Small Business Labs

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.

Deloitte on the Canadian Gig Economy

Deloitte's The Gig Economy is Here to Stay provides an overview of the Canadian gig economy.  

The chart below (click to enlarge) contains the key data: about one in three Canadian workers use the gig economy to generate income.

This is similar to the workforce share of gig economy workers in other developed economies.  

Deloitte provides four broad trends driving participation in the gig economy. These are:

1. Older workers are delaying their retirement.
2. Younger workers (Gen Z and Millennials) are seeking more flexible work arrangements.
3. Worker perceptions around long-term employment are changing.
4. More people are looking to supplement their income with alternative work.

We certainly agree that these trends are helping to drive the growth of independent work and the gig economy.

See Deloitte's report for more information on the Canadian gig economy.

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.

Another Strong Month for New Business Applications

The October Business Formation Statistics were released by the U.S. Census last week.

And as the Census chart below shows (click to enlarge), there were 432,934 new business tax I.D. applications in October.  

Business applications took off in Q3 of 2020, and in 2022 they've run at a rate about 43% higher than pre-pandemic.

Retail trade, which includes ecommerce firms, and professional services, continue to be the top two applications categories.

Also continuing is the shift to solopreneur business applications instead of employer business applications. 

We're going repeat ourselves and point out that new business applications ARE NOT the same as new business startups.

Research by the U.S. Census and similar research by our firm indicates that about 18% - 22% of applications result in new businesses. So if you read that 432,000 small businesses were started in October, it's not correct.  

But by historical standards, 20% of 423,000 is still a lot of new businesses.  

What the Department of Labor's Worker Classification Guidance Means for Independent Work

Last month the  Department of Labor (DOL) announced it's releasing new guidance to help determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.

The announcement got a lot of press coverage, most of it saying the new guidelines will make it much harder for companies to classify workers as independent contractors. Examples include:

• Wall Street Journal's Biden Rule Would Add More Gig Workers to Company Payrolls
• New York Times's Biden Proposal Could Lead to Employee Status for Gig Workers
• NPR's Labor Department proposal could change gig worker and company rules

But - and this is a big but - the new guidance basically returns the guidance to where it was under the Obama administration. Key quote from the Wall Street Journal article on the proposed guidance:

"It would replace a Trump-era rule—completed just days before the Biden administration took office—and return to an approach favored by the Obama administration."

In other words, the guidance is reverting back to what it was between 2008-2019. 

In case you weren't following independent work and the gig economy between 2008 - 2019, it grew dramatically. So going back to an approach favored by the Obama administration is unlikely to have a major impact on independent workers. 

Bloomberg's Uber, Lyft Shares Fall on Possible Changes to How Gig Workers Are Classified also points out:

"Companies had anticipated the Biden administration would reinstate the Obama-era guidance on the classification, and the proposal didn't come as a surprise, according to Tom White, an analyst at DA Davidson & Co. "It has no immediate changes to anything related to how companies operate their business," White said. "It's a proposal that in some ways can be viewed more like a conversation starter."

So don't expect significant near term changes in the gig economy based on the new guidance.

But having said that, all the press saying it will have an negative impact on the gig economy, will have an impact.  And that impact will likely be companies - and their lawyers - choosing to be more conservative about the use of nonemployee labor.

But this will be a relatively minor impact.    

The legal issues around worker classification, the DOL's role, and why the new rules aren't going to have a major impact are too long and complicated for this blog post. So we're not going to cover them here.

For those interested in more depth on this topic, we recommend the Independent Contractor, Misclassification, and Compliance blog. 

Their article THE LABOR DEPARTMENT'S INDEPENDENT CONTRACTOR RULE HAS LITTLE IF NO LEGAL IMPACT BUT IS LIKELY TO CAUSE ANXIETY FOR MANY STAKEHOLDERS covers this topic in-depth.

The article's title, in our opinion, also nicely sums up the impact of the new guidance.

Independent Influencers Driving the Growth of Social Commerce

Social commerce happens when consumers - and business buyers - discover and purchase products through social media and content creation platforms.  

And as McKinsey explains in Social commerce: The future of how consumers interact with brands, it's taking off in the U.S. 

As their chart below shows (click to enlarge), social commerce is expected to grow from $45.7 billion this year to $79.6 billion in 2025.

Social commerce is being driven by social media and content creation platforms such as TikTok, Instagram, Pinterest and others.  

These platforms have added shopping features that allow in-app shopping, including purchases.  

And independent influencers and content creators leverage these platforms to reach and monetize their audiences.  

McKinsey covers two types of independent influencers that are part of the social commerce sales and marketing mix:

1. Key Opinion Leaders have large numbers of followers and fans and are either celebrities and/or experts in their field. Highly professional, they are also skilled marketers that can sell millions of dollars of products in minutes and make new products trendy overnight. Think Kim Kardashian or Mr. Beast. 
2. Microinfluencers drive social commerce through organic, word-of-mouth recommendations to their networks. Many receive commissions or are paid directly by the brands. But some get free products or early access to new products.  

We first covered social commerce in 2014. Back then, social ecommerce companies, such as Stella & Dot, recruited independent workers to be brand ambassadors and commission salespeople.

In most cases, the business models were similar to multi-level marketing companies such as Tupperware. And these independent salespeople mainly marketed to their friends and families.  

But thanks to the rise of the creator economy, many consumer companies - and a growing number of B2B firms - have influencer programs designed to incent independent influencers to help sell their goods and services.

These programs also allow independent influencers to extend their reach well beyond friends and family. which means they can build larger and more sustainable businesses.  

Walmart, for example, has created the Walmart Creator Program. Key quote from the program's landing page:

Walmart is where you shop to save. Now, it's where you create to earn. Walmart Creator is a platform designed to help you monetize your content, grow your business as a creator, and keep you inspired every step of the way.

Selling merchandise (referred to as "merch" in the creator economy) has become one of the most popular creator economy income streams. And its popularity - both with creators and consumers - will likely continue to grow.