EXECUTIVE SUMMARY

The digital acceleration and increase in the flexibility of work arrangements spurred by the COVID-19 pandemic has led to an increase in contractor utilization by U.S. companies, large and small. This increase occurs against the backdrop of several macroeconomic and technological forces that, taken together, support the increasing utilization of contractors in the labor market. These include the expansion of online labor market platforms that match contractors with companies; the proliferation of digital tools to manage and monitor workers’ tasks; the rapidly changing skills environment; and evolving workers’ needs and preferences for work arrangements.

There is no consensus on the number of full-time freelance workers or independent contractors in the United States today. Estimates range between 7% to 15%. Estimates of the share of workers who engage in contract work part-time or intermittently are larger, between 25% to 34%. Businesses of all sizes use contractors, and early evidence suggests that this has increased because of pandemic-induced economic shifts. Most businesses report they value the flexibility, agility, and skills that contractors bring to the business.

There is an important policy interest in better understanding the experience of contractors in the U.S. workforce and the implications of this arrangement on their long-term career development. The sizeable share of workers who engage in contracting need appropriate policy supports to fully develop their careers, and that U.S. companies need access to a critical source of skills and talent that can be used flexibly.

Contractors bring many benefits to companies. Because they tend to have more experience working for many more companies than employees, they have a broad view of the relevant markets, and can bring diverse perspectives to their work for their current company. They also have strong incentives to quickly develop a broad set of desirable skills to optimize their value in the labor market, which they navigate more frequently than employees.

This “boundarylessness” is both an opportunity and a challenge. Contractors are excluded from certain benefits commonly provided by employers, notably  training and education programs for upskilling and professional development. They also receive no support from any human resources program that could help them plan or navigate their careers. With the expansion of e-learning services for corporate training and development, it is more feasible to facilitate contractors’ general access to company learning and development resources. Yet, tests to establish worker classifications generally discourage companies providing these and other resources or support to contractors.

Because of the regular need to develop skills, decide where to take their career next, and how to signal value to potential and current employers, freelancing and independent contracting work generally benefits those with higher levels of skills and strong reputations. This can pose challenges for contractors with lower skill levels or who are members of underprivileged groups.

Supporting contractors to continually develop their skills and extend essential worker protections can maximize the opportunities for contractors and businesses to work together. This requires policies to include contractors under basic equal opportunity protections such as anti-harassment and anti-discrimination laws and polices, as well as creating incentives to include contractors in some forms of company provided learning and development programs. It also requires entrepreneurship training as part of general education and workplace readiness preparation for students, and incentives for continual education and development as the contracting role. Together, these policies would serve as a recognition of the idea that self-employed contractors are a unique and growing class of workers that have similarities both to multi-employee companies as well as individual workers.

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