MBO Partners’ 8th Annual State of Independence Report: What’s In It For Contingent Workforce Managers?
MBO Partners has released its latest State of Independence in America report, which examines the size, trends, demographics and other information about the population of U.S. workers that, in effect, “work on their own” and earn income outside of traditional employment. The report, which was first published in 2011, provides a broad range of data and insights pertaining to this population that MBO estimates at nearly 42 million workers.
The population of such workers has been scoped in various ways in multiple reports over the past several years, causing confusion when estimates and survey results are compared. As scoped in the MBO report, this populations consists of people aged 21 years and over who have worked independently — full-time, part-time or sporadically in different work arrangements (e.g, contractors, freelancers, temps, on-call workers or micro-business owners). The population encompasses a broad set of labor categories (from car drivers to construction workers, from creative freelancers to independent consultants, and personal caregivers to goods sellers on Etsy).
While the scope of the surveyed population is extremely broad, the study does provide some breakdowns which are helpful to understand a bit about what is really happening beneath the surface. Moreover, the report provides a restrained and realistic assessment of what is happening — perhaps not so much the over-hyped “rise of a gig economy,” but rather a labor market that is evolving, becoming more complex and dynamic and presenting new, more efficient ways for businesses to tap into the now often scarce supply of labor.
The MBO report speaks for itself in many ways, and everyone will have their own interests and should have their own thorough read. Our angle here is to focus on and interpret findings that may be most relevant for contingent workforce buyers (most of whom are, to a greater or lesser extent, trying to get their arms around what the independent workforce means to them and their organizations beyond the hype in 2018).
Touring the Data
As noted above, the 2018 MBO report estimates the aggregate independent workforce accounts for 41.8 million workers, up from 39.8 million workers (2016 report) — a respectable 5%. While the report began tracking the full-time segment in 2011, it was not until 2014 and 2016, respectively, that the report tracked part-time and occasional independents.
- Full-time independents, 38% of the total independent population, were estimated at 16 million (2011) and 15.8 million (2018), with a peak of 17.8 million (2014/15). Full-time is defined as working more than 15 hours weekly and an average of more than 35 hours weekly
- Part-time Independent, 27% of the total independent population, were estimated at 12.1 million (2014), 12.4 million (2016) and 11.1 million (2018). Part-time is defined as working less than 15 hours per week
- Occasional Independents, 34% of the total independent population, were estimated at 10.5 million (2016) and 14.9 million (2018) — a rather spectacular increase of 34% (16% 2018/2017). Occasional is defined as working occasionally as independents and at least once per month
The growth in the population of now 14.9 million occasional independents stands out. The MBO report points out that this increase is consistent with the idea that more workers are entering into very flexible, self-determined work arrangements, often as a side gig or a moonlighting project that augment steady payroll employment (something that may be related to wage stagnation). So this is an interesting break out, which we’ll come back to later.
But the findings on full-time and part-time Independents could be more difficult to explain. The MBO report suggests that the decline in part-time Independents may be associated with the strong economy and the increasing uptake into full-time employment. This seems very plausible. But once again, not being able to get to a level of more granularity leaves many important questions open.
It is informative to look at the distribution of Independent workers different “industry/occupation” categories identified by the survey respondents. While 30% of the total fell into a catch-all “other” category, 70% fell into these specific categories:
- Construction (12%)
- Creative services (9%)
- Personal care and related services (9%)
- Education and training (8%)
- Retail/ecommerce (8%)
- Consulting and coaching (7%)
- Sales and marketing (7%)
- IT (5%)
- Healthcare (5%)
This breakdown gives us some insight into the distribution of white-collar/knowledge-work compared with blue collar Independents — an important distinction, since it may be argued that white-collar/knowledge-work independents are the most important for most organizations (they are specialized, high cost, needed only for short periods, often in short supply). Drawing from the breakdown above, creative, education/training, consulting, sales/marketing, IT and healthcare or 41% of Independents might be considered white collar/knowledge workers. If we were to adjust that up to 50% (to account for white-collar/knowledge-work Independents in the “other” category) then the total number Independents involved in white collar/knowledge work would amount to 21 million independent workers
Unfortunately, we don’t know how these 21 million Independents would be distributed across the full-time, part-time and occasional worker categories, something which provide a useful insight. But, nonetheless, 21 million is an eye-opening number.
Another potentially-related break-out is that of high-earning independents, defined as earning more than $100,000 annually. The MBO report estimates that of the more than 15 million full-time Independents, 3.3 million are high earners, a group that has consistently grown 65% since 2011. By contrast, full-time Independents, in total, actually declined over that same period. It is also noteworthy that this statistic only accounts for high earners in the full-time category. While it may be much less likely that part-time or occasional independents would earn $100,000 or more from their work over a year, independents in these categories may nonetheless be highly compensated for the work they provide.
In any case, we have over 20 million independents who appear to be skilled, white-collar/knowledge workers and, therefore, fairly well compensated. To what extent those Independents are full-time, part-time or occasional is unclear. We don’t know how their numbers and earnings are changing over time nor the extent to which workers migrate across categories. Beneath the hype, it is a complex picture — and that’s just how it is.
Challenging Contingent Workforce Managers
Perhaps the most important takeaway is not that the “gig economy” or the “future of work” have arrived to disrupt traditional labor markets. It is rather, that the labor market is becoming more complex, multi-threaded and dynamic. Sourcing and engaging human resources in this environment is an expanding, uncharted territory in which flexible independent workforce will be a significant component.
There is an enormous population of skilled, white-collar/knowledge worker Independents that are offering their services — in many cases, only sporadically. And whether or not this population is increasing or declining is not really that important, at least at this time. What is important is that the number is large (more than 20 million), and a significant percentage of the resources cannot be sourced and engaged by traditional means — nor should they be.
Organizations not only want but need to have more flexible kinds of work arrangements, faster and more efficient sourcing and onboarding, and shorter and more dynamic engagements. Achieving these aims requires building a new, “alternative” sourcing and engagement channel over and beyond the established channels for temporary staffing and contract services. Organizations that do not do this will not only be depriving themselves of access to a supply of critical, high-value human resources but will also be missing the boat on being able to apply resources in new and more efficient ways.
Exploring and settling uncharted territory is almost always a long, major undertaking. This is no exception. There are many obstacles, least of all the absence of an appropriate legal/regulatory framework and an affordable and reliable way for independents to gain access to healthcare. Fit-for-purpose processes and technology enablement (e.g., to source and engage independents that moonlight only now and then) will also be necessary. The former is definitely in the purview of and the responsibility of organizations, while the latter is already being pursued by a range of third-party solution providers.
What is most important at this time is to put a stake in the ground and start the process — a process that is not going to happen overnight by any means. Many organizations seem to be starting very small with capabilities to manage independent worker talent pools, starting with independents they have already worked with, alumni and so on. A next stage could be developing appropriate processes and focusing more on sourcing. In any case, it is very early days — but it is happening, albeit gradually.
To sum up: It is critical to understand labor markets are changing — really changing — in many significant ways, and they will continue to do so. It’s not about some sudden appearance of a gig economy, it’s about many profound changes already occurring in the labor market. While independent workforce has long been a large and important part of labor markets, it is likely to become a more significant component driven by organizations’ requirements for scarce, specialized talent, flexibility, speed and efficiency along with what appears to be the desire and need of some workers to work outside of traditional employment arrangements. While a large supply of skilled, flexible, independent knowledge workers is at the ready, alternative sourcing and engagement channels are at an early stage of development, but that development is gradually getting underway. At this point in time, the major question, for contingent workforce procurement practioners, is really not about the size, trends or characteristics (i.e., the state) of the independent workforce. It is more about the ability of organizations (particularly larger enterprises) to take advantage of that rich, largely underutilized pool of flexible resources and capabilities. Perhaps instead of talking so much about the future of work, we should be talking more about the future of contingent workforce sourcing.