A 2017 Projection on Private Equity

According the most recent labor statistic report from the McKinsey Global Institute, the ‘gig’ or freelance worker economy accounted for 25%-33% of the total US workforce in 2016. Its rate of growth is expected to outpace that of the full–time-employment workforce in 2017 and beyond. The exigencies this segment of the labor market faces are manifold. Specifically, there are a key set of pain points indigenous to the ‘Gig Economy’: consistently finding contract work; smoothing out cash flow volatility from paycheck to paycheck; tax planning/financial advisory bespoke for the 1099 worker; comparing and selecting health insurance plans; paid time off; ongoing education and training/keeping skills current; and managing retirement benefits.

While still largely in their infancy, human and digital solutions designed to creatively address the points of angst and concern of the Gig Economy are beginning to proliferate, and private equity investors are helping to finance their development and growth. The piece that follows overviews the defining characteristics of the Gig Economy, touches on some of the technologies, applications and solutions these workers are using today, and outlines trends for 2017– where one can expect to see more investor dollars flowing in the future.

The Macro view: How did we get here in the first place? According to a recent report by the RAND American Life Panel ‘Many possible factors could have contributed to the large increase in the incidence of alternative work arrangements for American workers from 2005 to 2015… 1– Alternative work is more common among older workers and more highly educated workers, and the workforce has become older and more educated over time… 2– Technological changes that lead to enhanced monitoring, standardize job tasks and make information on worker reputation more widely available may be leading to greater disintermediation of job tasks…3-.Contracting out is often sought because firms seek to restrict the pool of workers with whom rents are shared, as well as to reduce the volatility of core employment. 4– It is plausible that the dislocation caused by the Great Recession in 2007-2009 may have caused many workers to seek alternative work arrangements when traditional employment was not available.’ And, clearly, the growth and magnitude of this shift in work constructs has been largely facilitated by the ubiquity of mobile phone use and the seemingly endless new development of mobile apps for mobile devices.

 The Micro view: Who works in the Gig Economy? A report from Spera, a provider of tools and resources for freelancers and entrepreneurs, which was published in early 2016, cited the following statistics:

  • Nearly 54 million Americans participated in some form of independent work in 2015
  • 50% of U.S. working population projected to move into the gig economy over next 5 years.
  • The Gig Economy includes all age groups, but Millennials comprise its largest portion.
  • More than one-third of Millennials are independent workers.
  • In 2015, Millennials became the largest demographic age group in the workforce.
  • 32% of Millennials believe they will be working “mainly flexible hours” in the future.
  • 87% of Millennials say their smartphone never leaves their side, night or day.
  • 45% of Millenials use personal smartphones for work (vs. 18 percent for older workers).
  • 80% use social media as a means of finding work.

In the Spera report, Gig Economy workers were asked to force rank the challenges they face:

  • 63% of those interviewed cite marketing is their most important expense.
  • 57% report experiencing cash flow issues at times during the year.
  • 64% use some form of project management software.
  • 70% use software to track finances.
  • 40% prefer to get paid via direct deposit versus other forms (e.g., check, PayPal).
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    By: Jessica Drislane

    Jessica Drislane has 18 years of investment management expertise in alternative assets–specifically private equity and hedge funds. She has worked in both portfolio construction and new financial product development on behalf of her investment clients at firms such as Advent International, Audax, BNY Mellon and Harvard Management Company. Jessica has also worked extensively as a corporate strategist and business development executive across a range of industry sectors including: financial services, consumer retail, eCommerce and fine art. She holds a B.A. from Colby College, an MBA from Northwestern’s Kellogg School of Management and a degree in Fine Art from the School of the Museum of Fine Arts and Tufts.

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