There’s no doubt that in the long months of lockdowns and restricted activities in America during the pandemic, many people got the entrepreneurial bug. In July 2021 alone, applications for business formations were up 98% year over year, according to federal data. Many are dipping a toe into the water of business ownership by doing independent work, such as freelancing and contracting, based on MBO Partners State of Independence in America data preview for 2021. “I think this is a good sign for America,” says Miles Everson, CEO of MBO Partners, a provider of back-office services for independent workers.
Here are some of the key findings from MBO Partners:
· After a 7% dip in 2020 due to the pandemic, the number of independent workers rose by 34% in 2021. The number of independents skyrocketed from 38.2 million to 51.1 million in that period.
· 63% of workers (up from 59% in 2020) say that working independently was their choice completely, and 77% are highly satisfied with independent work, the largest percentage in the 11-year history of the survey.
· 73% of those who did part-time independent work in the past year did so to supplement their income
· 68% of full-time independent workers say working independently is more secure than a traditional job. In 2021, 29% of traditional job holders agreed, up from 19% in 2019.
· 40% are using online marketplaces to connect with customers.
MBO Partners calls this confluence of trends the Great Realization. “There’s a realization I don’t have to work for one company every day—I don’t have to work on one project,” says “Many workers feel happier and more secure working for themselves.”
Part of the equation, according to Everson, is that many of the highest performers are realizing that they will never be paid what they are worth on a corporate wage scale. “Corporations will pay you the lowest amount on the full-time wage scale it takes to keep you there,” he says.
So, these high performers are opting to start businesses instead. “As an independent, you can command the prices for your work that you want,” says Everson.
One demographic that’s driving the trend is younger workers. About 2/3 of new independent workers are ages 18-25 or millennials. “Younger and younger Americans are choosing to be independent earlier in their careers,” says Everson. “That has the potential to be a much more impactful trend in how works get done and where you find the best talent.”
Another interesting finding: 55% of those who became independent workers in the past year identify as female, up from 46% one year ago. It appears that some of the women pushed out of the traditional workplace by back-to-the-office mandates or the added pressures of online school and unstable school schedules are starting businesses, where no one can penalize them for being responsible parents. “You can control your day,” says Everson. “You’re not beholden to a single manager who creates demands.”
Many employers are realizing this is not a temporary trend and are embracing it. “Companies are realizing the independent workforce has got to be key to my workforce strategy,” says Everson.
In some fields, it will become increasingly difficult to get things done without relying on freelancers and contractors, Everson believes. “The balance of power has shifted from corporations to the worker,” he says.
The good news for companies is that those with a greater share of independent workers have higher market valuations, according to MBO Partners’ research, says Everson. “We see this as evidence the great realization is having benefits to both the independent workforce and the enterprise.”