The gig economy has matured — when will the business world catch up?

The gig economy is still maturing, but it has been making waves over the past few years. As more people leave their day jobs to focus on freelance work, the gig economy is ripe for some growing pains.

More than 57 million people freelanced in some capacity in 2017, according to research by Upwork and the Freelancers Union. The freelance workforce has grown thrice as fast as the workforce as a whole since 2014. In fact, gig workers are expected to make up the majority of the workforce within the next decade.

When freelance work becomes the norm rather than the exception, how will businesses handle the gig economy’s transition into adulthood?

Evolving preferences at work

Last summer, we hosted an intern from Northwestern University. Not only did he work for us, but he also delivered for Postmates on the side to earn extra income. He’s a gig worker at the young age of 19, and his friends do the same sort of work to make a living. Perhaps as he gets older, his side jobs will evolve from delivery work to technology consulting, but he’s unlikely to lose his taste for the flexibility that freelancing provides.

New college graduates are increasingly dissatisfied with the returns on their degrees. According to research from Accenture, 51 percent of recent graduates feel underemployed — a significant increase from the 41 percent of graduates who felt that way 10 years ago.

These new grads are unhappy because companies do not offer the types of jobs they want to hold. Why should they go into the office from 8 to 5 when they could work from home, set their own hours, and make their own money? Big companies want millennial and Gen Z employees to fit their square selves into round holes, but the internet provides alternatives.

Why do freelancers do it? Maslow’s famous hierarchy of needs puts safety and security as the second most important factors — just above things like air, water, and food. Now that most people aren’t afraid of becoming lunch for wild bears, the type of security we crave is more financial than physical. But according to the same Upwork research, 87 percent of full-time freelancers are taking part in the gig economy for the independence. In fact, half of the respondents said “there was no amount of money” they’d definitely take for a traditional job.

The disparity between what workers want (independence) and what companies offer full-time employees (guaranteed steady income) is so great that freelancers would rather risk a basic need than deal with the alternative. These sacrifices don’t mean freelancers are happy without security, however. Millennial and Generation Z workers prioritize independence over predictable income, but most would prefer both.

The point? Freelancers want gig opportunities that provide some level of predictable income, but they also want the ability to turn down projects or pursue personal passions. For example, parents want the flexibility to take their kids to all-day doctor’s appointments and play rehearsals, and younger workers want the freedom to jet off to Iceland for a long weekend. They ultimately want to choose what they work on and when. This power dynamic, which leaves the final decision in the hands of the worker, is the key driver of the freelance economy.

Now that freelance workers have the final say, the dynamic between clients and providers is shifting. Workers have multiple projects for multiple companies moving at the same time. Accountants keep the books for multiple businesses, and content creators develop marketing materials for multiple clients.

These specialized freelancers will soon make up the bulk of the workforce. When that happens, the gig economy will be a full-fledged teenager — full of immense potential but faced with steep challenges.

Over time, the traditional workforce will be replaced with freelancers. (Source)

Operating in the new economy

More opportunities for freelancers in the gig economy means more workers will migrate over. This increased number of freelance workers will reduce the need for full-time employees. Over time, the traditional corporation will disappear, giving way to systems that allow companies to contract the skills they need rather than hire for them.

To survive this shift, companies must become more flexible. Some startups have the right idea, but larger, more bureaucratic operations will need to take a hard left to iterate on new ideas, change quickly, and pursue opportunities. And instead of a full-time team to help with that transformation, they will have a pool of skilled freelancers to slot in and out, testing new strategies and products on an as-needed basis.

As traditional companies and the gig economy feel out this relationship, the workforce will begin to resemble a marketplace more than a talent pool. People will have not only résumés and LinkedIn profiles, but also measurements of creativity, intelligence, and skill sets. Matchmaking algorithms will crop up to connect people to projects. Companies that use full-time workers for 90 percent of their workforce could see that number drop to 50 percent in favor of more contractors within 20 years.

The business world is on the cusp of major change. Between the rising role of artificial intelligence and automation, even high-paying jobs are becoming commoditized. Freelance workers are better positioned to keep earning money as the economy changes and evolves, with 65 percent of full-time freelancers working to develop new skills to ensure they remain relevant in the new marketplace — only 45 percent of workers who don’t predominantly freelance said they were taking similar steps.

Today’s freelance economy is learning to walk and talk, but as technology improves, those shaky first steps will become a confident stride. But how will businesses in the gig economy respond to these changes?

Some will mimic today’s career progression by providing learning opportunities for frequent contractors. Others will try to stand out from other companies by providing first-rate tools and support to freelance employees. Ratings will become common — as they are for Uber drivers and Upwork freelancers — to help companies and freelancers alike find ideal pairings.

However companies choose to respond, one thing remains clear: The gig economy will decide the future of work for everyone.

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DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.