Who are the Independent Entrepreneurs?
In the summer of 1776, the Founding Fathers drafted a document that declared the 13 American Colonies would no longer live under the thumb of a system that wasn’t looking after their interests. These days, a similar search for independence is taking place in the labor force. Though different entities use different metrics to classify independent workers, it is estimated that between 16 and 36 percent of the workforce is comprised of those participating in the “gig economy.” Now more than ever, workers are choosing the flexibility of self-employment over the security of a traditional job. For those of us in the microbusiness sector, it’s important to understand not just the reasons for this shift but the needs of this emerging demographic.
A study by the McKinsey Global Institute found that 32 percent of independent workers are in this line of work by choice, and derive their primary income from it. 
Another 40 percent choose to supplement their traditional jobs with independent work. This means that a large percentage of workers are opting into self-employment, out of a desire for flexibility, autonomy, and multiple income streams. And research shows this change in priorities might be paying off, as independent workers report higher satisfaction levels than traditional ones. A study by the universities of Exeter and Sheffield found that “those who were self-employed were not only among the most engaged but also experienced greater opportunities for innovation, achieving challenging targets and meeting high standards.” Even in an economy with record unemployment, self-employment is becoming a viable option for an increasing number of workers. But it’s not without its challenges.
Challenges
Innovations in technology have allowed for the flourishing of platforms that connect independent workers with their clients, bypassing the need for middlemen and traditional employers. But this also has the possibility for a race to the bottom, particularly in industries where pricing is a primary driver when choosing a product or service. For entrepreneurs in low/moderate income sectors, this creates a high barrier to success and prevents them from thriving and building wealth. The dismantling of the safety net – such as a lack of employer-sponsored health and retirement benefits – is another problem that puts independent workers at higher risk. And our institutions are decades old, built for a labor force doesn’t necessarily exists. So what can be done to address these issues?
Opportunities
We like to see the silver lining in change and look toward the opportunities. This is a new market for our members to serve. We are working on bringing you a train-the-trainer module for serving the gig economy independent entrepreneurs. The more that we can help these entrepreneurs act like a small business, the better they will do.
Others in the gig-economy space are looking to cooperative structures as a way to provide self-employed workers a community from which they can learn and take ownership – literally. Uptima Business Bootcamp‘s model offers classes and business advising services for freelancers, small business owners, and startup founders and the participants are owner of the accelerator. Loconomics is a networking and booking platform for independent professionals, but it is unlike well-known platforms that have shareholder interest and the bottom line at the heart of their decision making process. Loconomics’ cooperative model means that every member is an owner and has an equal voice in the platform’s decision-making, as well as a share of the profits that is proportionate to their participation.
On the policy side, Etsy published a paper outlining four policy proposals to bolster economic security for gig economy workers, including creating a Federal Benefits Portal, replacing payroll with tax withholding for the administration of benefit contributions, and expanding the Earned Income Tax Credit. The Reason Foundation advocates for a more market-led approach to the issue of health insurance, removing regulatory obstacles to allow insurers to provide more options for different types of workers. CAMEO has been advocating to integrate entrepreneurship into the Workforce system and include the self-employed into California’s new retirement plan and the tax policy. All of these efforts make clear that current legislation is a long way from meeting the needs of this emerging workforce.
What’s clear is that independent entrepreneurs are here to stay and our job is to make sure they have the tools they need to succeed and work on advocating policy with the indie in mind. Happy Independence!