Freelancer economy trends

Do you work for free?

Nov 15, 2014

I remember talking to a friend a couple of years ago about mobile applications. I was working at Microsoft at that time, a company that makes money with software. He waved his Android phone and said "why should I pay for anything?". I tried to explain it to him. He is academic, highly intelligent and in a very senior position far away from the software industry. He didn’t get it. He already was too deep into the "freebie economy". He already had a perception of entitlement for free software.

Working for free is ok in a world where everybody has a job and earns a regular income. You do it in your spare time, for fun, for the sense of charity.

Companies who give their products away for free can only afford it if they have other sources of income too. Advertising for example. This is how Google can support a business model that would lead the old Microsoft to bankruptcy.

This trend has arrived at the supply side and companies regularly request free services from their suppliers. Consultants and freelancers are being asked to provide free discovery engagements or workshops. This is ok to proof your worth but rates are being negotiated down everywhere as well. "Proof yourself to us first and you shall be rewarded later" is the promise that is rarely delivered on: The person who made the promise left the company and the successor doesn’t know anything about it, your low initial rate is locked in for good, procurement policies require the tender of your next big engagement. There are many reasons.

Enter the freelancer economy. By 2020 it is expected that 50% of work force in the US will be comprised of freelancers. How can they survive in a "freebie economy"?

In the freelancer economy more and more people will rely on earning an income from doing things that others do for free.

  • The independent software developer competes with his employed but moonlighting peer.
  • The successful book author that engages in free consultancy puts rate pressure on other consultants.
  • The tax-consultant father of 3 competes with the freshly retired senior ex-colleague who doesn't feel like enjoying his comfortable pension yet.

All those have their income sources secured but chose to engage in practices that makes the life harder for others. Worse, it conditions the expectations on the client side. Organizations are getting used to get services for nothing, free trials, freebies or at least huge discounts.

In 2007 Harlan Ellison commented, well, ranted, about not working for free. It is more relevant than ever.

We are risking entering a vicious circle. Companies are under increasing cost pressure because they are experiencing the same issues: people don’t want to pay anymore. So what do they do? They put the same pressure on their suppliers.

I live in Singapore which is a very small and competitive market. When you are out "on your own" as a freelancer you incur costs that you don’t have when you are employed: business development, idling, paying for your own insurances or a car. So if you want to maintain your standard of living you will need to charge a higher rate than if you were employed.

In Europe you can expect to make about twice as much when freelancing than when employed in a similar position. In 2012 this was about 1.2 - 1.3 in Singapore. The other day, I heard about a company who puts pressure on their managers to "exploit the market", "hire more external people" and  "get them as cheaply as possible". They hired a freelancer who works at 0.5 of his last salary now. In a buyer's market where companies continue to lay-off people, where talent is (still) abundant this is easy to do. But is it right to do?

Just a few days earlier I talked to a recruiter friend. He just had an Australian company putting out a couple of fresh contract positions at good rates. Which company do you think will enjoy higher loyalty from their increasing complement of freelancers?

This is difficult to crack. People have the right to work for free and organization have the right to ask for it. It will take several shifts in mind:

  • People need to be prepared to reward receiving value. Even if not asked to pay. Some software developers offer you the option to donate something if you like their work.
  • Freelancers need to say 'no' to unreasonable requests that undercut their market value, be prepared to work virtually and globally to exploit rate differentials in different markets. Freelancers still get the vast majority of assignments through the word of mouth. They need to create networks and pull each other into good engagements & clients.
  • Companies need to rethink their practices and start to build circles of trust and safety that do not only include their 'own' people but extends to an inner circle of freelancers. Simon Sinek speaks about this nicely.
  • Governments need to think about the social implications of a labor market that is highly competitive and erratic. This might include granting a base salary to every citizen which would provide everybody with a minimal guaranteed income. This might require higher taxes on businesses. Especially businesses who chose to replace people with machines.

You may think that the call for regulation is early. But the next wave of technology will put the old labor market to rest for good. Robotics, the Internet of Things and Industry 4.0 enable levels of automation never seen before. There will be less and less work, especially on low qualification levels. We better think about the implications now.

Still want to work for free? Of course there might be good reasons for you to do so:

  • Higher cause: like speaking at your local school, to a professional association, to a charity for free
  • Pressure: you like to procrastinate and need the kick to build something new or finish something off
  • Fun: you know you will enjoy it because of the location, audience, event, topic or format
  • Learning: as a speaker you usually can attend the conference for free, get into a new function or industry
  • Novelty: sometimes you get the chance to develop something new that you would normally not be able to that would allow you to jump-start a new line of business and establish your credibility in a new area.

For whatever reason you work for free, make sure that the value you are getting is tangible for you. It is your decision of what you do for free. 



Category: Trends

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