Who Is the Freelance Economy Hurting?

These days, it’s all about the freelance economy—or what
many experts envision as the new economic normal. As the economy makes its bland recovery,
flexible (no-benefits and low-cost) freelance (a.k.a. “shared,” a.ka.
“contingency”) work is all the rage.

But who benefits from this supposed freelance boom? This
growth of contract employees, such as the ride-sharing and taxi-obliterating Uber,
along with its competitor and policy partner-in-sector Lyft, has already
sparked some good old-fashioned turf wars over innovation. And while the
fever-pitched combat between traditional taxis and ride-share services might
seem like just another nose-breaking scrap between rivals in a market space,
there’s even more to it than that. The outcome promises to radically and
forever reshape what it means to be a worker.

The Freelancers Union excitedly sneezed out its “National Survey
of the New Workforce” last September, boasting about the 53 million workers
disrupting the typical economic model. Gone are the days when like Ward Cleaver
strolls through the front door after a 9-to-5 white collar grind. First add June
to that equation—she’s working, too, while the Beav and Wally are left
latch-keyed to their own smartphone-fueled devices because their parents’
freelance work comes without the benefit of regular hours. The generational impact of the “freelance
revolution” doesn’t stop at the nuclear family—imagine Millennials hunched over
laptops in the local Starbucks or overwhelmed Gen-X’ing parents hustling for
both paycheck and flexibility.

Let the numbers tell it, and it’s all good—advantage
innovators. Popular freelance economy
pioneers like Uber enjoy
eye-popping valuations of $40 billion or more, thereby validating an emerging
freelance ideology. Freelancers,
according to the Freelance Union, are also contributing more than $700 billion
of productivity to our $14 trillion economy, which is solid and respectable. As the economy rapidly reconfigures and
technology pushes us further into automation, the segment of the workforce
that’s contracted will also rise from today’s 34 percent to an astonishing 50
percent by
2020. Hence, the trend shows no sign of reversing, but rather more signs of
metastasizing. It’s reasonable to assume that, in our collective lifetimes,
freelance or contractual work will be the fundamental core of our global labor
market. There will be way more
freelancers than full-time permanents. A world of full-timers and full-time-nots
looms just over the horizon—and for some workers, it’s already here.

Not only does that make the Affordable Care Act convenient
in terms of its timing, but also rather prescient. Permanent non-freelance jobs
won’t be an economic staple in 10 years. Instead, they’ll be something of a highly-prized
and rather rare privilege.

From a white-collar perspective, freelancing seems like an
efficient fit. Philosophically, it
appears to thrive off the notion of high-octane entrepreneurship, an attractive
social construct where we control our own agency.

But the freelance economy is troubling given the unbending
and unforgiving realities of today’s economic environment. Among traditionally
underserved populations, who face income inequality, stagnant wages, and
underemployment, disrupting tech enthusiasts prompt more anxious questions than
giddy answers. A ballooning freelance workforce means a permanent state of non-permanent
wages, adding more uncertainty to an economic environment saddled by stuck
income. As Pew found recently, “the
average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in
January 1973 has the same purchasing power as $22.41 would today.” While poverty
is at 15 percent, economic inequality in the United States is obscene, a place
where the top
20 percent own 84 percent of … well … everything.

Anecdotally and statistically, we see persistent public anxiety about the economy.
A POLITICO
poll discovered 64 percent of respondents feeling as if the country
was “out of control” and only 36 percent believing it’s in a “good position to
meet its economic and national security challenges.” When a subsequent POLITICO
story highlighting economic concerns as a central issue in the
upcoming elections dropped, it was peppered with quotes from average voters
expressing “raw” concerns about matters such as “outsourcing” and “job growth.”

The question of who
benefits becomes more pressing with each passing year the freelance economy
grows. Interestingly enough, the decline
of purchasing power since 1973 seems to mirror the upward trend of the
“contingent” economy during that same period. And, along with the recession, it
also means—eventually—that large segments of the population are getting
left behind or will remain behind. Already, as Prospect’s Virginia Durivage pointed out
some time ago, “most contingent workers are women and minorities clustered in
low-wage jobs with no benefits or opportunities for advancement.”

Official unemployment rates released each month by the
Bureau of Labor Statistics make recovery feel as fresh as a detergent
commercial, but these reports slickly ignore other indicators such as
underemployment or diminished labor force participation rates that actually
show joblessness is much higher
than we think. One factor, perhaps, could be a rising freelance mindset as
fed-up workers tap out of traditional models in a bid to make it on their
own.

Another obvious factor is a society still largely
discriminating on the basis of race and perceived status, a condition for which
the freelance economy may have no solution – especially if, as USA Today showed in a recent analysis,
“top universities turn out black and Hispanic computer science and computer
engineering graduates at twice the rate that leading technology companies hire
them.” Would embracing a dominant freelance economy make that situation worse?
It’s unclear at the moment. What we can see, for example, is that freelance
pioneers like Uber are disrupting taxi industries largely populated by drivers
of color: while 32 percent of tax drivers are black, less than 20 percent of
Uber drivers are the same compared to more than 40 percent who are white. Asian
and Latino Uber driver rates are, however, nearly identical to their
proportions as taxi drivers, even while still low (17 percent each,
respectively) when compared to white Uber drivers.

That
probably doesn’t hint at any pattern of hiring discrimination on that part of
Uber when it clears and selects contracted drivers. But, what is
clear is that companies reliant on outsourcing as their primary operational
model have more incentive to circumvent (or altogether neglect) worker rights
than when industries were more reliant on permanent positions.