It’s that time of year again! Time to pack away the Christmas lights, finalize resolutions we won't keep and make some predictions. For the last five years we have been making scary accurate predictions about the freelance economy and the future of work. From the size of the gig economy to regulations and trends in software, the WorkMarket prediction engine has been pretty spot on!
In continuing our annual tradition, here are five predictions for the freelance economy in 2019.
1. Temp Worker Labor Clouds Go Mainstream: We have seen a handful of enterprises use Freelance Management Systems (FMS) to organize their temporary workers. In 2019, we will see this number grow to hundreds as temp labor clouds, or talent pools, go mainstream. The logic and ROI of this trend is too powerful to deny. Let’s take a step-by-step look at a real-world scenario of how this plays out today:
A Fortune 200 company uses an FMS to build a bench of people that want to perform temporary work. This means talent is driven -- either through social search, alumni (see prediction two below) or just good old fashioned recruiting -- to a customized landing page where the worker signs up to join a temp labor cloud. We have seen the average temp labor cloud consist of 30,000 workers.
This company then sets unique rules within the FMS so that as soon as a temp project is established, the search algorithms automatically query this temp labor cloud to find people ready to work the assignment. For the sake of this scenario (and simplicity), let’s assume 1,500 people are needed to work in a warehouse for the holiday rush. These 1,500 workers need to meet the company’s requirements, such as passing a background check, willing to work for $15 per hour and the ability to lift twenty pounds.
The FMS search yields a result of 900 people, or 60 percent of the workforce needed, that are available. They meet the company’s established rules and criteria, have responded (usually through the convenience of a mobile app) and are ready to work. Using the help of an API, these 900 vetted temp workers are then seamlessly sent into the company’s Vendor Management System (VMS) where the temp payroll staffing partner takes over management. The VMS will then fulfill the remaining 600 person request for the staffing partner from their own source of talent.
At the end of three month project, the company will save themselves about $1 million (the difference in the markup between a temp payroll solution and a full staffing partner) and have the added bonus of retaining a bench of temp workers for work in the future.
This is not a bold prediction. It has been shown to work and the ROI is crazy as an FMS and the integration points cost only about $200k/year. It’s just a matter of time, and the time for mainstream is 2019.
2. Alumni Labor Clouds Become Standard: The inevitable retirement of older, experienced workers is a skilled labor issue facing countless organizations. An estimated 10,000 Baby Boomers turn 65 every single day, according to this Pew Research Center study. Client, process, technical and product knowledge are walking out the door with a gold watch and heading to the beach for a well-deserved retirement. This creates the “corporate brain drain,” a knowledge and skills gap that’s tough for employers to readily replace.
Enter the alumni labor cloud. By linking a FMS to their Human Capital Management (HCM) system, today’s leading companies are easily capturing that knowledge and maintaining direct connections with their alumni population in retirement. An HR manager can simply click a button in their HCM system to transfer this worker into an alumni labor cloud within their FMS. Data, previous work experience and any other relevant info are automatically transferred -- with the alumnus’s permission of course -- into the alumni labor cloud.
When a need arises for a company, the search algorithms of their FMS pluck the right alumni at the right time. The alumni talent receives a freelance offer of work to come back and be engaged on a contract basis. No more corporate brain drain. Hundreds of companies are doing this today. In 2019 we will see it become the standard at large corporations around the world.
3. Legal Happenings at Federal and State Levels: Regulatory and compliance conflicts between the states and the federal government will take center stage in 2019. We’ve seen the federal government reduce regulations, making it a bit easier for companies to engage their workforce. By contrast, we have seen states like California, Massachusetts and Illinois take a more rigid approach to employee misclassification by modifying their independent contractor (IC) definitions, meaning more workers will be viewed as W-2 employees. This trend will continue as the feds continue to loosen restrictions and more states push for further worker protections.
In 2019, we predict there will be an increase in major court decisions at the state level and possibly some legislative action by state governments. In response, we may see a major clarification memo from the Wage and Hour Division of the US Department of Labor. This will try to establish once and for all who is an employee and who is a freelancer/IC. This determination will have some quantitative measure, but will fall short of the definitive direction organizations need. Unfortunately, and sadly, the clarifying memo may not actually clarify enough to help employers truly comply.
4. Beginning of the End of the Annual Review: Get ready for an explosion of people analytics, the catchall for quantifying the performance of your people. While the annual performance review has been a mainstay in corporate America for decades, it’s on its way to extinction. Instead, we’re going to start seeing even more real-time reviews for full-time employees -- and that’s just one way the burgeoning freelance economy is influencing traditional HR and talent management practices.
Software platforms like an FMS empower companies to qualitatively and quantitatively rate and review independent workers on each gig. A freelancer or IC is constantly evaluated on their professionalism, punctuality, responsiveness, you name it. Businesses will begin to use real-time rating systems and reviews with their full-time employees as well.
5. Labor Force Participation Rate Climbs Above 63 percent: While we are still far away from a full workforce recovery stemming from the Great Recession - when participation rates hit 66 percent - we do believe the continued economic expansion and tight labor markets will conspire to bring labor force participation consistently above 63 percent during 2019.
For historical perspective, the workforce participation rate in the ‘50s and early ‘60s was about 59 percent. As social barriers were removed and more women joined the workforce, rates grew over next few decades to an average of about 67 percent through the ‘90s. After the tech bubble burst, the participation rate settled down over the next decade to about 66 percent. Finally, the rate dropped due to the Great Recession and its aftermath to settle at its current 62 percent range.
The labor force participation rate has not hit 63 percent since November of 2013. The reasons vary, but include the emergence of the on-demand economy (which is not included in participation rates), the retirement of the Baby Boomers, the removal of the long-term unemployed from the workforce and an increase in disability and incarceration. The increasingly tight job market -- as well as higher wages and decreasing restrictions such as failed drug tests or previous criminal records -- will drive the labor force participation rate above 63 percent and consistently stay there throughout the year, potentially reaching 64 percent by the end of 2019.
The coming year should bring plenty of thrills and excitement as we’ll see how technological, governmental and entrepreneurial forces clash. No one knows for sure what’s in store for 2019, but we’re certainly looking forward to how our educated guesses pan out.
And there you go -- a quick glimpse into our freelance economy crystal ball. Here’s to another exciting year in the future of work!
