There’s a debate underway involving the legal issues surrounding the rise of independent contractors. One recent article called the rise of the millions of independent contractors, working outside the labor laws, as, “The most significant legal trend in the American workforce—contributing directly to low pay, irregular hours, and job insecurity.”
Wow, really? How can we put the cart before the horse? The rise of the sharing economy and the increase in the number of independent contractors is not causing low pay, irregular hours and job insecurity. Freelance Nation is a response to Corporate America changing the pact it had with its workers. Our world has changed and our companies have not been able to provide stability, which has instigated another way of working.
I started my career in the age of paternalistic companies, when employers offered jobs for life and rewarded employees for their years of service with paydays, promotions, pensions, picnics and little gold pins. But as society and culture changed at the end of the 20th century, the role of companies also shifted. With increased global competition and the need for responsiveness, companies had to make trade-offs to thrive in this new world. One of the first trade-offs was giving up the notion of lifelong jobs. Truthfully, this was something they could no longer offer—while corporate jobs once offered security, corporations themselves ceased being stable. According to John Hagel III at Deloitte Center for the Edge, the average life expectancy of a company in the S&P 500 has dropped from 75 years (in 1937) to 15 years today!
Now, the typical member of Generation Y will have 10 jobs by the age of 38, and stay an average of 1.5 years with their employers. Millions of individuals will not work under the traditional terms of employment at all. I believe this will continue. In the future it will make more sense to work on a project-by-project basis, similar to how crews work on movies. The best teams are organized and consist of individuals who work together for a set period of time and then, upon completion of a project, go their separate ways. In many industries we will have the opportunity to have many different jobs, many different employers and, therefore, achieve many more personal freedoms.
The advantages of a more independent workforce are clear: lower overhead for a company, broader access to talent and greater elasticity in getting work done efficiently. Companies such as Uber, TaskRabbit and DoorDash are built on leveraging these benefits and are driving economic growth and creating opportunities. This year Uber will deliver hundreds of millions of rides and the company plans to create one million jobs in the process!
I saw the benefits firsthand when I was CEO of LiveOps, a cloud-based call center with an on-demand workforce. Instead of working as employees, LiveOps workers are free agents, which allows them to build their careers without sacrificing the other priorities in their lives. And there were advantages to our customers that came with the flexibility of having an elastic workforce. ProFlowers enlisted agents during high traffic times such as Mother’s Day or Valentine’s Day, but didn’t need to keep them during less busy times. American Idol Gives Back was able to drum up 10,000 agents in hours—something it only could have done with a contingent workforce.
But nothing is perfect. Let’s talk about the downsides, including some of the results of working outside the labor laws. It’s true that independent contractors have no guarantees for work and they are responsible for a lot of tasks, such as accounting and invoicing. Health insurance was once a major roadblock, but one that has been remedied by the Affordable Care Act. There are still other sacrifices; saving for retirement is one’s own responsibility and there’s no paid vacation days or sick days.
For companies, there’s the tricky issue of training a far-flung and changing workforce. This is your brand they are representing, even if they are not permanent employees. It’s a legitimate concern, but one that can be solved by making training part of the onboarding and certification process. It’s necessary to build mechanisms into the model to see how everyone is doing—much like Uber has its rating system. At LiveOps we built software that routed calls to our best performers so they got the best work. This awarded workers who did a great job and minimized the impact from people who were not doing a great job.
Enlightened companies see the world of work differently: There is a global economy consisting of suppliers of talent and buyers of talent. In many ways, it’s the eBay way. Just as eBay revolutionized the world of e-commerce, we can now tap this same idea to revolutionize the world of work. There are new ways to get work done, which eliminates the dependency on office buildings, commuting and set work hours. It’s a future that looks different, but also one that looks more promising.