There is growing debate in the market around the size and growth trajectory of the gig economy. Some prior research is being backtracked and some earlier projections are being tempered; all the while, research is emerging with new conclusions. There are some fundamental questions here. How should we define the gig economy? What are the different parts of the alternative talent economy? What data sets can, and should, we use to explore the demographics and economic impacts of the gig or alternative workforce? Perhaps more importantly, what current workplace and workforce supply and demand trends can provide insights on how to best guide organizations to prepare for the future?
Observation 1: What is the gig economy? Answers vary. But it’s growing.
Gigs have been around as long as struggling musicians have been trying to get into music venues. But since about 2014, the terms “gig work” and “gig economy” have assumed new meanings. These days, the gig economy is eponymous with the seemingly omnipresent Uber and Lyft drivers, but it is clearly so much more. There are multiple other models that contribute to a broader definition of alternative work arrangements that are active in the marketplace, muddying the definition and scope both within academic circles and pop culture. In our work, we have expanded the conversation to include a continuum of potential work arrangements, from traditional employment to crowdsourcing and everything in between. In the media narratives, gig economy refers to arrangements beyond work, such as emerging “income” arrangements (such as Airbnb and Etsy), and different types of sharing economy arrangements (such as Lime scooters and Zipcar). As these nascent markets continue to mature, we anticipate the definition, narrative, and data sources around “gig” work will continue to sharpen as we reach a threshold of segmentation that allows us to unpack these alternative work arrangements with additional clarity.
In this post, we will look at the gig economy that is driven by work; as such, we exclude the sharing economy and income/asset-driven options like Airbnb, Etsy, eBay, Lime, and Zipcar, among others.
Figure 1: Elements of alternative work arrangements and the intersections
Source: Deloitte Analysis. Note: Size of the box does not correspond to the size of the segment. Does not include students.
Figure 2: Overlaps in definitions across various research reports
Source: Deloitte Analysis.
Implication: Define your terms.
While the debate continues around how to define a “gig,” organizations should focus on the segments of the alternative work arrangement continuum that might impact the organization or that have potential benefits that can be leveraged. The best way to figure that out is to expand the view of types of alterative work arrangements and test all of them—being able to leverage the unleashed workforce means being agile across the spectrum. The nomenclature in the market will get more complicated before it gets simpler, especially with new terms (such as human cloud, on-demand economy, dependent contractors) being floated around to tame this wild, wild west marketplace. And, yes, you can get cowboys as gig workers.4
Observation 2: There are so many different estimates. Who is right? Everybody is right because they are asking slightly different questions.
The differences in definitions and methodologies of how to calculate who and what type of work lies within the scope of the gig economy can lead to wildly different results:
- 10.1% of the 2017 workforce was engaged in alternative work arrangements and 3.8% was engaged in contingent work arrangements. These measures apply only to individuals whose main work hours come from alternative or contingent work.5
- 27% of the U.S. working-age population identifies as an independent worker, either as their primary or supplemental income.6
- 35% of the US workforce is in supplemental, temporary, project, or contract-based work.7
- The on-demand economy is 34% of the workforce. Intuit includes people working on any on-demand platform (Uber, Lyft or Upwork style platforms).8
Figure 3: The vantage point issue
It is like the blind man and the elephant, trying to understand the trend from their vantage point and coming to different conclusions.
Source: Deloitte Analysis.
Implication: Accept that it’s real, and plan for it.
Despite the methodological differences and hair splitting, one thing is for sure: the gig economy is not going away anytime soon, and it would behoove organizations and individuals alike to begin preparing now for the shifts in workforce needs and demands.
Observation 3: Jobs are changing. Secular trends indicate shifts in employment constructs.
Macroeconomic trends around employment data, Millennial preferences, and marketplace participation show significant changes to how, where, and by whom (or what) work is done. As such, we need to rethink how we track and leverage data on employment so that our research keeps pace with our lived reality.
- Companies are struggling to find full-time workers: According to the Job Openings and Labor Turnover Survey done by BLS, there were 6.9 million job openings in the US as of November 2018.9
- Workers are looking for flexibility to manage their life style: 51% of workers picked a flexible schedule and 35% wanted to work from home as a non-monetary benefit.10
- The freelance workforce is growing faster than the total workforce; 8.1% compared to 2.6% of all employees.11
- Approximately 9% of the group surveyed reported alternative work incomes, with alternative workers representing between 8.1-10.8% of the sample in various years.12
- 74% of Millennials prefer contractual rather than full-time work, as compared to 57% of in Generation X and 43% of older Baby Boomers.13
- As cost of living rises, 16% of retirees plan to work on side hustles to support retirement income.14
Implication: Consider how your talent model should shift.
No matter your industry or sector, you are likely already being impacted by these trends. The key question is how to organize a talent model that benefits from these trends versus fighting against the tide. These trends mean that there is a real opportunity to shape and define the emerging arrangements to support both employer and employee goals. However, this necessitates a willingness to acknowledge and address these changes both from an organizational policy and organizational culture perspective.
Observation 4: Alternative work arrangement models are growing at different speeds. But they are growing.
Given these secular trends and the broadening definition of “gig” work, we anticipate that alternative work arrangements will continue to increase, both on the supply and the demand side. From a supply side, Millennials and Baby Boomers alike continue to leverage alternative work arrangements both as full-time employment, and as an employment supplement (a so-called “side hustle”). From a demand side, shifts in where and how work is done continue to drive the search for off-balance-sheet employees as organizations rethink their workforce needs and structures. These dual trends have uprooted the standard definition of work and forced us to rethink how we approach purely numbers-driven decisions. Instead, we continue to take a holistic view on the growing alternative models as the marketplace continues to evolve in response to both worker and employer wants and needs.
- On-demand workers
- On-demand platform workers will increase to 9.2M in 2021 from 3.2M in 2015.15
- While exact numbers are hard to come by, calculated estimates predict that there are about 1.3M Uber drivers in the U.S., up from 160K in 2014.16
- 56.7M Americans freelanced in 2018, up from 53M in 2015.17
- 28% of freelancers have a full-time job, up from 17% in 2014.18
- Crowdsourcing – Number of competitors (mostly designers, developers, and data scientists) on Topcoder rose from 500K in 2013 to more than 1.4M in 2018.19
- White collar gig economy – 47% of HR respondents reported they are looking to hire contractors to fill management and senior executive roles, including c-suite contractors.20
- Global remote workers are growing fast. Workers from economies with high education status and low local employment opportunities offer US employers new opportunities to hire cost-competitive workers remotely. The average freelance developer costs $70 in the US, $46 in India, and $43 in Ukraine. 80% of Upwork clients are in North America, whereas 80% of the freelancers are from outside of North America.21
Implication: One-size-fits-all has never been further from the truth. Prepare to flex-fit.
If you add some of these estimates it seems like everybody, including your pet dog22, has an alternative work arrangement. As you can see in Figure 1, many of these individuals operate across one or more segments of the alternative work continuum, based on their income and lifestyle needs. Your portfolio of alternative work arrangements will likely constitute workers from many of the segments above; planning for that complexity from the start will allow you to leverage this trend more effectively than forcing it to fit into existing employment constructs.
Observation 5: CHROs and business teams: We need new talent. But, can teams look the same?
With the prevalence of automation and technology there is a need for new skills and capabilities, many of which are in high demand and short supply. Until the number of qualified applicants with STEM and data fluency skills matches that of the market demand—and/or organizations’ learning and development programs are robust enough to upskill their current workforce—organizations will continue to source talent and capabilities off their balance sheet. This means tapping into the gig economy, contractors, the crowd, and freelancers. This matching process is facilitated by continually emerging platforms that help to align worker capabilities with available employment opportunities.
- In Deloitte’s 2018 Global Human Capital Trends survey, 50% of respondents reported a significant number of contractors in their workforce, 23% reported a significant number of freelancers, and 13% reported a much higher number of gig workers in their workforce. But, only 16% had an established set of policies for different types of models.23
- More HR executives are planning to use these models: 56% of organizations are leveraging labor automation and online talent platforms when addressing talent requirements for a new business project.24
Implication: Programs, policies, and procedures need to catch up.
While the supply side of this market is growing fast, the demand side (large enterprises) hasn’t kept pace with the appropriate understanding, sourcing mechanisms, or policies to leverage these alternative talent models. Creating processes for project managers to access alternative talent through structured and easy-to-use processes helps keep everybody happy and compliant. Companies that leverage these models will likely have a significant competitive advantage in the market by accessing the best talent. However, as these models accelerate within your company, pay close attention to culture,25 training, and inclusion of this new workforce so that they contribute their best to you and to your customers.
As a business or talent leader, six key questions you need to ask are:
- As my company starts using more of these workers, how do I triage which role/task/job goes to which model? What are the new roles that need to be created in my business and talent teams to drive utilization of these models?
- How do I access, curate, nurture, and support workers in the alternative talent models?
- How should I think about new approaches to rewards, incentives, and retention to make my company the destination for the best talent to work across the continuum, not just for full-time employees?
- Many people participating in the gig economy face financial instability due to the variable nature of income and due to the lack of benefits infrastructure like those that are available to employees. What is my company’s role in supporting this new talent pool? How does that help me stand out as the best employer?
- How do I create an internal culture of mobility and leverage it across the company so there are more gig/freelance-style opportunities within the company for my employees?
- Employees in my company could be doing gigs and freelancing as side hustles to support their income or for learning. How should compensation, training, and organizational culture flex to account for this new behavior?
We may never settle on one version of the truth about the whats and whos of the gig economy, but the numbers and observations we do have speak volumes. Are you listening? And more importantly, how will you respond?
1 Ravin Jesuthasan, “You may not be a disrupter, but you might find opportunities in the gig economy,” Willis Towers Watson, 2017
2 Gig Economy Data Hub, “BLS Contingent Worker Supplement,” 2019
3 JPMorgan Chase & Co. Institute, “The Online Platform Economy in 2018: Drivers, Workers, Sellers, and Lessors,” September 2018
4 See, for example, RanchWORK, https://www.ranchwork.com/jcategory/ranch-hand/.
5 Gig Economy Data Hub, “BLS Contingent Worker Supplement,” 2019
6 James Manyika, Susan Lund, Jacques Bughin, Kelsey Robinson, Jan Mishcke, and Deepa Mahajan, “Independent work: Choice, necessity, and the gig economy,” McKinsey Global Institute, October 2016
7 ,Freelancing in America,” Upwork and Freelancers Union, 2017
8 Patrick Gillespie, “Intuit: Gig economy is 34% of US workforce,” CNN, May 24, 2017
9 Job Openings and Labor Turnover Survey,” Bureau of Labor Statistics, January 8, 2019
10 State of the American Workplace,” Gallup, 2017
11 “Freelancing in America,” Upwork and Freelancers Union, 2017
12 Kelly Monahan, Jeff Schwartz, and Tiffany Schleeter, “Decoding millennials in the gig economy,” Deloitte Insights, May, 1, 2018
13 Charisse Jones, “More Millennials want freelance careers instead of working full-time,” USA Today, April 15, 2018
14 “Gig economy and the future of retirement,” Betterment, 2018
15 “Dispatches from the new economy: The on-demand economy worker study,” Intuit, 2017
16 Harry Campbell, “How many Uber drivers are there?,” Quora, April 18, 2018
17 “Freelancing in America,” Upwork and Freelancers Union, 2017
18 “Freelancing in America,” Upwork and Freelancers Union, 2017
19 “Topcoder Open brings world’s best programmers to Dallas for Global Software Development and Design Competition,” Nov 15, 2018
20 The White-Collar Gig Economy: On-Demand Workforce Trends According to Today’s Business Leaders,” Mavenlink, September 2017
21 “How much do freelance developers cost around the world?”, Codementor, July 7, 2017)
22 Olivia B. Waxman, “Finally, an app that lets you borrow a Corgi,” March 24, 2016, Time.com, http://time.com/4270505/app-dog-bark-borrow/.
23 “2018 Deloitte Global Human Capital Trends : The rise of the social enterprise,” Deloitte Insights, 2018
24 “The State of Contingent Workforce Management 2017-2018: The Convergence of Talent, Technology, and the Future of Work,” Ardent Partners, 2017
25 Sara Salinas, “Google’s ‘shadow workforce’ of contractors demands higher wages, equal benefits, in a letter to CEO Sundar Pichai,” December 5, 2018, CNBC, https://www.cnbc.com/2018/12/05/googles-shadow-workforce-demands-more-from-ceo-sundar-pichai.html.