The answer is a little bit of both. Recent research from the McKinsey Global Institute examined the economic potential associated with online talent platforms and found that their biggest impact will likely come from boosting labor force participation: “In countries around the world, 30 to 45 percent of the working age population is unemployed, inactive or working only part-time.” This translates into some 850 million people in the United States, the United Kingdom, Germany, Japan, Brazil, China and India alone. The U.S. labor force participation rate, for instance, declined by 3.7 percentage points from the beginning of 2007 through the end of 2014.
While some have opted out of the workforce by choice or prefer part-time employment, this number includes many millions who would like the means to raise their incomes. A U.S. survey, for example, reports that three-quarters of people who are unemployed and able to work would be likely to work if they had flexible options. Digital marketplaces for contingent work can deliver that option to people who do not want traditional full-time positions. If even a small fraction of inactive youth and adults use these platforms to work a few hours per week, the economic impact would be huge—amounting to some $1.3 trillion annually by 2025, according to MGI’s projections.
But the quality of jobs being created through these on-demand service platforms is coming under increased scrutiny. Digital platforms create pricing transparency and increased competition. Just as e-commerce marketplaces tend to bring down the price of products sold online, talent platforms put pressure on the prices associated with services. Many of the jobs created by contingent work platforms do not add up to a living wage.
Around the world, policymakers will need to clarify how project-based workers are treated under the law, whether regulations like minimum wage laws apply, and what benefits the employers will need to provide.
Chosen excerpts by Job Market Monitor. Read the whole story at What the rise of the freelance economy means for the future of work | McKinsey Global Institute | McKinsey & Company