The traditional labor market is experiencing one of the most serious crises and reformations in the history of mankind. On the one hand, developed countries are preparing for an acute shortage of qualified personnel. For example, Germany is actively recruiting specialists from neighboring countries, as up to 40 % of the country’s businesses report a staff shortage. At the same time, qualified experts who are increasingly in demand don’t wish to be bound by the obligations of time and place: the remote work market is set for explosive growth. Today, there are 53 million freelancers in the US alone. According to forecasts, every second American will be a freelancer (either entirely or by combining freelance work with their main job) by 2020. On the other hand, developing countries are unable to cope with population growth and increasing unemployment of low-skilled personnel. The next billion users will go to the Internet in search of work.
The gig-economy — the future is already here
Traditional employment, still thought essential only 10 years ago, is less and less interesting for both sides today. Companies don’t want to keep a huge staff and provide social support to their employees. In addition, the market is changing from being based on general professions to one of skills. Specialists with a narrow range of skills, who are able to provide one or two functions, but do so flawlessly, are growing in value compared to averagely-skilled generalists. There is no need to keep such an employee as a permanent member of staff, it being sufficient to make contact only when suitable tasks arise.
Good specialists know their own worth and will always find clients. The market is becoming globalized, and if you are the best specialist in your field in the world, you can afford to work to your own schedule and from anywhere on earth. The new generation of professionals is not interested in employee benefits and a 9–5 office job. They want freedom and the opportunity to live by their own rules.
The best go freelance
Experts forecast a bright future for the freelance market. In the next few years, explosive growth is anticipated in practically every country. According to the Job Seeker Trends 2016 study conducted by BCG, which covered the G7, the BRICS countries and Australia, the average percentage of respondents who expressed an interest in searching for freelance work was 76 %. Even in Japan, which is more traditional in terms of its labor organization, more than half of respondents expressed an interest in freelance work. According to the estimates of Staffing Industry Analysts, the market will grow to $16 billion by 2020 (its optimistic forecast estimates $46 billion).
Today, even the most traditional companies are starting to employ freelancers, they simply don’t have a choice: the best experts can afford to live by their own rules outside a corporate culture, and they make the most of this opportunity.
Like the traditional market, the freelance market can also be divided into skilled and unskilled labour. However, both markets place an emphasis on skills over profession. There’s no need to be a journalist, it’s enough to be able to write excellent texts on medical subjects. The suitable person may be a journalist, a doctor, a pharmacist, or even a mathematician. You may have a PhD in physics, but if you are also the best locksmith in the country you could earn three times as much. Your skills, you level of craftsmanship and objective feedback on your work is what’s important.
The next billion users — freelancing as an escape from poverty
Roughly 5 % of the population of India – about 65 million people – can’t find a job. At the same time, 77 % of the total population of India noted that none of their family members has a regular income or salary. We need to understand that India’s labor market, where 287 million people cannot read and write, represents 37 % of the total number of illiterate people around the world, of whom more and more are becoming users of mobile Internet services.
With the advent of freelance platforms that will be understood by uneducated users, and with the increasing penetration of mobile Internet, freelance exchanges will grow inexorably. For the next billion users, this is almost the only possible solution to poverty today.
The current trends of the remote work market can be tracked on freelance platforms (for example, Upwork and Elance). Their statistics show that the Asian market already provides a large number of employees. For example, the latest Elance report can be used to estimate the market share for users who already have Internet access.
According to the report, there are now about 30,000 registered freelancers in Indonesia and 31,000 in Malaysia (for comparison, there are about 650,000 freelancers in India). The average cost of an hour of work is $16 and the total volume of the Indonesian market is $3.6 million (compared with $312 million in India). There are 1.1 million freelancers, with an average hourly rate of $30 per hour registered in the US. The market volume is smaller here than in India: $310 million versus $312 million.
On the other hand, an analysis of the geographical distribution of clients (those offering and paying for work) in the same report shows that the main clients are from “first world” countries, in particular the USA (2.6 million projects in the US, 0.35 million in the UK, 0.32 million in Australia, 0.27 million in Canada, 0.1 million in India, and 0.05 million in Singapore).
Thus, it may be supposed that global freelance platforms are able to even out imbalances in the world market and solve both staff shortage and unemployment problems.
Non-transparency and risks
The freelance market in many countries is still a shadow market. Freelancers use platforms to find their first orders, then subsequently work with the company directly, so as not to pay a high percentage of their fee to the intermediary platform. Differences in legislation and difficulties with making payments in various currencies are also problematic. All this greatly complicates the work on global projects, when the client and the freelancer live in different countries.
There is a risk to both client and freelancer that the other party will be dishonest. It is possible to “cheat” the rating systems on the leading freelance platforms, meaning the client may pay too much for a less qualified worker or receive badly substandard work. It is quite difficult to prove that a translation has been done poorly, for example. And in this case, instead of making a saving by employing a freelancer, the client incurs additional expense for redoing work that has already been paid for.
The solution could be creation of a new decentralized global P2P platform for conducting transactions on smart contracts based on the Blockchain. A skill exchange such as this wouldn’t require a large IT team to maintain the system, meaning the commission imposed on transactions wouldn’t exceed 2 % (compared to 15 % on existing platforms). Clients and freelancers will benefit from working on a platform that guarantees execution of the contract or a full refund, and won’t attempt to bypass the system to save money. Thanks to the Blockchain, the entire transaction history and the ratings of the client and the worker will be stored, meaning they cannot be faked. Additionally, thanks to the use of a cryptocurrency, transaction participants around the world will be freed from a range of problems related to converting and withdrawing funds.
The creation of such a decentralized system will revolutionize the world labor market and remove all the barriers to remote cooperation that exist at the moment.
Blockchain evangelist, sociology and labor market specialist, more than 5 years of development IT-services for freelance. Architector of Unolabo Skillmarket platform.