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Clik here to view.Yesterday on the Diane Rehm show on National Public Radio I heard a discussion of the labor shift toward engaging short-term, part-time, contract workers to meet business needs. The panel included representatives of the Economic Policy Institute,  Freelancer’s Union, and Elance , a company that connects independent contractors with employers.

A Personal Story about Contracting

I was one of the people who was unable to find another job after being displaced in the economic downturn. Rather than fruitlessly chasing “my next great opportunity”, I decided to take project and contract work as a business owner. I registered my DBA, created a website and business cards and began networking as Stand-Out Communication. I have progressively extended my web of connections and my functional expertise. Now that the economy seems to be improving, I am looking for a full-time position again, but this time I will maintain my thriving business on the side.

The Freelance / Contract Revolution

My story is typical. The shift to a “you’re on your own” employment model probably began before the beginning of the Great Recession but it accelerated after the economy tanked. The trend is showing no signs of reversal. If this is the new reality, we need to accommodate it if we are all to thrive.

This really is a revolution. It is difficult to foresee the scope or outcomes of a process from within, but reliable predictions are that the tendency toward an increasing number of contingent workers will continue. During the radio program this new reality was compared to the workforce shift toward an industrial economy in the 1930s or toward using craft workers in the 1860s. The percentage of people who freelance rather than being employed is currently somewhere between 20-33% according to the best estimates.

The Benefits of Freelance Work

For the worker, freelancing maximizes flexibility and independence. Many contract workers like the ability to select among short-term or part-time activities in order to augment other income or to accommodate competing priorities like care giving or health issues. Along with those benefits however, the worker generally works more to reach the same level of income and loses personal security and income.

In this arrangement, the employer is relieved of the responsibility for collecting payroll, unemployment and social security taxes or providing health insurance or paid time off. In addition, the company need not abide with the Fair Labor Standards Act, provide overtime pay, or furnish equipment or office space. Without these obligations there are significant labor costs for the enterprise. Why wouldn’t that be popular with businesses?

Why would any company continue to hire full time staff when freelancers will do the work with significant savings in labor costs? The big reason is that managing workers will be easier when they are in-house, your company becomes the employee’s priority, and staff members will better understand the needs and culture of the company. If cost is the determining factor, freelancers are preferred. If quality is more important, internal employees will do a better job when they are well-selected.

The New Workplace Reality

It seems obvious that, in most cases, the worker is short-changed because there is no safety net in a freelance economy. The Diane Rehm panel agreed that this radical, continuing shift in the workforce will continue. The trend toward filling workplace needs with contract workers is unlikely to end any time soon.

If this is the reality, what can workers do to prosper in the freelance economy? We need to find ways to meet our financial needs, manage our time, and minimize risks to our future. The goal is to earn a livable wage, provide value to our employers, and maximize autonomy and satisfaction. The system is still in flux and worker and employer expectations have yet to be met. We will all do better by being thoughtful going forward. The presentation on the Diane Rehm Show is a place to start.

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