Does The Gig Economy Mean the End of Job Security for College Grads?
Posted By Terri Williams on February 9, 2016 at 9:28 am
“By 2020, Fortune 500 companies are projected to employ 50% of their workforces as contractors,” Amy Vasquez tells GoodCall. Vasquez is vice president and head of U.S. Enterprise Talent Solutions for CDI Corporation.
And according to The Intuit 2020 report, freelancers and part-time workers are projected to replace more traditional employment by the year 2020, and over 80% of large corporations will significantly increase the number of contingent workers that they use.
For more information about these workers, GoodCall turned to the 2015 Freelancing in America report, which reveals several interesting facts:
- 7 million workers are freelancers
- 60% of them do so out of choice, not necessity
- 23% quit their traditional job to begin freelancing
- 50% would not quit freelancing to take on a traditional job – regardless of wages
Freelancers and contract workers often enjoy being their own boss. Many work remotely and/or choose their work hours. And these workers are attractive to companies because they help to reduce costs. These employment relationships don’t require a long-term commitment, and they often don’t include any benefits or office space.
This type of work may especially appeal to millennial workers. Research shows that this generation is more likely to change jobs frequently, value work-life balance, and set their sights on entrepreneurship.
So – what are the pros and cons of working in the gig economy?
The employment of the future
Vasquez cautions GoodCall readers against classifying the gig economy as “good” or “bad” and says it’s just the direction that the economy and jobs are moving in: “Companies both large and small want the flexibility to hire very quickly and change out skills when specific projects or initiatives spike.” Vasquez says workers are not victims in this process, and that they actually have the opportunity to benefit from this arrangement.
“It’s actually more secure in some ways, because the worker is not dependent on one employer for their livelihood; it’s a frame of mind and the dividends are considerable in the form of multiple opportunities and choices, the chance to grow professionally and the advantage of building a tremendous network during every engagement,” says Vasquez.
Opportunities and limitations
James Wright, CEO of Bridge Technical Talent, has been in the business of placing information technology contractors for the past 25 years, and he tells GoodCall that there are benefits and downfalls to choosing a freelance or contractor career path.
Contracting is not without challenges, and the number of available opportunities may depend on your major or skill set. Wright says most of the contractors that he has worked with appreciate their freedom, love the opportunity to dig deeper and master a particular skill set, and also enjoy the job opportunities and earning potential: “Particularly when you’re in a desirable skill – say information security, or healthcare IT – and you have great demand and are working in a field that is exploding and interesting and changing constantly, that can be a wonderful situation to be in.”
But Wright also says that contracting can become a grind. “You can’t be in two places at once, so once you go to the hourly model, you realize there’s a ceiling on that earning ability, and now you start focusing on those hours that you’re not billing for.” As a result, he says you’re constantly thinking about how you’re going to get your next gig. “Often, when it rains, it pours, so when you’re in a gig, you have other contiguous opportunities you have to turn down, but at the end of 3 months, or 6 months, or however many months you’ve committed to, will other opportunities still be available?”
Wright says the majority of contractors he’s worked with have considered hiring other people to work with them, but decided it wasn’t worth the effort to expand their operation. “They had different reasons, like they didn’t want to manage people, they didn’t like sales and marketing, they hated the administrative side, or they didn’t realize the taxes would be such a burden.”
Another challenge contractors face is the risk of being too dependent on just one client: “You do a job, it goes well, they give you some more work, you’re comfortable, you don’t have to go digging for your next gig, and the next thing you know you’ve been working at the same place for X years.”
How does the gig economy affect the average worker?
Wright thinks it’s too early to determine how the rise of contractors affects American workers, but he does think that IT is a good test case. “We may not be at 50%, but I think the number of contractors in this industry is probably higher than in many other industries or professions,” he says. He thinks that has provided a lot of benefits for both employers and employees/contractors – and has helped the industry be more innovative and dynamic.
“Skills are shared and adopted more rapidly when you have specialists going into environments where a skill didn’t exist and helping the in-house team to get it integrated and mastered,” he notes. In technology, Wright says a large part of American commerce depends on 3rd party vendors, which are staffed by contractors.
And Vasquez notes that this increased shift toward a contractor-type workforce is also due, at least in part, to the wants and needs of millennials. “The millennial workforce particularly is driven by working on impactful, strategic projects, vs. entry level projects which would be typical for a new hire.” And Vasquez says that millennials have higher expectations for advancement opportunities and are motivated by frequent promotions and pay increases.
“But outside of the tech giants and a few very progressive employers, most companies are not set up to deliver these things, and that produces high turnover, which is costly and counter-productive,” she concludes.
While many workers may enjoy the freedom that comes with being a freelancer, it isn’t always a practical choice. Kristen Zierau, a director of executive recruiting at JMJ Phillip Executive Search, tells GoodCall that this type of arrangement works best for those for those who have a unique skill set that’s in high demand and who can work on their own terms. She says that freelancers without desirable skills may suffer while waiting for that next job. “If you’re looking for work three months of the year, this is comparable to taking a 25 percent pay cut, and someone with dependents or financial obligations will quickly realize that unsuitability can be stressful.” For those going into or still in college, think about what degree you’ll be graduating with.
Advice for college grads
Wright sees the gig economy as a great opportunity for college graduates, and he recommends that they jump in and start learning the system. “New tools for tracking hours, billing clients, doing taxes, etc. – basically the back end grind of administration – are coming online daily, and you should master the boring, administrative part early on so it’s native for you,” he recommends.
He says that students should apply for a few contract jobs to see how they like it – even if they already have jobs and only freelance on weekends or after hours – because it provides an opportunity to discover some things about themselves: “How are you with clients? How are you with deliverables? Being your own boss, sticking to a schedule? Or do you prefer the relative stability and structure of being a permanent worker?” For most students and grads, Wright says the biggest challenge will be finding a skill that lends itself to contracting, and developing those skills until they’re marketable.
“I often ask candidates I’m interviewing to tell me what they want to do, and also what is their most marketable skill, because often the two aren’t the same thing,” Wright says. He asserts that college grads have an opportunity to answer that question early in their career, and temp work or a side gig can help them discover the answer to both questions.
Once students have identified their marketable skill, Vasquez says that they need to “sharpen the saw,” or be committed to keeping those skills up to date.
Zierau says college students need to ask themselves if the market is flooded with similar candidates: “Are you unique? Does the job you want have a low barrier for entry? We’ve witnessed a copious amount of communication and psychology graduates in the last 5 years – if you’re working at a job that’s contracted and isn’t even based on your degree, you may become commoditized.” She warns that when someone with a lower salary requirement comes along, you may be out of a job.
“Future graduates really need to focus on an education and career that allows their skills to be of higher value, maybe even a bit unique, rather than falling victim to having a knowledge-base that is an inch deep and a mile wide,” concludes Zierau.