Jul 01, 2016

The Number of Independent Workers Falls

Recent reports by industry experts and figures by government agencies reveal that the number of independent workers is starting to decline, as the labor market strengthens.

According to a recent report, “2016 State of Independence in America”, by MBO Partners, the total number of independent workers is expected to decline by 5 percent in 2016, as companies transition workers to permanent roles. This annual study estimates that 39.8 million people are working independently in 2016, compared with 42.1 million in 2015, thus representing the first annual decline in the number of independent workers since 2011 (when MBO started its survey series). 

Estimates Breakdowns, 2015 vs. 2016

Estimates Breakdowns, 2015 vs. 2016

Source: Spend Matters | MBO Partners

Despite this decline, a majority of the workers surveyed indicated that they plan to remain independent. They cited benefits such as increased earning power, control over their career, and greater flexibility. As per MBO Partners, the numbers in the report reflect cyclical economic workforces as opposed to a retreat from independent work. These economic forces include the willingness of companies to transition independent workers to permanent positions as the labor market strengthens, the retirements of Baby Boomers, and independent workers returning to the traditional workforce for a “tour of corporate duty.”

MBO Partners predicts that despite the fall this year, the independent workforce will continue to be strong due to several factors:

  1. The infrastructure supporting independent work continues to grow in breadth and sophistication, making independent work less risky and easier to manager.
  2. Millennials entering the workforce continue to use independent gig work to gain experience and build up resumes.
  3. Baby Boomers are working even after retirement, as they want to remain socially and professional engaged.
  4. Businesses across all industries are hiring more contingent workers.

The 2016 study shows that 13 percent of adult Americans who are currently not independent workers are considering a shift in the next few years. Over the next five years, MBO expects the number of full-time and part-time independent workers in the U.S. to grow by 16.4 percent.

Who are these Independent Workers?

The 16.9 million full-time independent workers (those who work at least 15 hours each week in independent work) represent all ages, professions, educational levels, and geographies. These workers have generated approximately 41.1 trillion of revenue for the American economy over the past year, accounting for roughly 6 percent of the U.S. GDP.

Currently, millennials and Baby Boomers make up over 70 percent of the total independent workforce. The demographics of the independent workforce, however, are constantly changing. 

Demographics of the Independent Workforce

Demographics of the Independent Workforce

Source: MBO Partners

Additionally, approximately 60 percent of independent workers have highly-desirable specialized skills that require certifications, special trainings or education; and 43 percent have a 4-year college degree or higher. The independent workforce is largely composed of service providers, with 83 percent providing services to their customers.

Of the independent workers included in the MBO Partners report, 47 percent say that they earned more money working on their own than they would in a traditional job. In 2016, 17.9 percent earned over $100,000 and more than 28 percent earned over $75,000. Average gross income generated from independent work, despite low inflation and overall wage stagnation, was $64,450.

“I’m still confident that the long term trend towards independent work is still in place. But it’s clear now we underestimated the extent of business cycle impacts on this sector.” ~Steve King, Partner at Emergent Research (Designers of the MBO Partners survey)