  I’d probably speak with an employment attorney to figure out a strategy.  You don’t want to lose either a regular revenue stream or a reference.  Chalk it up to what one does to remain in business.

Thanks for reading,

Kim