Small Business Labs

AARP: Almost Half of Older Workers are Independent Workers

AARP's Gig Work on the Rise Among Older Adults as Demand for Workplace Flexibility Grows covers the gig economy parts of a broader study AARP conducted on workers who are aged 40+. 

AARP found that independent work is the main job for 27% of American workers aged 40+.

The AARP survey question below explains how they defined gig/independent work:

"Q25: In your current job / main job / most recent job are you an independent contractor, an independent consultant, a gig worker, or a freelancer?"

This is a pretty narrow question. It only covers services and even then leaves out a few independent worker services areas. It also only covers main jobs, leaving out side gigs and second incomes.  

But AARP also asks a broader question that includes non-main job work activities:

"Q29: Please check the box beside each of the ways that you independently earn money on a regular basis."

As the AARP chart below shows (click to enlarge), 48% of workers aged 40+ said they regularly work independently.

Discovering this data point requires careful reading of the small print at the bottom of the slide (highlighted in blue), which says, "52% of respondents reported: I do not earn money independently."  

After some quick math, this means 48% - almost half - of the respondents earn money doing independent work. 

The gig economy data is just a small part of the broader AARP study. This once-every-five-year study looks at the overall attitudes and motivations of working adults ages 40 years.

It's well worth reviewing for anyone interested in older workers.

The impact of Recent Layoffs on Freelancing

Historically, job security has been one of the main attractions of a traditional full-time job.

But research (click on the chart below to enlarge) from the long-running MBO Partners State of Independence study shows a growing share of independent workers believe independent work is more secure than a traditional job. 

The study has also found that the share of traditional jobholders saying independent work is less risky than a traditional job is also growing, increasing from 18% in 2018 to 33% in 2022. 

Put another way, 7 in 10 independents and 1 in 3 traditional employees say independent work is more secure than traditional employment.

And the rash of layoffs in tech is reinforcing this view.  

Two recent articles on this topic caught our eye.

Vox's Tech Workers are Increasingly Taking Contract Jobs covers the recent tech industry layoffs. Key quote:

"Part of what's leading more people to independent work is that regular employment doesn't look so hot right now in certain industries ... All of a sudden, contract work isn't looking so bad."

The article also points out something we often hear in our interviews - because most independent workers have multiple sources of income, they feel more secure than if they were relying on a single employer:

"It's almost like diversifying your stock portfolio," she said. "Instead of working for one company, I'm going to work for several because if one of them doesn't have work, the other ones do."

The Information's Tales from the Shredder: How a Quarter-Million Fired Tech Workers Are Picking Up the Pieces focuses more on the human impact of getting laid off.  

Our favorite quote is from a laid-off tech worker that illustrates the lack of security of traditional jobs:

"They paid us well; they gave us good severance," he said. "But the experience made me feel like I was just a tool. If they need you, they hire you. If they don't need you, they discard you."

The choice between a traditional job and freelancing generally comes down to an evaluation of the pros and cons of each.

And anything that makes traditional jobs less attractive - like a lot of publicity about layoffs - makes freelancing more attractive, and means more workers making a choice will choose freelancing. 

Emergent Research (that's us) works with MBO Partners on the State of Independence study series.

Digital Nomads are Life Goal Champions

Independent workers (freelancers, independent contractors, gig workers, etc.) who are also digital nomads score significantly higher than independent workers in general and workers with traditional jobs in achieving their life goals.

The chart below (click to enlarge) is from the MBO Partners research brief Life Goals: Explore the Great Realization In Depth.

It shows that Independent digital nomads score the highest in 7 of 8 life goal categories. They tie for the highest score in the 8th goal, spending enough time with family.

Digital nomads score exceptionally high on getting the most out of life (79% report achieving this life goal), continued personal growth (74%), and ensuring their life has a purpose (71%).

In addition to scoring high on life goals, independent digital nomads have among the highest work satisfaction rates of all workers. Ninety-two percent of independent digital nomads report being highly satisfied (81%) or satisfied (11%) with their work and lifestyle.

No doubt, visiting new places, being exposed to new cultures, and meeting new people all play a role in these high scores.

Another factor is that most digital nomads report high work/life flexibility, autonomy, and control levels. Our research shows that independent workers who report having work/life flexibility, autonomy and control also report high levels of work satisfaction and happiness. 

See the research brief for more details.

Emergent Research (that's us) worked with MBO Partners on this study.

Gig Economy Doctors

Locum tenens - "one holding a place" in Medieval Latin - is the healthcare industry's term for doctors, nurses, and other caregivers working in temporary roles.  

It's also the name of a temp staffing firm that places doctors and other healthcare professionals at hospitals and other healthcare facilities.

The company LocumTenens recently released The Future of Work: Redefining the Role of Physicians in the Gig Economy. 

As the study chart below illustrates (click to enlarge), 73% of doctors surveyed said they would be interested in local contract work, and 63% said they would be interested in a contract position that required travel.

The reasons doctors are interested in gig work are pretty much the same as others who say they are interested in gig work - better work/life balance and more flexibility, autonomy, and control.

And just as the pandemic has many questioning the role work plays in their lives, so are doctors, nurses and other healthcare professionals.   

Key quote from healthcare consulting firm Oliver Wyman's HEALTHCARE WORKERS MOVING TO GIG WORK IN RECORD NUMBERS:

"COVID-19 has battered the healthcare workforce. Historically known for their resilience, the pandemic has left doctors, nurses, and other front-line workers not just exhausted, but bitter, traumatized, and questioning their passion and commitment to a calling they once loved. In search of greater work-life balance and mental wellbeing, many are considering major changes to their work-life, from moving to gig work to leaving the profession altogether ..."

One of Oliver Wyman's recommendations to hospital executives is "strategically utilize gig workers".  

We think they will accept this advice, and the healthcare industry will see steady increases in the number of gig doctors in the coming years.  

Independent Workers and Their Life Goals

Since the pandemic, people have been reevaluating work's role in their lives. And for many, work-life balance, the ability to pursue passions, and health and wellness are taking center stage as top priorities.

MBO Partners' study Life Goals: Exploring the Great Realization in Depth explores the life goals of independent workers (freelancers, gig workers, self-employed, etc.) and how successful they are at achieving them.

The key finding of this study is that independent workers outperform traditional jobholders in achieving their life goals.

The study chart below (click to enlarge) illustrates the top 3 life goals reported by a survey of traditional and independent workers.

As the chart shows, independent workers outperform traditional workers in all 3 of the top categories.

Independent workers scored higher in all areas except financial goals. They scored lower than traditional workers in earning a steady income and being on track for retirement.  

Interestingly, they scored statistically the same for the goal of creating wealth. This is likely due to both types of workers scoring low on this achieving this goal.

One goal that caught our attention was continued personal growth. Almost two-thirds (64%) of independent workers reported achieving this goal versus 54% of traditional workers.

Based on our interviews with independent workers, the need to continue to upskill and adapt to changing demand associated with independent work is likely why independents score higher in this area.

Of course, not all independent workers are successful at achieving their life goals.

The study found that about one-third of independent workers score poorly regarding life goal achievement. In most cases, this group reports not having the work/life flexibility, autonomy, and control that more successful independent workers have.

MBO Partners collaborated with future of work expert Connie Steele and her firm, Flywheel Associates, on this study. Flywheel Associates provided input, guidance, and survey questions from their annual State of Work and Career Success study.

Emergent Research (that's us) also collaborated on this study.

See the report for more information.  

The Lifestyle Employment Contract Versus Freelancing

Mercer's study, Rethinking what we need from work, found that "employees are more focused on securing their financial, physical, and emotional health and well-being than by achievement and climbing the ladder."

Because of this, they are proposing firms shift to a lifestyle contract to attract and retain talent (click on the Mercer report chart below to enlarge).

The new contract suggests 6 areas employers should focus on if they want to win the war for talent:

1. Step up efforts on retention
2. Align to shifting workforce needs
3. Focus on financial health
4. Reimagine well-being at work
5. Accelerate diversity, equity, and inclusion
6. Build a more flexible future

When you look under the hood at most of these areas, Mercer suggests employers offer greater work flexibility, autonomy, and control.  

These are, of course, key reasons workers choose to pursue independent work and freelancing.  

We've long viewed the choice between having a traditional job and freelancing as a competition.  

And most traditional jobs offer much less work flexibility, autonomy, and control than freelancing does. And we've long wondered why more firms don't provide at least some of the flexibility, autonomy, and control freelancing offers.  

And perhaps, they will.  

One of Mercer's focus areas, financial health, is where traditional employment has always had an advantage over independent work.

And because of this, it's a good area for employers to double down on in their competition with freelancing for talent (and their competition with other firms).  

Before the pandemic, we were seeing a trend of employers offering more flexibility, greater work/life balance, higher pay, and better overall financial support.

However, there is much talk - especially in the tech industry - about cutting back on these changes. And if we have a recession, there will be more talk.

Our hope is that more companies will adopt some form of the lifestyle employee contract.

Either way, we think the appeal of freelancing and independent work will be sufficient for their numbers to continue to grow.

Accounting Rules Favor the Use of Freelancers by Corporations

According to The Harvard Business Review's February magazine article How Financial Accounting Screws Up HR, accounting rules and practices mistakenly favor using nonemployee labor instead of employees.  

The main reason is the treatment of employees as a fixed cost. Key  quote: 

"...a number of rules have been prompting a major effort by companies to move work to nonemployees. One involves treating wages and salaries as fixed costs. Such costs are a big worry for investors because if business and revenue decline and those costs can't be cut, the profitability and value of the business collapse in a hurry ...

Why wages and salaries are ever considered fixed costs in the United States is a puzzle given that virtually all employment there is "at will," which allows companies to end it unilaterally for any business-related reason. 

The other accounting rules favoring the use of nonemployee labor the article points to are:

• Using per-employee statistics as key performance metrics: Using nonemployer labor reduces the number of employees, which improves per-employee metrics like sales per employee, profitability per employee, etc. 
• The use of nonemployee labor can increase a firm's reported gross margins: Direct labor costs are included in a firm's cost of goods sold. This reduces a firm's gross margin, a metric investors closely scrutinize. Nonemployee labor is much easier to categorize so it's not included in the gross margin calculation than employee labor costs are.
• It's generally harder to get approval to hire an employee than it is a contractor: This is not an accounting rule, but a common financial practice at most corporations.

Based on our corporate consulting work, our work with investors, and our experiences working at corporations, we agree that accounting rules and practices are tilted towards the use of nonemployee labor.

And many corporate decision-makers do not fully understand the impacts of these rules and practices on resource allocation and hiring decisions.

So shining a light on these issues is important.   

But even if the accounting rules and practices are changed - and we think they should - the use of freelancers and nonemployee labor by corporations will likely continue to grow.

The reason is simple.

The main trends driving the use of nonemployer labor - the need for greater business agility and flexibility, the challenges of hiring in-demand labor, the greater productivity and efficiency of nonemployee labor in some instances, and the desire by many skilled workers to be independent - significantly outweigh the accounting impacts.  

One-Third of U.S. Business Use independent Contractors

The U.S. Government Accountability Office (GAO) recently released Nonstandard and Contracted Work Arrangements, a study looking at nonstandard work arrangements by U.S. companies.

As the study chart below shows, 33% of firms responding to the 2020 Annual Business Survey reported they used contractors, subcontractors, independent contractors, or outside consultants.

These results are not surprising.

IRS data shows that there's been a long-term shift to contract labor by small businesses. And many studies show that a majority of big companies use contingent labor.

Echoing those studies, the GAO also sampled annual financial reports submitted by S&P 500 companies in 2021.

They found that 89% of the companies in their sample mentioned using contractors in their annual reports.

The shift to nonemployee labor by firms large and small has been going on for years. It's a trend we are forecasting to continue.

The Number of U.S. Independent Workers Continued to Surge in 2022

MBO Partners released the 2022 edition of their ongoing State of Independence study series. Emergent Research (that's us) works with MBO Partners on this study.

The key finding is that the number of independent workers (freelancers, gig workers, independent contractors, etc.) reached 64.6 million, up 26% over 2021's 51.1 million.

As the study chart below shows (click to enlarge), the number of U.S. independent workers is up 57% since before the pandemic. This is despite a pandemic-induced decline in 2021.

What is also quite noticeable in this chart is that the total number of independent workers grew relatively slowly between 2015 and 2019.

This raises the question, has the pandemic - and the related shift to remote work - resulted in a growth inflection point for independent work?

We believe the answer to that question is yes. And there are both supply and demand reasons why.

On the supply side, workers are seeking to take greater control of their destiny, exercise a sense of agency, and build strong connections between their work and personal purpose.

On all these fronts, working as an independent - either part or full-time - can be a path to empowerment and self-realization. And more Americans are choosing this path.

On the demand side, firms of all sizes are increasing their use of independent talent to access specialized skills and improve business flexibility and agility.

But while we think we've reached an inflection point, independent worker growth will likely not continue at the torrid pace of the past two years.

We're forecasting that the growth rate will slow to 5%-7% next year. This is still quite fast by labor market standards.

We'll be covering other key findings in the coming weeks.

See the study microsite for more information. And click here to download the 2022 MBO Partners State of Independence report.

Academic Study Suggests Self-Employment May Lead to Better Cardiac Health

Harvard Health Publishing's Can self-employment promote better cardiovascular health for women covers an academic study that found self-employed women have higher cardiac health and fitness levels than women with traditional jobs.

Key quote:

The study found that self-employed women reported 34% lower odds of obesity, 43% lower odds of high blood pressure, and 30% lower odds of diabetes than those working for a salary or wages.

The academic study - Exploring the relationship between self-employment and women's cardiovascular health - also points out prior studies that found a positive correlation between self-employment and improved cardiovascular health and general health.

The study suggests that the work flexibility associated with self-employment is the reason for better health outcomes. This is consistent with the findings from other studies.

One of the key findings from our ongoing, 12-year study of the independent workforce is that the vast majority of full-time independent workers consistently report that they believe they're happier and healthier because they work independently.

For example, in 2021, 87% reported they were happier, and 78% said they were healthier. This is consistent with prior years.

While our data shows independent workers perceive they're happier and healthier, a growing number of academic studies are showing their perceptions are correct.