Understand the global independent contractor and small business landscape
Hello, and thank you for your request for insights into the global independent contractor and small/midsize business landscape, including both the quantitative landscape and emotional drivers. The short version is that while data on the small/midsize business landscape was limited, the top ten countries globally for independent contracting are India, United States, Philippines, Ukraine, Pakistan, Russia, Bangladesh, Canada, United Kingdom, and China, although the majority of both quantitative and qualitative data on freelance employment is available for the United States and EU-15 countries. In the United States and European Union, approximately 20% to 30% of the overall civilian workforce are considered independent contractors, although definitions for this term vary considerably and are affected by factors such as the voluntary nature of participation, whether employment is full-time or part-time, and the use of freelance wages as primary or supplemental sources of income. Finally, quantitative trends motivating increased participation in the independent contracting labor market include unemployment rates, unavailability of traditional jobs, dissatisfaction with traditional employment arrangements, increased flexibility of scheduling and income, and technological advances. Below you will find a deep dive of our findings.
In order to gain a broad overview of the industry affecting independent contractors and small/midsize businesses, my colleagues and I reviewed industry reports, regulatory findings, and trusted media sites, with a special emphasis on research papers, when available. Per your request, we did not limit the scope of our research to the United States, and we pursued information on the overall global independent contracting industry. We identified the top ten countries for independent contracting and qualitative employment trends in each nation. Unfortunately, the bulk of publicly available data describes employment trends in the United States and EU-15, which is defined as Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
In evaluating small/midsize businesses, we attempted to focus our research on companies employing 30 or fewer people, per your request. However, our findings revealed that "small/midsize businesses" and "small and medium-size enterprises" are often inconsistently or inadequately defined on a global scale. For example, in the European Union, the designations of "small" and "medium" may apply to companies with up to 250 employees, while the United States generally applies this classification to businesses with less than 500 employees. These classifications did not seem useful for your purposes, and so we have elected to omit these findings from this brief. Due to our inability to identify a consistent global classification system for small/midsize businesses, we have focused on the independent contracting industry, although the intersection of freelance work and self-employment is addressed in some detail below.
Classification of workers
Our preliminary research revealed that there is an incredibly diverse array of terms utilized when describing workers who are classified as self-employed, and those engaging in alternative work schedules outside the traditional "9-to-5" employment schedule. Relevant terms include "freelancers," "independent workers," "free agents," "temporary workers," "self-employed workers," "fissured workers" who are actually subcontractors, small to medium-sized self-employed business owners, small/midsize business owners, and small/medium enterprises. Additionally, the term "independent contractor" may also apply to the very broad categories of employees earning income through formal relationships with temporary agencies, as well as on-call workers and "contingent workers."
These terms are further complicated by the classification of an employee's participation in alternative working arrangements as voluntary or involuntary. For example, labor statistics often classify "free agents" as workers who deliberately choose to contract their labor. In the United States and European Union, it is estimated that 30% of independent contractors are "free agents." On the other hand, "casual earners" are defined as independent contractors who supplement earnings from a traditional workplace with freelance employment, and there are currently 64 million people in the United States and European Union who self-identify as "casual earners." Among "casual earners" who do not meet their full financial needs from traditional employment, 16% are classified as "financially strapped," and they only participate in the freelance economy by necessity. There are approximately 26 million people in this category in the United States and European Union. Finally, there is a further category of "reluctants," defined as independent contractors who only participate in the freelance market because traditional jobs are unavailable. In the United States and European Union, this constitutes 23 million freelancers, for a total of 14% of the total independent contracting industry.
Among self-employed persons in small/midsize businesses and small/medium enterprises, discerning both quantitative and qualitative data about workers' intentions are similarly complex; these workers may have desired and planned their entry into the self-employment market, or they may have similarly been influenced by the unavailability or inadequacy of earnings from traditional jobs.
A more general model for the independent contractor and small/midsize business industry classifies workers by four categories: primary independent workers, supplemental independent workers, individuals not earning income, and traditional workers. Both individual workers and self-employed small/midsize business owners can be evaluated within the same model, as their status as a freelance worker or a business owner is irrelevant in classifying their earnings are primary or supplemental. Unfortunately, despite exhaustively searching, my colleagues and I were only able to identify statistics for these categories in the United States, although global information on the overall industry will be discussed in more detail below.
In the United States in 2016, 30% of the population, or roughly 76 million people, were identified as earning no income, while 43% of employees earned income from traditional workplaces, for a total of 107 million workers. Approximately 13% of freelancers were classified as primary independent workers (or 32 million people), and 14% of freelancers were identified as supplementing their traditional wages with independent work, for a total of 36 million workers. It is estimated that by 2020, there will be 60 million American participants in the independent contracting industry, either as freelancers or self-employed business owners.
GLOBAL QUANTITATIVE INDUSTRY DATA
On a global scale, the top ten countries for freelance labor are India, United States, Philippines, Ukraine, Pakistan, Russia, Bangladesh, Canada, United Kingdom, and China. India is identified as the top source of independent contract labor in the world due, in part, to the prevalence of outsourcing to the country, where the workforce is identified as "industrious, intelligent, and efficient." Similarly, the Philippines benefit from strong outsourcing opportunities, offering the combination of a highly skilled, multilingual population and low labor costs. Approximately 80% of the call centers in the Philippines are administered by companies based in the United States.
Approximately 20% to 30% of the labor force in the United States and EU-15 is comprised on independent contractors. In the United States, this constitutes approximately 54 to 68 million workers of the overall estimated civilian workforce of 159.9 million. The United Kingdom appears to have a robust market for independent contractors, particularly in the media and design industries. Of the top ten countries for freelancers, the Ukraine also has a strong market for independent contractors with skills in graphic design and webpage development. In fact, there are approximately ten times the amount of online freelance positions available for design and multimedia than for finance and management.
In Bangladesh, our research indicates that increased unemployment in traditional workplaces has led employees to turn to online/remote options, although in Pakistan, independent contracting via online/remote workplaces has long been considered an acceptable form of employment. Russia's inclusion on the list of top ten countries for freelance labor appears to be linked to its large population, widespread cultural acceptance of remote/alternative work arrangements, and labor regulations that allow independent contractors to negotiate their own pay rates. Russia boasts the highest rates of job satisfaction among independent contractors globally.
China's marketplace for independent contracting is growing, as China is the world's most populated nation and is adapting to its status as a global economic superpower. However, it may have comparatively lower rates of freelance employment due to poorly defined labor and employment laws. On the other hand, Canada's freelance marketplace is affected by the opposite issue; each province in Canada enforces unique labor laws, and there are three separate classifications of self-employed labor in Canada, which make earning income and paying taxes more complex. Additionally, Canadians are rated the poorest designers and multimedia consultants globally, and this category has previously been identified as the most popular type of work available for independent contractors.
QUALITATIVE TRENDS motivating independent contracting
As participation in the independent contracting labor market continues to increase globally, we were unable to identify a primary ambition for participation, but we have identified four trends of relevance. First, as previously discussed, workers are often classified based on their status as independent contractors being voluntary or involuntary. In some locations globally, this may be the result of overall high unemployment rates in the traditional job market. In other locales, corporate downsizing and increasing cultural acceptance of remote work may motivate entry into the freelance labor market.
Second, younger workers increasingly report a preference for independent contracting, noting that if offers them the freedom to manage their own time and output, perform work outside non-traditional schedules, and manage their income at their own pace and/or as needed. In fact, poor work-life balance at traditional workplaces, including excessive overtime and a lack of scheduling flexibility, are identified as sources of employee dissatisfaction that often result in the pursuit of freelance employment. Improved flexibility is two-sided; businesses also report that hiring independent contractors reduces costs by eliminating the need for on-boarding new, full-time employees and offering extensive compensation packages. However, one significant challenge in the independent contracting field is that this flexibility often results in the inability of the freelancer to locate sufficient work to meet financial needs, a concern cited by 35% of independent contractors in one study.
Finally, as previously noted, the rise of independent contracting has coincided with a variety of technological advances. The increased availability of co-working spaces in major cities has reduced the social isolation previously reported by independent contractors, and there are a number of technology startups focused on software platforms that connect businesses with a wide pool of freelancers whose services might have been unavailable otherwise, especially due to geographical constraints. Even without specially designed software, both businesses and contractors are likely to identify new and more effective ways to connect.
CONSIDERATIONS FOR FUTURE RESEARCH
As our findings revealed a diverse array of definitions and classifications for "independent contractors," it may be helpful to identify a particular subset of this group of individuals for further research. For example, many studies separate primary independent contractors, who depend on freelance income as their sole source of earnings, from supplemental contractors, whose freelance earnings supplement wages from a traditional job. Additionally, as our findings revealed that global trends in the independent contracting labor market vary substantially from one country to the next, if there is one geographical location of particular interest to you, we could perform a more detailed analysis of that area. For example, there is a wealth of information available on independent contracting in countries in the European Union, but much more limited information on China.
In summary, the top ten countries globally for freelance labor are India, United States, Philippines, Ukraine, Pakistan, Russia, Bangladesh, Canada, United Kingdom, and China. As the most detailed quantitative information on this industry is available for the United States and the European Union, our findings indicate that approximately 20% to 30% of the overall workforce is currently engaged in some form of freelance work in these countries. Trends motivating increased independent contracting globally include the unemployment rate of each country, unavailability of traditional jobs, employee dissatisfaction with traditional workplaces, improved flexibility for employees and businesses, and technological advances.
Thank you for your request, and if you would like additional information on this topic or another, please do not hesitate to ask Wonder!