BY STEPHANE KASRIEL
In some ways, 2015 was the year of the gig economy, with the scale and diversity
of the freelance workforce not just expanding, but attracting more mainstream
notice as well. By our own recent estimates here at Upwork, some 54 million Americans are now freelancers.
Still, that's just the most
noticeable trend among several that will reshape the nature of work in the next
five years. In fact, shifts in technology, connectivity, and the expectations
of both employers and employees are on track to bring about bigger changes than
the freelance economy can on its own. Here
are four.
The 20th century saw big, cosmopolitan
cities boom. The best jobs and top talent were concentrated in a few
"first-tier" urban centers like San Francisco, New York, London,
Tokyo, Los Angeles, and Paris. If you wanted a job, you had to move to one of
those places.
That's already changing. The major urban
hubs have largely exhausted their stores of opportunity. The cost of living is
now outpacing salaries in many of those places. In Los Angeles, rents are rising twice
as fast as inflation; in
San Francisco earlier this year, rents grew a massive
15%. As a result, residents' purchasing
power is shrinking.
I recently heard about a case in East
Menlo Park—one of the few low-income neighborhoods remaining in Silicon
Valley—where the owners were renting 12 bunk beds in a broken-down house for
$1,000 per month apiece. There’s just so much demand that absurd rates like
this are now commonplace.
This is one reason that the fastest-growing cities
of the past 10 years
have included such "second-tier" places as Houston, Austin, Raleigh,
Seattle, and Denver. It’s just cheaper to live and do business there.
Meanwhile, technology is
making it far easier for people to live in places other than the largest hubs
and still have access to jobs they otherwise wouldn't. Dropbox, Google
Hangouts, Skype, and other key tools in the remote worker toolkit make it
possible to be productive from just about anywhere, no matter where your
employer or clients are based.
This is especially true for
freelancers. In a recent study co-sponsored by my company
Upwork and the Freelancers Union, one-third of freelancers say they were able
to move as a result of the flexibility freelancing offered them.
Michelle Decker lives in
Atlanta and has been freelancing since 2011. She and her husband are both
working at home, so they have more time to raise their family—without having to
spend time commuting or paying for day care—and says she's making more than she
would in a local job. They dream of moving to Europe and living in an RV with
their children as "digital nomads," a lifestyle choice that would've
been unthinkable a decade ago.
Many businesses are becoming
more flexible, too. It's in no one's interest to have a substantial part of the
workforce spend two hours each day navigating traffic when there are simple,
easy-to-use alternatives that in many cases work better.
It's getting ever more
apparent that companies that take a hard line on working in the office, like Yahoo did in 2013, risk losing the most
talented workers. A recent study showed that 70% of employees would switch jobs if it gave them more
flexibility.
Differentiated labor is a basic building
block of complex societies and has been around far longer than the Industrial
Revolution that accelerated it. But technological change is ensuring that ever
greater specialization continues into the 21st century. Particularly in
technical fields like software engineering, security, hardware design, and
product management, the skills required are simply too numerous for any one
person to master.
If the need for greater
specialized expertise is growing, it's at least partly because the demand for
those skills is changing more rapidly than ever. But paradoxically, we aren't
becoming ever smaller widgets; no one is a "specialist for life" in
any one thing any longer. You always have to be ready to switch from Java to
Objective C, from PHP to Ruby, from statistical analysis to big data, from
media relations to social media management.
The half-life of a skill is
shrinking, which points to the growing need for continuous education and
re-education. Rather than earning one big degree then going to look for a
lifelong job at a single corporation, most smart workers will now follow a
repeatable cycle: learn, work, learn, work.
The online-learning company Udacity offers what it's termed
"nanodegrees."Graduates then follow those degrees with
"nanojobs," where they work for a year or two, cementing what they
learned and picking up practical skills—until it’s time to move on and learn
something new.
That means the emphasis on employee retention might be at least
somewhat misplaced. More and more, companies need to adapt to the fact that
team members aren't going to be with them for a long time, and professionals
need to adapt to the fact that companies aren’t going to need them for a long
time.
My dad worked for the same
company for 40 years. I’ve never worked for a company for more than five or
six. Today, the average time that workers stay with one employer is 4.6 years, according to the Bureau of Labor
Statistics. Actually, that average is probably misleading, because some workers
stay with one employee for many years, while the ones whose skills are in
relatively higher demand stay much less than four years.
More certain is this: While
job-hopping still carries some stigma, it's fast becomingless of a disadvantage in the workforce.
People are going to be more selective
about the jobs they take, not based merely on compensation, but on how those
positions fit with their values, lifestyles, and professional development
goals.
Why? Let's look at the trends. In the
past few years, corporate profits have surged to record
highs, but wages are at their lowest level in 65 years. Labor productivity has leveled off in the
U.S. over the past decade, and even though the recovery from the last financial
crisis has picked up, economic growth overall has slowed. In the 1970s, global
GDP growth was in the 6% to 8% range. Now it’s between 2% and 4% annually.
As a result, professional
growth for individuals working within established companies has also been flat;
their salaries aren’t growing as much, and they aren’t getting as many
promotions. So it's no wonder that people are starting to look for other
opportunities. And when economic payoffs are less than desirable, they start
optimizing around other factors, such as how much they can learn, whether they
have better work-life balance, or whether they can live somewhere more pleasant
for less.
These seem like small shifts
in priorities, but they've been in the works for decades, and their potential
to alter the profile of the workforce and the very nature of work is enormous.
Ultimately, companies will need to get used to the idea that professional
growth means more than simply growth in income—and that job seekers who are
more likely to weigh a greater range of factors will be choosier overall.
The opportunities for entrepreneurship
have steadily become better distributed around the country. But there's also a
growing segment of people who are turning into entrepreneurs in a different
sense—without having a big idea or creating a
product. Rather than founding a startup, they're simply working independently
as freelancers or by teaming up with one another.
You may not see this as a form of
entrepreneurship, but as the freelance economy expands, that's precisely what
it will come to resemble more and more. When they start out, some freelancers
increase their income simply by working more hours. But once they’ve quit their
day job and are dedicating 30 or 40 hours a week to their business, there are
two ways to start making more money: either by becoming more specialized so
they can charge higher rates, or by engaging other freelancers, freeing them up
to tackle bigger, higher-level projects themselves. We’ll see more freelancers
cultivating specialties and forming teams that let them earn bigger revenues
than ever before.
Or they'll take advantage of
those knowledge networks and launch startups of their own. In the 20th century,
the economist Ronald Coase explained how large firms grew
ever bigger because the transaction cost of hiring people for short-term jobs
was too high; it was simply more efficient to continue growing the size of
companies and performing work in-house. That trend is reversing.
It can actually be more
efficient now to get work done with ad-hoc teams. In fact, McKinsey Global
Institute recently estimated that this shift could add $2.7 trillion to global GDP by 2025—a
shift that creates a huge opportunity for entrepreneurial freelancers.
Stephane Kasriel is the chief executive
of Upwork, where he built and led a distributed team of more than 300 engineers
located around the world as SVP of engineering before becoming CEO. Stephane
holds an MBA from INSEAD, an MSc in computer science from Stanford, and a BS
from École Polytechnique in France.
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