U.S. ‘gig economy’ worker numbers grow, help with labor shortage issues like those in Northwest Arkansas

The traditional labor force is changing, with a growing number of independent contractors choosing to be self-employed – part of the so-called, “gig economy” – instead of signing on as a salaried or hourly employee.

Freelancers now make up about 15.8% of the labor force, according to the Princeton/National Bureau of Economic Research survey last year. (Link here for a PDF of the academic report.) Over the past 10 years, freelancers have grown from 10.1%, or by 9.4 million people in the labor force, the survey found. Some experts expect that by 2020 as many of 40% of the workforce will be freelancers or alternative workers such as independent contractors.

For Marc Henning, a professional photographer in Bella Vista, becoming self-employed and leaving his full-time newspaper job in 2013 was a seamless transition. Henning said he filled out his calendar with eight weddings and began picking up commercial work from large corporations located in Northwest Arkansas.

“I had grown tired of shooting the same type of events year-in and year-out and I needed a change. The move into corporate photography was a good fit. The jobs paid more and before long I had lined up several very steady customers that I routinely shoot for on a regular basis,” Henning said. “I have since tapered down the wedding work and I stay very busy, earning considerably more than I did at a traditional job.”

The caveat to that Henning said is there is no guarantee of work tomorrow and no employee benefits, the most important being health insurance and retirement. Henning said his wife Alona, who has a traditional job provide health insurance and he’s trying to save on his own for retirement. Henning said the only regret he has is that he didn’t make the leap sooner.

“I have a good accountant to do my taxes and I continually save back money because I don’t know what’s around the corner. Sometimes the calendar is blank one month out. So far there has been steady work but there are no guarantees.”

NEW WORKPLACE REALITY
Because Henning is able to work for local businesses as a freelancer, it allows those companies to not need a full-time photographer. This is one way the gig economy can benefit a region like Northwest Arkansas that has a labor force shortage, according to Michael Harvey, chief operating officer of the Northwest Arkansas Council.

Harvey and the Council have identified the tight labor force as one of the region’s biggest challenges to future growth. He said hundreds of jobs go unfilled each month because there are no qualified candidates. Harvey said there is no silver bullet answer to the problem, but in some sectors such as construction, healthcare, media, IT programming, and website design the use of freelance professionals is one way companies can patch together a suitable workforce.

“It really requires employers to be more flexible in how they recruit, hire and manage their workforce. The old 8 to 5 model, stand on the line and tethered to the desk is being replaced by an outcome based economy that’s powered largely by technology,”  Harvey said. “I personally think this is to a certain extent empowering to some people and it may be scary to some because of the benefits gap.”

Harvey said many jobs can be worked remotely and in some cases the use of freelancers makes sense. He said the professionals are not constrained by the salary of one company, and said employers who use freelancers often get the same work in a more efficient manner than if they hung out a shingle and staffed an office. The overhead cost savings could be used to bolster the professional’s income or the company’s bottom line.

Harvey said regional construction workers are largely freelancers who work on contract, and at least 50% of them report as self-employed. He said 25% of the sales workforce in the region work on contract basis and 20% of the IT professionals are freelancers as well as a large percentage of health care professionals such as doctors and other specialists.

THE STRESS OF INDEPENDENCE
Graphic artist Michelle Hedegard left a traditional job in 2009 and founded Mockingbird Creative, a Fayetteville-based boutique public relations company. She said there was plenty of work for her from day one, but managing the day-to-day business and continuing to grow the client base was a challenge.

“I was not a business major, nor salesperson, I am an artist and keeping the business growing was a lot of work and beyond a skill set I had at the time,” Hedegard said.

In 2012 she sold the business and took a full-time creative graphic arts job with the Walton Arts Center. Hedegard said there are lots of benefits with being a freelancer or independent contractor but there also is stress to make sure everything runs smoothly. She said the Walton Arts Center job was a good fit for her at the time and she felt confident about the Mockingbird’s future because of the new owner’s expertise.

Hedegard moved in 2014 to Portland, Ore., with her husband Jay. At time she was approached by Mockingbird to work remotely as the company’s creative director. Mockingbird has contracted with other professionals in Dallas and Portland in addition to Fayetteville to run the business. Hedegard said she is thrilled to be part of the company she founded once again.

“This type of alternative work allows me to set my own hours and I have since began using tools to help me with basic record keeping requirements. Freshbooks is an easy system for the non-accountant like me. The biggest thing is freelancers have to pretty much set aside 30% of their earnings for taxes and you can’t look up at the end of the quarter or year and not be prepared,” she said.

Because Mockingbird Creative operates largely on a remote basis, Hedegard said it’s important for the core team of contractors to stay connected.

“We embrace technology, we typically skip meetings and use instant messenger and because we all use Mac systems we FaceTime as necessary,” Hedegard said. “Freelancing is not for everyone. There is still a need for beauty shops and restaurants that require workers to perform those services, but as technology improves, the number of remote jobs that can be done by freelancers or 1099ers is going to grow. Here in Portland, working remotely on a freelance basis is more the norm than not.”

Hedegard said her contract stipulates that she travel to Fayetteville once a quarter to meet face-to-face with clients. Her family is in Northwest Arkansas so coming home four times a year doesn’t seem like work in her book.

“There is no perfect job, but for me working remotely and independently is about as good as it gets,” she said.