Researchers say that somewhere between 55 million and 70 million people across the United States are members of the “gig economy”—freelancers and independent contractors who provide products and services to clients on a job-based or contractual basis.
In Lexington, evidence suggests the number of freelancers and independent contractors is growing. Just how much, however, can be difficult to quantify.
According to the Federal Reserve, the number of gig economy workers nationally is just over 75 million people. But that number includes everything from babysitters to Uber/Lyft drivers to temporary CEOs. And because the U. S. Bureau of Labor Statistics (BLS) doesn’t have a definition of what a “gig economy worker” is, there’s no federal labor statistics on how many people are actually in the gig economy or the work they’re doing.
Timothy Ewing, a regional economist with the U.S. Department of Labor, said that makes getting to a national number difficult, and getting to a statewide or municipality number virtually impossible. “Data on contingent workers, workers in alternative employment arrangements and electronically mediated work are not available for states, cities or local areas due to the relatively small sample sizes for most states,” Ewing said.
But in Lexington, the number of freelancers and independent contractors seems to be growing, according to those in it.
Tim Guthrie
Tim Guthrie and Randall Stevens are partners in Base110 and Base 163, which offer dedicated office space, co-working space, conference rooms and event space for freelancers and independent contractors. Occupancy in the space continues to increase, pointing to the health of the gig economy in the Lexington-area, Guthrie said. He and Stevens are in the process of adding 22,000 square feet of space.
More corporate clients are also using independent contractors, which makes the gig economy much more attractive, according to Freelancing in America 2018, a comprehensive study of the freelancing and independent contracting economy done by UpWorks, a gig economy platform linking contractors with clients who need them, and the Freelancers Union.
Using independent contractors reduces a company’s tax burden, as well as their workers’ compensation and unemployment insurance premiums. For businesses like Uber and Lyft, hiring workers as contractors can reduce labor costs by as much as 30 percent, some estimates say. According to UpWorks, an estimated 30 percent of Fortune 500 companies use its site regularly to find freelancers—including companies like FedEx, Bank of America and Verizon.
“Corporations have the choice of how to organize, and they’re increasingly choosing to use gig workers to be lean and control costs,” said Louis Hyman, author of “Temp: How American Work, American Business, and the American Dream Became Temporary,” as well as an associate professor in industrial labor relations at Cornell University. In his opinion, it is companies’ desire to operate leaner that is driving the gig economy shift and not the workers themselves.
“Corporations have the choice of how to organize, and they’re increasingly choosing to use gig workers to be lean and control costs." —Louis Hyman, author of “Temp: How American Work, American Business, and the American Dream Became Temporary.”
And while gig-based work is on the rise, for those businesses hiring independent contractors, it’s best to be aware of changing federal and state labor laws that govern such arrangements.
California, New York, New Jersey and Massachusetts have all introduced new or pending legislation changes regarding contract work. Spurred by Uber and Lyft’s use of independent contractors, California recently changed the test by which employees can be classified as independent contractors. Known as the ABC test, classification is dependent upon how much control an organization has on a worker regarding where, when and how the work is produced; whether or not that worker is doing work outside of the organization’s main function, and whether the worker has other clients for which he or she does similar work.
Hiring independent contractors is not a new issue, said Jason Hollon, an associate attorney specializing in employment and general litigation with McBrayer law firm in Lexington.
The National Labor Relations Board addressed the issue during the Obama administration to tighten requirements for classifying workers as independent contractors. Since then, however, the Trump administration has rolled back some of those opinions, especially concerning the gig economy.
In Kentucky, a bill passed the Kentucky Legislature in 2018 to define whether or not ride share drivers were considered employees or contractors. That bill, KRS 336. 137, defines some gig workers, such as Uber and Lyft drivers, as marketplace contractors. To be considered contractors, the workers would have to contract with an online third party vendor, without a physical facility within the state, or “marketplace platform.” There’s no pending legislation on the horizon in Kentucky addressing changes brought about by the gig economy, Hollon said.
“I know businesses for the most part, in our experience, would prefer that the worker be an independent contractor, but… that’s not really up to the employer,” he said. “What we tell employers in that situation is you can have a written agreement with them and you can classify them as independent contractors, but the courts and department of labor or any other kind of administrative agencies are really going to look at the nature of the relationship between the parties, and that is the same for a gig economy type job or any other temp service or employer in Lexington or in Kentucky.”
McBrayer recommends that companies looking to hire freelancers or independent contractors consider the “economic realities” of the business relationship. McBrayer attorney Cynthia Effinger, out of the firm’s Louisville office, recommends that organizations consider how much the contractor’s work is integral to the business, how much the work requires special skills, the permanency of the relationship between the company and the worker, and how much control the company exerts over the worker.
“Under this set of factors, courts generally regard independent contractors as those who operate a separate business and are economically independent from the employer. Those who are economically dependent on the employer are employees where the FLSA is concerned, according to the DOL guidance,” Effinger wrote on the McBrayer blog. “The defining question in this calculus is whether the worker is truly in a separate business that is independent economically from the employer. If the worker is economically dependent on the employer, the worker is an employee in the DOL’s eyes.”
Gig Economy by the Numbers
57.3 million
Number of American workers in the gig economy in 2017, per “Freelance in America,” a study commissioned by UpWorks and the Freelancers Union.
25
Average hours per week gig workers spend working
45
Number of clients per month freelancers report having.
$36,500
Average annual income of independent workers, according to Prudential, compared to $62,500 for full-time employees
170
Number of companies in the U.S. that only hire gig workers, per CNBC
$115
Average hourly wage of freelancers working in the artificial intelligence industry, per FitSmall Business. Other high hourly wage industries include blockchain architecture ($87), robotics ($77.46), ethical hacking ($66.33) and cryptocurrency ($65.37).
63%
Percentage of freelancers who say they feel more secure than traditional employment with one company
90%
Percentage of Americans who would consider freelancing or independent contract work instead of full-time employment, per Manpower Group