The Self-Employment Gap: How To Make Work...Work, When We All Work for Ourselves?

A few minutes on social media at the moment and you’d be forgiven for thinking everyone is going into business for themselves. From going freelance, to taking side hustles public, to starting businesses - it's hard to escape news about self-employment. Some of this might be me. Having stepped back from the first company I co-founded earlier this year after moving to the US, I’ve had a clear interest in how others approach working for themselves.

However, between waves of AI news, layoffs, economic uncertainty and company realignment, many organisations are in the midst of a change in how workers, work. The United States is a particularly interesting case for this transition because of attitudes towards self-employment, the reality of working for yourself here and the role companies and platforms could take to make it better. The US has a self-employment perceptual gap, where those who’ve taken the plunge experience a reality that is wildly different from those who are considering self employment. Dealing with this gap looks to become increasingly important as more of the US workforce is pushed through it in the coming years. So how do we tackle the gap to make work for ourselves, work for us??

The American Desire for Self-Employment?

Americans are overwhelmingly positive about small business , ranking it higher as a positive impact on society and the country (86%) than the military, religion, labor unions, tech companies and large corporations. This positivity maintains across demographics and politics, as well as increasing from 80% in 2022. The public believes it's the best way to build wealth over options such as buying a home.

With this type of positivity around self-employment, it's not surprising that the number of small businesses being created in the US annually is increasing. Registrations for Employer Identification Numbers (EINs) have increased significantly since pre-pandemic 2019 levels, from 1.3m to 1.8m annually according to the US government . Within this, professional services and knowledge based businesses have increased upwards at a higher rate, especially in the last 3 years.?

With economic uncertainty increasing layoffs and artificial intelligence poised to change the working landscape, it is projected that self-employment and freelance numbers will increase in the coming years. McKinsey found in 2022 that 36% of employed Americans (58m) identified as independent workers , up from 27% in 2016. Upwork has claimed that in 2023, freelancers now comprise 38% of the US workforce, with 52% of Gen Z and 44% of millennials reporting some type of freelance work in the year. AI disruption and economic shifts have begun the freelance push within industries like advertising, tech and marketing - as 47% of freelancers in 2023 were skilled workers in (tech, marketing and consulting). Further pressure towards self-employment for sectors like advertising will come from a rethinking of agency business models and realignment of roles.?

Even amongst those employed full time, freelancing and side hustles have given many workers a slow move into self-employment or freelancing. 39% of the US workforce reports some type of side hustle in 2023 and of those, many are working towards a sales trigger that makes their side hustle their main focus. A quarter of side hustlers want their business to make $50k out of it before making it their full time job, while 62% want to make $100k to take the leap.?

The businesses being built by the self-employed aren’t necessarily the next Ogilvy, McKinsey, Nvidia or Microsoft. A majority will be solo (14%) or less than 4 employees (49%) - leaving the determination for the direction and outlook of the business down largely to the owner or freelancer. The majority of current solopreneurs just want stability in income and flexibility (47%) vs. expansion in business size (34%). Amongst rising inflation and employment uncertainty, it's not surprising that many are looking to self-employment to find an answer, though their outlook may make it seem more achievable than it really is.?

Being Pushed Towards the Self-Employment Gap

Whether choosing to move quickly into self-employment, being pushed or easing in through a proven side hustle, the economics and reality of doing it yourself look different than how workers may expect it. Consumer and small business confidence and economic outlook in the US are trending in very different directions.?

US consumer confidence has increased since its lowest point in July 22 , while SMB optimism has gradually declined to its lowest point since 2012 . While in other countries, similar measures aren’t trending in such different directions, the US economy is shown to manifest very differently in the outlook of SMBs and consumers. The gap this creates poses a risk to how optimistic potential new freelancers and SMB owners consider the reality of self-employment.?

This gap can potentially hide some of the challenges that face the self-employed. SMB owners already report higher levels of stress than full time workers . 41% of freelancers, contract and gig workers report high levels of stress, vs. 33% of side hustlers, 31% of solopreneurs, 30% of full time / W2 workers and 26% of small business owners with employees. While multi-employee establishments show lower stress from the freedom and growth available through self employment relative to full time work, most new businesses will start out as solo operations which concentrate worry on the owner or freelancer.?

It can additionally create a seemingly positive opportunity out of self-employment which hides more financial risk than assumed. Figures show 36% of solopreneur (single person businesses) generate less than $25k annually vs. 3% of full time employees. 59% of solopreneur businesses have used a personal credit card as an emergency or temporary source of business funding, with an average small business APR reported to be 16%. 38% of these businesses have used 50% or more of the owner’s personal credit limit to support themselves.?

The financial and emotional challenges facing the self-employed stunt the motivations to why each owner or freelancer made the decision in the first place. Though these range from positive reasons like self-determination (52%) or challenging yourself (33%), to negative reactions like lack of other opportunities (33%) or loss of a job (22%) - once the business has started, it's about growth. Growth comes in many forms, but smaller and solo operations face the unmet need of increasing revenue above all else (42%) . On average, a single person US business owner believes they need $219k to feel like they’ve succeeded. In an economy where many will earn less vs. their previous employment, a new market of self employed support is flourishing.?

Upgrading the Self Employment Industrial Complex and Cushioning the Fall Into the Gap

Anyone who’s been self-employed is familiar with the support industries that outreach to help you. From questions about ‘what I would do with 100 more clients a week’ to classes on personal branding, new business and AI generated content and design services - the Self Employment Industrial Complex is alive and well, especially for the knowledge and skill based industries growing in number. When there’s a gold rush, it pays to sell shovels and when there’s a freelance shift, it pays to be in the freelance support business - especially as we look to be coming into a boom phase.?

However, just as the prospectors discovered in the American west, not everyone can be given a fair return on their efforts and not every offer of support is effective or even genuine. Similar to other pressurised environments, such as job hunting, drop shipping, crypto-currency or college admissions, self employment and entrepreneurship suffers from the inherent grafting of a secondary economy geared up to spread mis-information, imperfect products, fraud and exploitation. The promise of self-employment is powerful, powerful enough to create opportunities to leverage unmet needs in dishonest ways. Economic instability, rising costs including a challenging US healthcare system, emotional isolation and the growing, but underdeveloped promise of technologically driven change are all pressing issues.?

Freelancers and solopreneurs are actively looking for help to address these. Freelancers are 2.2x more likely to use AI with 20% using it regularly vs. 9% of full time workers. However, many use it for more quotidian tasks like research (44%), translation (33%) and proposal writing (32%). AI must continue to develop to become a true business partner for the self-employed. 60% of solopreneurs are looking to hire this year in the form of employees, freelancers and contractors - however, economic uncertainty and the lack of a standardised talent pool are challenges to growth. 42% of freelancers in the US don’t have health insurance and those that do often have it through a spouse.? To cushion the fall through a potential Self Employment gap, the growing numbers of a self-employed workforce need real allies creating real support.???

Who Will Support Us When We Work For Ourselves?

The current downturn and challenge facing WeWork is an apt reminder that self-employment and entrepreneurship requires adaptive and innovative thinking on how to be useful and successful. As remote work attitudes, economic forces and technology shifts, so must the support given to the self-employed. Simply putting forward a provocation about new ways to work and leaving your customer based to solve it isn’t enough in the current market.?

As many companies rethink how they interface with the self-employed due to AI, and others fill the ranks of the self-employed through layoffs, being a positive force is needed, but difficult. Companies like advertising agency R/GA have shown how you can think differently about interacting with freelancers and contractors. in creating their Associates program they showed the value of supporting those they’ve worked with - offering stability, community and space to work to freelancers who interact with the organisation.

While market places like Fiverr and Upwork have intensified the competition and challenged pricing for the self-employed, they’ve also taken the front foot when it comes to AI and education around it. Technology platforms like Google Cloud are supporting innovation amongst the self-employed with credit and grant systems for startups.?

Additionally, while finding growing communities for the self-employed or small businesses is often confusing, freelancer groups (like a personal favourite of mine, Outside Perspective ) and a growing range of consulting and SMB networks are offering community support and knowledge sharing amongst the self employed. The number of LinkedIn users resharing freelance requests and posts grows exponentially by the day in a well intentioned, but if a little cluttered effort.?

Finally, B2B advertisers can be realistic about how they portray and relate to small businesses and the self-employed. Rosy depictions of overcoming struggle easily or the freedom of self-employment only reinforce the gap in potential customers and don’t relate to reality. Grit and determination should be celebrated, but brands should consider how they functionally support it beyond communications. As someone who once named a bank Mettle for this reason, I’d ironically claim we’re beyond the celebration phase. It’s time for brands to get pragmatic and real in communications, as well as involved in action to support the self employed further.??

The popular portrayal of self-employment in advertising needs to evolve. The HSBC ad above is one of my classic favourites, but as more and more businesses are individual or solopreneur with stability and not multi-person growth as the goal, so must how B2B ads talk about growth.

Forward thinking platforms and businesses are adapting alongside the self-employed, to deliver the promise of self employment in new ways that are mutually beneficial to both. The gap between how we see the world as consumers and SMBs is real and not closing anytime soon. Now is the time for everyone to think about how to adapt to this gap - especially as we face a future where most of us will go through it.