What is the gig economy? - McKinsey
The gig economy refers to the workforce of people engaged in freelance and side-hustle work.
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More than a quarter of <anchor>respondents</anchor> report taking on independent work because it’s what they have to do to survive and support their families. Back in 2016, only 14 percent of respondents said they did independent work out of necessity and as a primary source of income.
Meet the US workers who are going it alone—and feeling good about it | McKinsey
Forbes

# Meet the US workers who are going it alone—and feeling good about it

November 1, 2022 | Article

A large and growing slice of the American workforce has no employer-provided health care or 401(k)s to build retirement savings, and they have to pay twice as much into Social Security as their peers. These individuals don’t get paid time off and must cover their own business expenses, and their earnings can be subject to unpredictable swings. But here’s the kicker: It turns out that this group is more optimistic than the rest of the US workforce, writes Kweilin Ellingrud in Forbes.

The people behind this paradox are America’s independent workers. They run the gamut of professions, from rideshare drivers, housekeepers, hair stylists, and pet-sitters to music teachers, therapists, construction workers, writers, and graphic designers.

The so-called “ gig economy” didn’t just spring into existence with the touch of an Uber app. A significant share of the workforce has always been self-employed. Today the options for making a living without a regular 9-to-5 job are far more varied—and as a result, a large slice of the labor force doesn’t fit neatly into government statistics. It’s been hard to get a handle on how many people work independently, what they do, and what motivates them to go it alone.

In McKinsey’s American Opportunity Survey on independent work, more than 1 out of 3 (36 percent) employed respondents identified themselves as independent workers. This share has grown sharply since 2016, when the McKinsey Global Institute estimated the that 27 percent of the US workforce was independent. We include anyone who identified as a contract, freelance, temporary, or gig worker. More than 70 percent rely on independent work as their primary source of income; the remainder take on side hustles, whether they are pursuing a passion or simply supplementing their paychecks.

The growth of independent work may be due to several factors. The consumer market for services-on-demand has grown exponentially. Digital platforms such as Upwork, Toptal, Uber, Grubhub, and Rover match larger pools of workers with potential customers. Many people who were laid off during the COVID-19 pandemic turned to freelancing, either out of necessity or out of a desire to be more entrepreneurial and independent. More recently, inflation may have pushed even more low-income workers to take on side gigs to make ends meet.

A third of employed respondents who earn more than $150,000 a year say they work independently—occupations such as lawyers, accountants, successful actors, influencers, traveling nurses, and a variety of advisers and specialists. But they are not the majority. Younger and less economically established people tend to take on gig work with lower barriers to entry, such as driving passengers or delivering take-out meals. Nearly half of all immigrants report being independent workers, underscoring that gigs and freelance jobs are a gateway to the labor market in the United States. Many independent workers who provide personal services are hustling just to stay afloat. A majority (54 percent) report being concerned about the stability of their employment, compared with 35 percent of permanent workers.

Perhaps surprisingly, independent workers have a brighter outlook on their own futures and the overall direction of the US economy than the average survey respondent. More than a third of independent workers say that they expect to have more economic opportunities in a year’s time, compared with just a fifth of workers overall who say the same. More than 40 percent of independent workers expect continuous economic growth over the next five years, compared with about a third of all respondents.

The motivations for working independently instead of taking a traditional job run the gamut. Just over a quarter of respondents say they do independent work because it’s what they have to do to support themselves and their families. That’s a large increase over the 14 percent of respondents in our 2016 research who said that they did independent work out of necessity and as a primary source of income. Meanwhile, the percentage of people pursuing independent work to add discretionary income has been cut in half since 2016, falling from 40 percent to 20 percent. The change indicates that independent work has become a more serious pursuit for more people.

A quarter of independent workers report that they go it alone because they enjoy what they do. This is the top reason cited by high earners. Another quarter say they are in it for the autonomy and flexibility.

This last point hits home for companies. Flexibility clearly has inherent value—so much so that some are willing to trade off a regular paycheck and benefits to obtain it. Finding a way to incorporate more flexibility into traditional roles can be a big part of improving employee retention. And when specialized needs or temporary spikes in demand arise, companies can take advantage of the agility that comes from being able to call on external and independent workers.

The needs of this large and growing segment of the US workforce also merit more sustained attention from policy makers. With over a third of the workforce in some kind of independent work, addressing longstanding gaps in worker protections, benefits, and income security could make independent work a more viable and less precarious option.

This article originally appeared in Forbes.

Kweilin Ellingrud is a director of the McKinsey Global Institute and a senior partner at McKinsey & Company.

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