Five ways freelancers contribute to the economy

We have witnessed profound changes in the organization of careers paths as well as employment relations in the last two decades. These major changes are often attributed to a paradigm shift from “bureaucratic” to the so-called “post-bureaucratic” or, in other words, “entrepreneurial” modes of career and work regulation. We know from statistics that fixed jobs are decreasing and more people start to take freelancing jobs and independent contracts.

In the last few decades, small or home businesses have been on the rise. A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors.

But you might ask yourself how freelancers and the gig economy are going to contribute to our societies? I believe there are at least five ways that freelancing and independent contracts stimulate the economic development:

Increasing participation of the labor force and hours worked. A study by the United States’ government demonstrates that there are 232 million individuals of working age over the United States and the EU-15 who work not as much as full time or are not active at all. No less than 100 million of them say they need to work more. Especially in Europe, where several nations have persevering work advertise troubles, there is a powerful urge among labor market participants to get more things done through being productive.

In a study of labor market by McKinsey, 80 percent of review respondents expressed they want to work more hours every week to earn more wage in the event that they had adaptable choices. Essentially, in a worldwide study directed by LinkedIn in 2015, 55 percent of part-timers and 31 percent of full-time employees said they might want to include hours for a proportionate increase of their income.

These studies suggest a desire to be more productive particularly among part-time workers in order to earn more. Freelancing indeed help to have more labor force participation.

Giving work to the unemployed. We know from research that unemployment can lead to major unhappiness among individuals. Nowadays, there are possibilities to survive with temporary in-between jobs and freelancing is definitely an important option.

Related: 3 Things you should consider before freelancing

For a few, independent contracts are not a favored decision—however it might be a life saver. At the point when people are pushed into unemployment, independent work can keep their heads above water while they scan for their next full-time employment opportunity. Having this sort of option is basic for many laborers who are in unsafe monetary conditions. Some research found a developing pattern of individuals joining online freelancing platforms to counterbalance temporary drops in their salaries.

Expanding returns on resources. A little yet developing way of independent contracts includes leasing resources. In principle, this ought to enhance returns on unused resources and capacities as underutilized resources are utilized—and online platforms  move forward this ability by including nitty gritty, real-time data.

For example, by mixing  property owners with voyagers, who need particular courtesies, and who have a reasonable spending plan as a top priority, online platforms, like Airbnb, VRBO, FlipKey, and HomeAway adapt resources that in some way or another would be unused, opening up a never used capacity of the economy.

Expanding work efficiency. It is likewise conceivable that a move to independent work could raise work efficiency, despite the fact that there are additionally some counter-balancing impacts. A potential enhancement in labor efficiency originates from two sources. First, a move to freelance work empowers individuals to have practical experience in doing what they specialize in and secondly, it raises their engagement. This can possibly bring them more benefits, both through directing them toward the right occupation, and higher expertise in what they do.

Despite the fact that the scholarly findings are mixed, there is increasing observational confirmation that workers who are  well-connected make more money than others in the time they are entering the gig economy.

Stimulating consumption. Digitization has empowered service delivery to customers that were once unimaginable to acquire—or that may not have even existed some time ago. Many individuals who once would have driven themselves to nearby destinations have changed their habits and will now order a ride with Uber or Lyft on their cell phones. As online platform marketplaces take advantage of these new markets, they may level up consumption in the economy as the price for Uber taxis and renting a room via Airbnb are way cheaper than their traditional rivals.

About pourya

I am an entrepreneurship postdoctoral research fellow at Tilburg University in the Netherlands. My vision is to fill the gap between entrepreneurship research and practice with this website. Research and practice are two separate islands when it comes particularly to entrepreneurship. There are hundreds of papers/articles written every month but we hardly see their contribution to real life entrepreneurship.

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