Number of U.S. Freelancers Dropped in 2018, But Talent Pool Still Deep

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A recent report on the state of freelancing in the U.S. shows that about 4 million more people are freelancing than in 2014, with a steady increase each year — until now.

About 600,000 fewer workers were in the freelance pool in 2018, according to the Edelman Intelligence report, which was commissioned by Upwork, an online freelancer marketplace and enterprise solution company, and the Freelancers Union.

Five years ago, about 53 million Americans did freelance work, and the number climbed to 57.3 million last year before tapering off to 56.7 million this year, the report shows.

This year’s decline can be attributed to a solid economy creating more full-time jobs, as well as an understandable drop after a robust 2017, which the report shows had an influx of 2.3 million workers joining the freelancing pool.

Labor statistics show the unemployment rate dropping from 4.1% since the first of the year, into the summer when this survey was done and, most recently, falling to 3.7%. On a yearly basis, wages and salaries rose 3.1%, the biggest jump in 10 years, CNBC reported about third quarter Labor Department results that came out at the end of October. And the most recent labor figures on job openings showed 7 million available on the last day of September, up from 6.23 million a year earlier.

“The drop [in freelancers] is caused by the strong traditional job market,” said Steve King, a partner with Emergent Research, which was not part of the Upwork report. “It's pulling freelancers back to traditional jobs.

“This is particularly true for what we call reluctant freelancers. These are people who would prefer a traditional job, but are working as freelancers. With the unemployment rate below 4% and the number of open jobs at near record levels, reluctant freelancers can more easily get a traditional job. But even freelancers who like being freelancers are being pulled back to traditional employment as companies scramble for talent.”

Despite the dropoff, the pool of people in the contingent workforce is of major interest to job sites and managed services providers (MSPs).

The number of options for businesses to hire these workers and gauge their work outputs has expanded considerably, making the task of choosing the right kind of program or solution partner for a business all the more difficult, according to Andrew Karpie, Spend Matters’ research director of labor and services procurement. He covers these issues in his monthly Hot List for subscribers and news articles, like Upwork’s earnings report and a Q&A with the president of EverHive, a hybrid MSP.

The report, which was an online survey of 6,001 workers, also found that more freelancers are earning $75,000 a year or more. In 2018, 32% of freelancers made that or more, compared with 17% in 2014, the report says. (Another report said more high-skilled freelancers are making more than $100,000.)

King said he sees two exceptions to the strong job market cutting into the freelance pool: higher salaries for skilled workers and those workers with multiple sources of income.

“The number of higher-earning freelancers is growing,” he said. “This is because of the growing demand for people with specialized skills. This is leading to traditional workers with those skills to become freelancers. This is especially true for older workers looking for more work autonomy, flexibility and control.

“The other group is what Upwork calls diversified workers. These are freelancers with multiple sources of income. Their numbers are increasing because more people are cobbling together multiple jobs. They are doing this either for financial need or to pursue a hobby (think Etsy sellers).”

The study also found that technology drives the freelance market and that many freelancers wouldn’t take a full-time job.

It shows 64% of freelancers found work online, a 22-point increase since 2014.

The survey shows 51% of freelancers said no amount of money would cause them to take a traditional job, which indicates 49% would consider full-time work.

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