Freelancers are an important, but hidden, part of the small business population and one that sometimes is largely misunderstood.
Recent media coverage of the gig economy has created the perception that most freelancers are either driving for Uber or performing household errands through TaskRabbit. But these activities are actually a very small subset of self-employment, which covers a full range of skills and income levels.
While independent work is prevalent in the construction, cleaning, and transportation services, it is also widespread within certain types of specialized knowledge-intensive occupations. For instance, a psychotherapist today can join a dedicated digital platform that connects him/her with people seeking therapy. Requirements range from holding a phd degree to being professionally qualified.
What we know from the numbers
Data from the Labour Force Survey of Eurostat shows the biggest increase in self-employment in the last decade has been in professional, managerial, scientific and technical occupations. These are freelancers, some of the highest skilled self-employed groups and the ones who contributed to more than 9 billion euro in services trade to the GDP of the European Union in 2014.
"Freelancers (also called Independent Professionals) are the fastest growing segment of the European labor market and a key social and economic factor in all Member States of the European Union".
From 2004 to 2016, the EU28 freelancers’ population grew from 6.2 million to nearly 10 million, a 45% increase, whereas from 2000 to 2014 the growth was even higher: 82.1% (Eurostat, 2014).
United in diversity
Freelancers are heterogeneous, a very diverse group in a constantly evolving environment. They comprise many different types and work across all industries, from artists and web developers to social workers, accountants and opera singers. They include men and women and represent a diversity of ethnic and racial backgrounds. They live all over the country, not just in major cities.
The gig economy has accelerated the upward trend towards self-employment both for high and low skilled workers.
Recent research found that people are looking to find work on platforms to diversify their income stream, provide a backup in case they lose their main job, make money from a passion, learn a new skill and explore new career or business opportunities.
"Work that gives supplementary income has created a large number of “part-time” self-employed or moonlighters. However, they still represent a minority in the self-employed labour market".
Part-time self-employment is elusive, an area where official statistics are lacking and where European governments should do more to track developments.
What policymakers should do
Labor market policies developed for the industrial age often fail to apply to the world of independent work.
Governments need new metrics to track the number of hours worked rather than jobs created, as to gauge the strength of the economy.
"Policymakers need to obtain better data on the independent workforce through new and more regular surveys, with up-to-date categories and criteria".
One of the biggest gaps is that official labor market surveys collect data on primary occupations—so by definition, they ignore activities that generate supplemental income (part-time self-employment).
Official surveys also fail to track whether independent work is undertaken by choice or out of necessity—a critical piece of knowledge for understanding whether workers are being “pulled” or “pushed” into independence.
Definition, recognition and simplification come first
As a precondition to source better data on the freelance population, governments need to define freelancers as a unique subset of micro-enterprises for the purpose of the European SMEs definition and recognise them as economic agents in their own right.
They should formulate simplified policy with impact assessments adapted to self-employment (thresholds and exemptions as applicable) and the right incentives for freelancers to become and remain self-employed and for companies to engage them.
They also need to foster a policy environment that promotes a variety of contractual arrangements as a way to increase labour market participation and inclusion.
"Despite their growing numbers, there’s very little discussion of freelancers’ interests in public policy. This is a major oversight of one of the biggest driving force of the EU labour market and economy".
As elections are looming in a number of European countries, it is also a lost opportunity for political establishments to gather support of a large and engaged constituency, to whom elected officials should pay more attention.
Image Credit: Flick User: Gene Han – Numbers. (CC BY-NC 2.0)