Small Business Labs

The Surge in Full-Time Independent Workers

Between 2020 and 2023, the number of independent workers (freelancers, gig workers, independent contractors, solopreneurs, etc.) increased 91%, growing from 13.6 million in 2020 to 26 million in 2023.  

This is stunningly faster than the 2011-2019 growth rate, which was about 2% per year.  

This data comes from the 2023 MBO Partners State of Independence study series - the 13th year of this study.

And making this growth surge even more interesting, 2023 is the first year in the study that the number of full-time independents grew faster than the number of part-timers.

In 2023, the number of full-time independents increased by 20%, with part-timers rising by about 8%.  

There are several reasons for the step change in the growth of full-time independents: 

• Labor shortages and the need for skills are giving workers more leverage. Workers are seeking the greater levels of work/life balance associated with independent work.    
• Companies face skills and labor shortages and want to increase their talent flexibility and agility. These factors are leading to greater demand for full-time independent workers.
• Technology is encouraging and enabling the growth of independent workers, making it easier to start and operate successfully as an independent worker.

The combination of these results in more people becoming full-time independent workers. It also leads more workers with side gigs and other part-time independent work to become full-time independents.

Twenty-six million independent workers is roughly equivalent to about 16% of the U.S. workforce. And while the number of part-timers is still larger - 46.1 million in 2023 - these numbers mean working full-time as an independent is mainstream.

We work with MBO Partners on this study.  

The Pandemic Accelerated the Shift to Independent Work

As the chart below illustrates (click to enlarge), after a fall in 2020 due to business shutdowns, the number of independent workers (freelancers, solopreneurs, self-employed, gig workers, etc.) grew dramatically, increasing by 89% between 2020 - 2023.

This is roughly a 10x increase in the growth rate compared to its pre-pandemic trend line growth rate.  

The data comes from the 2023 MBO Partners State of Independence study, the 13th year this study has been conducted.  

But it's not just data from this study showing this shift.  The U.S. Census collects monthly data on new business applications (tax ID applications). 

Their data also shows a surge in new business applications, with most coming from what the Census calls "applications other than high-propensity".

These are applications that the Census thinks are unlikely to lead to businesses with employees - in other words, solopreneur applications (in blue in the chart below).      

Making this continued surge more interesting is that many trends initially accelerated by the pandemic have reverted to their prior trend lines.  

One example is ecommerce.  There was much discussion in 2020 and 2021 that the pandemic had accelerated ecommerce by 10 years or more.  

But as the data below shows, ecommerce has reverted to its pre-pandemic trend line.  So have things like dining out, travel, attendance at sporting events and others.  

We're forecasting continued growth in the number of independent workers over the next 5 years, but we expect the growth rate to slow.

The reasons are straightforward - the big one is that the independent workforce has grown so large that its growth rate naturally will slow.  Also, labor markets don't move as fast as they have over the last 3 years, and we expect to see some reversion to prior growth rates in the coming years.  

But it's clear the shift to independent work has been accelerated - and we believe this shift will continue.

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

Bain on The Rapidly Rising Number of Older Workers

Bain & Company is one of the Big 3 strategy consulting firms (along with McKinsey and BCG).

We follow all these firms because they do excellent research, and their work with leaders in both the private and public sectors means they have a lot of influence.

Bain's Better with Age: The Rising Importance of Older Workers covers the demographic reality that workforces worldwide are rapidly aging.

As the Bain chart below shows (click to enlarge), in the U.S., one-quarter of the workforce will be 55 or older by 2031.

Japan is even older, with almost 40% of its 2031 workforce 55 or older.

Bain's research found that the motivations and attitudes of workers change as they age. Key quote:

"Before age 60, the average worker in developed markets is primarily motivated by good compensation. Averages are often misleading, but not in this case. In nearly all developed markets, good compensation is the top priority across archetypes.

Around 60, there's a tipping point. Interesting work becomes the No. 1 job attribute, and both autonomy and flexibility significantly increase in importance."

Bain also found that older workers are more likely to be self-employed - something regular readers know from our past coverage of this topic. Key quote:

"The increasing desire for autonomy and flexibility at work is often expressed in efforts to control hours ... Managing the transition to fewer hours might come through working part-time, self-employment, or doing freelance work. Our research shows a very significant increase in these forms of employment among the 55-and-over age group, compared with those in midcareer."

Age discrimination also plays a role in the increased rates of self-employment as workers age.

Simply put, because of age discrimination, self-employment is often the best, or even only option, for many older workers.

Demographers like to say that "demographics is destiny".  

And at least in the case of self-employment, they're right - growing numbers of older workers means more self-employed workers.  

See our Baby Boomer section for more older workers.  And also see the New York Times recent article How a Vast Demographic Shift Will Reshape the World. 

Pew Research Finds Self-employed More Likely Than Other Worker to be Highly Satisfied With Their Jobs

The key quote from Pew Research's Self-employed people in the U.S. are more likely than other workers to be highly satisfied with their jobs is:

"Most self-employed workers (62%) say they are extremely or very satisfied with their job, compared with 51% of those who are not self-employed. They also express higher levels of enjoyment and fulfillment with their job."

As the Pew Chart below shows (click to enlarge), the self-employed also are more likely to find their job more enjoyable and fulfilling than other workers.

Regular readers know that almost all studies on the self-employed have found similar results.

But it's nice to get confirmation from Pew Research - they're considered one of the world's top research think tanks.  

See the Pew study for more details.  

Ho, Hum - Yet Another Strong Month for New Business Applications

May was yet another strong month for new business applications, with 436,048 new applications for a federal tax ID.  

As the U.S. Census chart below shows (click to enlarge), May's new business applications continued their 3-year run of being about 40% higher than pre-pandemic levels.  

This leads us to believe that the higher level of new business applications is the new normal.  

So while we'll continue to report on this data, we'll no longer use terms like "surge" or "huge" to describe the numbers as long as they continue in the 400,000 - 5000,000 per month range.

As with all our articles on this topic, it's important to point out that:

New business applications are applications for a federal tax ID. And only about 20% of those who apply for a federal tax I.D. start a business.

So no, and despite what you may read, 436,000 new businesses were not started in May.

But around 80,000 will likely be started over the next 1-2 years based on May's applications. By historical standards, this is still a big number.

May's numbers also continue the long-term shift to solopreneur applications, with about two-thirds coming from solopreneur applications (called applications other than high-propensity by the Census).  

This means most of the new businesses formed from May's applications will be freelance, gig economy, or other types of solopreneur businesses.  

Harvard Business Review on Personal Branding

Creating and maintaining a personal brand is important for everyone. But it's especially important for freelancers and independent workers - their brand is crucial to securing and keeping customers.  

Harvard Business Review's A New Approach to Building Your Personal Brand provides the best overview of the steps needed to create a personal brand we've seen.

It also nicely describes why you need one. Key quote:

For better or worse, in today's world everyone is a brand. Whether you're applying for a job, asking for a promotion, or writing a dating profile, your success will depend on getting others to recognize your value. So you need to get comfortable marketing yourself.

The article covers a seven-step process for personal branding. The steps are:

1. Define your purpose by exploring your mission, passion, and strengths, and thinking about whom you want to make a difference to and how.
2. Audit your personal brand equity by cataloging your credentials, doing a self-assessment, and researching how other people view you.
3. Construct your personal narrative by identifying memorable, resonant stories that will best convey your brand.
4. Embody your brand by paying attention to the message you're sending in every social interaction.
5. Communicate your brand story through speeches, social media, the press, and other channels.
6. Socialize your brand by getting influential people to share your stories.
7. Reevaluate and adjust your brand by doing an annual audit to find deficits to fix and strengths to build on.

The article goes into greater detail on how to accomplish each of the seven steps.  

We've used a similar approach since we started our business over two decades ago. For example, we started this blog in 2007 to help communicate and socialize our brand.  

And we completely agree with the article's conclusion and believe it's particularly true for small businesses and independent workers:

The personal branding process takes work. But we know from research and experience that it will allow you to better control your professional and personal image and thus the success and impact that you can have in the world.

Tupperware's Troubles

Tupperware, the iconic maker of food-storage goods, said it could go out of business.  

Founded by Earl Tupper in 1946, Tupperware was one of the first direct selling companies. Their sales channel innovation was independent sellers holding "Tupperware" parties, where primarily women hosts sold the product to their friends and family.  

The picture below (click to enlarge) is from the company's website.  It shows the title character from Amazon's popular series The Marvelous Mrs. Maisel hosting a Tupperware party (the show takes place in the 1950s).  

Nice Hats!

The direct selling industry is quite large. According to the latest statistics from The Direct Selling Association, 7.3 million Americans earn money as independent direct sellers.

Almost all direct sellers do it part-time (6.8 million), with most looking to direct selling as a flexible way to supplement their income.

But Tupperware has run into a couple of problems.

First, thanks to the gig economy, there are many more flexible, independent work options for people looking to supplement their income. This has resulted in fewer sellers choosing to work for Tupperware.  

Second, organizing parties and in-person selling is much harder due to today's time-challenged adults. Because of this, much of direct selling has moved online (and called social selling). 

But Tupperware has not effectively made the transition to online sales.

This is partly due to Tupperware being viewed as an old, stodgy brand by younger consumers.  This hurts their sales and their ability to attract younger sellers.  

The bottom line is Tupperware's sales are falling, their stock price is falling faster, and, adding to their troubles, they have a large amount of debt.

Despite Tupperware's troubles, the direct selling industry continues to do reasonably well overall. And we expect it to continue to attract millions of Americans looking for a flexible way to supplement their income.

Fiverr's Creator Economy Guide

Fiverr released a Creator Economy Guide, which is designed to help aspiring and existing content creators "handle the ups and downs of the creator economy."

To compile the report, Fiverr interviewed ten successful content creators and, based on these interviews, put together a top 10 list of tips for creator economy success.

The ten are:

1. Know the right time to start your own business.
2. Position yourself as a leader, not just a creator/influencer.
3. Find other team members who can help you.
4. Be prepared to handle the ups and downs of the creator economy.
5. Focus on your skills—let experts do the rest.
6. Don't just create for fans—create for yourself, too! 
7. Be prepared to scale your business.
8. Finding the best opportunities in the creator economy.
9. Learn to collaborate with other businesses.
10. A final word of advice.

Our favorites are the teaming tips (3,5, and 9). 

Our research shows that the creator economy is a team sport, and successful creators partner, subcontract, and hire others at much higher rates than most freelancers and solopreneurs. So we agree it's very important for creators to team up with others.

We also like 4 - Be prepared to handle the ups and downs of the creator economy - because there will be ups and downs.

The Fiverr guide provides an excellent set of qualitative research on what it takes to be successful in the creator economy. And while targeted at aspiring content creators, even experienced creators will find the advice useful. 

Why Freelancers Need to Experiment with ChatGPT (and other AIs)

The history of technical innovation is consistent.

Initially, new technologies cause both economic dislocations and new opportunities. But the longer-term net effects of the vast majority of technical innovations are positive due to the creation of new opportunities and jobs.

We think that ChatGPT, and other forms of AI, will follow the same path - at least for the next 5-10 years.   

In other words, AI will create economic winners and losers, but the net economic and job impacts will be positive.  

We've been experimenting with ChatGPT for months and found it improves our productivity, cuts our costs, and frees us to spend more time on value added activities.

Even better, after working with ChatGPT, we're not worried about AI replacing us anytime soon (by that we mean at least for the next 5 years or so). 

The reason is that our work is helping clients discern signals from noise.

And while ChatGPT is great at generating content (noise), it's not good at discerning signals - at least for the kind of work we do.

Like us, many other freelancers will benefit from ChatGPT and AI.  

But there will also be freelancers replaced by AI. 

Workers doing low to medium-skilled knowledge work, especially in content creation, will be at the most risk. AIs will provide the most significant productivity gains in these areas, reducing the demand for freelancers to do this type of work.

We think all freelancers and independent workers should be experimenting with ChatGPT and, if appropriate, other forms of AI. 

The objectives of these experiments are to understand the following:  

1. Can AI can automate some or all of your work?
2. If so, can you use AI to automate some of your work, freeing time to provide additional or higher-value services?  

If the answer to (1) is no, your business is unlikely to be impacted by AI.

If the answer to (1) is yes, and (2) is no, you are at risk of being replaced by AI. You need to figure out how to provide different services or higher-value services.

If the answers are yes to (1) and yes to (2), you have an opportunity to benefit from AI.

The good news is that ChatGPT is a very approachable technology. 

Getting started doesn't require specialized knowledge or training - although getting proficient takes time and practice.  

ChatGPT is a game-changing technology for many jobs and industries.

Freelancers need to understand this technology - and how it will impact their business.  

The End of Dream Jobs Means More independent Workers

Two work and job-related articles jumped out at us recently.

The first is Buzzfeed News' The Fantasy of the Dream Job is Gone covers the growing number of layoffs in tech and finance. Key quote:

Layoffs at some of the country's most prestigious companies are the latest sign that no one's job is ever safe.

The second is Fast Company's From the Great Resignation to the Great Refusal—here's what the 5 'Great Rs' mean for the future of work. Key quote:

We are no longer centered on where we work, but rather on where work fits in our lives, and there is no putting this genie back in the bottle.

Because we study why people choose to be independent workers and small business owners, we spend a lot of time on how workers compare traditional jobs with independent work.

We've found the teeter-totter is a good metaphor for how workers compare and choose between traditional jobs and independent work.  

At a high level, workers choosing between the two balance the security, predictable income, benefits, and career paths of traditional work versus the autonomy, control, and flexibility of working independently.

The recent tech and finance industry layoffs and the massive pandemic-related layoffs have made it clear that no job - and the predictable income and benefits that come with it - is completely secure.

Also, the pandemic accelerated existing trends toward people wanting more flexibility, autonomy, and control over their lives and work.

Both of these shifts make traditional jobs less attractive - tilting worker decisions towards independent work.  This is true even for "dream jobs." 

And this likely means more people will choose independent work, and the recent surge in independent workers will continue.