2017 Total Workforce Index™
The Gig Economy as it’s currently defined by most is composed of both informal and non-informal contingent workers. ManpowerGroup Solutions recognized that there are two unique subsets under the umbrella of contingent work, those with and those without formal contracts for employment. The true ‘Gig Worker’ is a contingent worker with no formal contract who earns compensation on a per job, or per gig, basis. In the 2017 Total Workforce Index™ we separate these two subsets of the workforce and take a closer look at the growing informal workforce and related trends.
Informal Workforce Participation
The most mature workforce market, with an informal workforce that is more than 40% of the total workforce is India. This market has 41% of the total number of workers who are engaged in work. This informal population is divided up nearly equally between the services, trade and manufacturing sectors, with the services sector claiming a slight advantage over the other two sectors.
Helping to drive this informal workforce growth is the emergence of new segments such as corporate freelancers, entrepreneurs and professional moonlighters. However the popularity of informal work isn’t limited to people who have been in the workforce and who decided to leave permanent or full-time employment or supplement those incomes. The flexibility has attracted many women seeking a work life balance that allows them the ability to continue to work or return to the workforce as a freelancer.
Facilitating this rise in informal workers is the technology that has allowed many people to manage their own businesses. Cloud based computer, online applications and mobile applications have allowed many people to significantly reduce the time necessary to manage businesses as well as reduce employee overhead and other overhead costs associated with owning you own business.
Challenges of the Gig Economy
There are certainly many positive aspects to informal work, however, along with freedom and flexibility often requires added responsibility and long ‘unpaid’ hours needed to acquire new work and manage the day to day tasks of operating a business or being self-employed. One such responsibility is that of taxes. In the United States many informal workers are termed as ‘1099 employees’ despite the lack of contract for employment. These people are essentially independent contractors who are paid on a per job basis by other business to perform work for them. An example would be a plumper that is contracted on a job-by-job basis by a general contractor.
Contractor must provide their own insurance and register for business licenses to operate independently but they must also keep their own accounting records and pay taxes on their income out of their earnings each year. This tax liability without the withholdings and management of an HR department that is enjoyed by a permanent employee can be the quick end of some informal businesses. Employees of the growing ‘sharing’ sector which includes ride sharing and subletting among other things is no exception to the taxes imposed by the federal and state legislature governing these independent contractors.
Growing Informal Populations
Despite the challenges most mature markets feature growing informal workforces between 5-10% of the total workforce. Canada, the United Kingdom and Ireland currently have 7% of the total workforce population engaged in informal work. As the workforce regulation in these markets changes and with the shift towards automation in many low-skilled positions throughout the mature markets we may see a steady climb over the next decade in the number of informal workers due to lack of employment in positions formerly filled with a population that is aging and seeking both flexibility and low to moderately skilled work using the skills they currently possess.
The rise of the informal workforce promises great opportunity to those people in the labor force who wish to take control of their employment opportunities while assuming the responsibilities of acting as their own independent business. A small shift towards closing the gender participation gap has already begun in some markets as more women are able to continue to work or return to the workforce on their own terms. Younger generations, those who are tech savvy and more likely to trust and be comfortable using mobile apps to find and be engaged by potential employers are enjoying the opportunities afforded to them. However, there is a growing population of older and otherwise retired workers who are finding a means to supplementing fixed incomes by adapting to new technologies such as those involved with ride sharing. This gives them not only supplemental income but the ability to enjoy social interactions outside of the home.
Emerging Markets Dominated by Informal Workers
While the mature markets have embraced the informal worker, it is the emerging markets where the informal worker is dominating the contingent workforce landscape. Countries like Bolivia, Honduras and Nicaragua have informal workforce populations of 44% or more in the case of Bolivia at just fewer than 50% of the total workforce. Thailand and Vietnam feature the highest percentages in the APAC region at 42% and 43% respectively. The markets in the Americas and APAC regions dominate the top 15 markets relative to informal workforce populations.
The Gig Economy may be more powerful than we thought. With an estimated 34% of the workforce in the United States classified as ‘Self Employed’ or informally engaged in work analyst predict that this opportunity will grow as the popularity of these types of work soars over the next few years. Most expect the percentage of the US workforce that is made up of informal or independent contractors to increase to 43% by the year 2020. However, this number includes workers and freelancers of all kinds, everything from the ride sharing driver to the plumber or electrician hired by a general contractor technically falls under the same umbrella.
That said the shift may not be as dramatic as the numbers may imply. Many people engaged in informal work are adding this secondary income to a primary engagement that provides them not only dependable income but things like medical insurance and job security. ‘Side hustles’ or secondary sources of income are all too common among the true ‘Gig Economy’ workers whether its driving, selling crafted good using mobile apps or websites or operating small online retail stores these smaller incomes may be a necessity to add to the household budget or driven by social factors like hobbies and personal human connection.