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Online and Self-Employed

New technologies give employers access to a world of workers while offering freelancers more ways to build a career.
September 28, 2015

Recently Megan Guse has been fielding questions from her former classmates about the atypical path she has taken since graduating from the University of Illinois law school. Three and a half years ago, after finishing a fellowship in the Champaign County state’s attorney’s office, Guse didn’t take the expected next step of joining a law firm or getting a government job. Instead she became an independent contractor. She does legal work, mostly on contracts, for a company called Versata, which specializes in acquiring and restructuring struggling software companies. Headquartered in Austin, Texas, Versata operates globally with almost no full-time employees. Like Guse, most of its workers are contractors.

“I think at first a lot of people viewed it as a questionable move,” says Guse. Now, after many of her classmates have begun to burn out on the long hours expected of young lawyers at big firms, “I have sensed a little envy sometimes,” she says.

She has little job security, must rely on her husband’s employer for health benefits, and does not make the salary she would at a large firm. But she says her earnings are comparable to what she could make as an in-house lawyer at a small company. And she’s gotten opportunities to branch out into different types of law, including some recent work on mergers and acquisitions that she wouldn’t have done in a more traditional setting. Plus, she works from home, so it was easy to move when her husband’s latest job posting took them from Texas to Connecticut.

Those who believe we are headed to a future of contract-based careers like Guse’s cite surveys finding that 53 million Americans do some freelance work today, or the fact that staffing companies have seen a growth in revenue. Companies that operate online marketplaces for freelancers include Upwork, TaskRabbit, Uber, and Amazon Home Services. Many others, from Skype to Slack, facilitate remote work and help contractors run their businesses.

The number of self-employed Americans, as tracked by the government, actually “hasn’t moved in two decades,” says Lawrence Mishel, president of the Economic Policy Institute. As a percentage of total employment, it has dropped. Depending on whether you include part-time workers, the self-employed, and others, the size of the U.S. contingent workforce is either as small as less than 5 percent of the total or as large as 33 percent.

Freelancing offers flexibility and access to a range of work, but downsides include lower satisfaction and earnings, fewer worker protections and benefits, and job instability.

And while those people have more flexibility and may be able to access a broader range of work in today’s digital economy, there are downsides as well. A recent study of the contingent workforce by the U.S. Government Accountability Office listed lower satisfaction and earnings, fewer protections and benefits, and job instability as some of the disadvantages freelance workers face. Workers’ advocates worry that employers will take advantage of the growing digital freelance infrastructure to shift more work off the payroll and more risk onto workers.

These online freelance marketplaces are a global clearinghouse for workers. James Manyika, a director of the research arm of the consulting firm McKinsey, says they could help find work for the 30 to 45 percent of the working-age population worldwide (200 million people) currently either not active at all in the workforce, unemployed, or working part time.

Upwork, the largest of these online marketplaces, has 2.5 million U.S. freelancers. Its contractors collectively earn more than a billion dollars a year. Building on the technologies underlying social matchmaking sites and the analytical recommendation engines of retailers like Amazon, the company is trying to cut the average time it takes to find someone for a project from three days to three minutes. CEO Stephane Kasriel, who oversees a team of 300 employees and 700 freelancers, says key challenges have included getting the network big enough to make such rapid connections possible and building an algorithm smart enough to start narrowing a would-be employer’s search on the basis of just a few questions.

There are particular challenges in building such an algorithm for freelance work. There’s no universally accepted taxonomy of skills. Also, freelancers are sometimes simply not available—the best candidate might currently be on a beach somewhere and not interested in work.

A few months ago, no jobs were being filled in three minutes on Upwork’s site; now a small number are. Still, searches can take time in fields where talent is scarce and in demand, like mobile software development, and for jobs that carry a high price tag (projects on the site can bill as much as $100,000, though most are in the $100 to $1,000 range).

While 50 percent of the jobs on the platform come from U.S.-based companies, only 20 percent are filled by U.S. freelancers. Other workers come from India, Eastern Europe, the Philippines, and potentially almost anywhere.

Participants in this global freelance pool wrote and still maintain the software that underlies Brecht Palombo’s business, Distressed Pro, a debt database that he sells to investors. He has used freelance software developers from overseas ever since the business launched in 2009, though he needed time to learn the various working styles in different markets. Programmers from the Philippines, for example, do business in a more Americanized way than those in many parts of Southeast Asia, Palombo says, but they have had challenges like an unreliable power grid and bad weather.

Eventually Palombo began trying to build relationships with a small group of contractors, rather than moving from one to another according to price. “Now I have regular guys who get paid like a salary,” he says. “They are free to work on other things, but I do offer them some security and stability.” He pays experts $2,000 a month for work that would cost $8,000 to $15,000 a month if he hired experienced developers in the U.S., he says.

Beyond managing a remote workforce on Upwork, Palombo has set up a virtual work system. He uses Slack to communicate, schedule and hold meetings, and track assignments. All the work is done using Google programs and is stored in the cloud, where it is safe in the event of a lost laptop or hardware mishap. He organizes assignments and tasks on Trello.

All this has allowed Palombo himself more freedom. He and his wife and three children have spent more than a year traveling the U.S. in an RV, while he works a few hours a day from the road or in a Starbucks. The arrangement hasn’t hurt his business, which he says has grown about 28 percent over the last six months.

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