Exposing The Shadow Workforce

Some time ago, I posted an article titled “Wanted—Entrepreneurs.” The article discussed the decline of new entrepreneurs in the U.S.

Here is the chart again, showing this decline: (in thousands)

New Businesses Started

(Numbers [x1.000] from the Kauffman Index of Entrepreneurial Activity) 

In that article I went a step further by presenting a chart showing that more people were actually leaving the workforce than were finding a job.

Here is the chart showing this situation:

Share Giving Up

(Chart by Ben Casselman at FiveThirtyEight.com)

At the time, I suggested that perhaps the decline in new entrepreneurs was the result of many people simply giving up and leaving the workforce to subsist on government largesse.

Since then, however, I was directed to a recent study conducted by Edelman Berland, “Freelancing in America: A National Survey of the New Workforce.”

This study uncovers some interesting data about a shadow workforce the business community seems to look down on—the Freelancer.

Let’s look at some of the highlights from this study:

  • 53 million Americans—34% of the U.S. workforce—are working as freelancers.
  • 21.1 million of this group work full time as freelancers—freelancing is their only job.
  • 5.5 million of this group work as temporary workers on a single long-term project at a time.
  • 2.8 million of this group are business owners with employees, but still identify as a freelancer.
  • The remainder of the group work as an employee and as a freelancer on the side.
  • This entire group adds $715 Billion to the economy through their freelancing.

I should point out that this study did NOT address the issue of mobile or home-based employees… that is an entirely different segment of the modern workforce.

Most important, I believe, is the finding in this study that should make everyone in the business community sit up and take notice: 53% of this group got into freelancing by choice, not necessity. Freelancing was their chosen career path—it wasn’t by happenstance.

So, why did all these people choose to go into freelancing instead of the traditional job market? Here is what a couple of them said in the study:

“I prefer the freedom to choose what sort of work I do without my schedule being controlled and my choices being commanded by someone else. I can express myself and be appreciated for it as well as bring beauty to the world by way of my work.”

“I have more control over where I work, when I work, and what I do for my work.”

This study makes it clear that we are in a new era of work. But it is more than just an economic change—it is a cultural, political, and social shift perhaps as great as the Industrial Revolution.

If this shift continues (and I believe it will), it will have a tremendous impact on our lives, our communities, our government, and certainly on how we view our economy.

After reading this study, and in view of the above charts, here’s what I’m thinking:

Yes, there are many people leaving the U.S. workforce entirely, but it appears that there are also a large number of people leaving the workforce—or not ever joining it in the first place—for the purpose of setting themselves up as freelancers. Primarily for the reasons expressed above.

If we were to add all the new freelancers who earn a full-time living on their own terms, to the number of new entrepreneurs each year, I wonder what the first chart above would look like?

So, what do you think?

  • Are we seeing a new workforce revolution unfolding?
  • Is freelancing a new form of entrepreneurship?


2 thoughts on “Exposing The Shadow Workforce

  1. Great article!

    I agree that more and more people are CHOOSING to become independent because of past circumstances and seeing that our society no longer honors tenure or experience served in a corporate workplace. Not only do jobs get cut without notice (or reason other than the bottom line) but other factors such as benefits are getting slashed and you’re basically on your own anyway.

    Working in the SF Bay Area I’ve seen tech job turnover as frequent and commonplace and choosing a different coffee shop – just to change things up a bit. So the independent who either services these industries or becomes a freelance contractor finds out they not only have their choices as to the clients/businesses they serve, but also the freedom of diversification so no single rug being pulled out from under you will knock you off your feet entirely.

    This is greatly empowering!

    1. Thanks for the comment Jeff. There is another aspect of freelancing I did not include in the article, because I didn’t have the exact data… but new tech startups are outsourcing more of their technical development work to freelancers and bringing fewer new employees into the startup.

      This saves money for the startup and provides more opportunity for freelancers… but the problem I see is that, although 53 million strong in the U.S., freelancers are a pretty loose group with no organization to set standards of work and payment. People who use freelancers always seem to be looking for the cheapest person, with little regard to the ultimate outcome of the project.

      Companies that look for the freelancer who works the cheapest are creating a lower standard of excellence that is pushing our country deeper into mediocrity.

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