Freelance economy makes up 36% of the U.S. workforce, here's how its evolved in the COVID-era

Adam Ozimek, Upwork Chief Economist, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss the state of the freelance economy, annual earnings for these workers, the type of freelance workers in the current climate and much more.

Video Transcript

ALEXIS CHRISTOFOROUS: A new report from the talent solutions company Upwork is giving us a closer look at how the freelance economy is faring during the coronavirus pandemic. By the way, freelancing makes up 36% of the total workforce now here in the US.

Upwork's Chief Economist, Adam Ozimek, is joining us now. Good morning, Adam. Give us a feel for where the freelance industry stands at the moment.

ADAM OZIMEK: Thanks for having me. So freelancing, like the rest of the economy, has undergone a lot of change during the pandemic. And workers in freelancing have been affected like everybody else.

What we're seeing is sort of two opposing forces. A lot of people are, for the first time, looking to freelance as a way to make a living during the pandemic, because of the unique challenges of the pandemic and because of how flexible freelancing is. At the same time, we have a lot of people who were freelancing who have paused.

Now, these two kinds of workers, the new freelancers and the paused freelancers, are really very different from each other. And I think what we're really seeing is the flexibility of freelancing is really on display in how it's helped workers and companies adapt to the pandemic.

BRIAN SOZZI: Adam, depending on the job, freelancing for some industries was good. You could make more money than if you were a full-time employee. Is that still holding true now, even amidst the recession?

ADAM OZIMEK: Yeah, so you know, average hourly earnings for freelancing has not taken a huge hit in the recession. And even when you look at, for example, Upwork, where we've had a lot of new freelancers come on, we've also had a lot of new clients come on as well. So it's really, both sides are looking for the ability to connect remotely right now. And that's a way that freelancers tend to specialize in.

So we've really had a lot of interest in that. And as a result, on our platform we haven't seen any decline in the average hourly earnings. And you know, for freelancers overall, we haven't really seen much either.

Now obviously, that's going to vary by occupation and place and all sorts of other factors. But overall, no, we haven't seen a big hit on wages. And you know, in general, that's going to be true for the economy overall. Wages tend to be pretty sticky. So it's, you know, they don't necessarily fall very quickly.

ALEXIS CHRISTOFOROUS: I want to talk about who is chasing the freelance work and what kind of work they are chasing. Is it younger people? Is it skewing older? I mean, I'm thinking freelance, I'm thinking the Lyfts, the Ubers, that kind of stuff. Is that right?

ADAM OZIMEK: So in general, freelancing is really done sort of across the age distribution. There are freelancers who are younger. There are freelancers who are older. It's true of education too. There are freelancers who are more educated, who are younger educated.

But during the pandemic, we've really seen a significant surge in younger freelancers. So a lot of people who graduated from college-- and you know, some of them graduated early because their schools stopped. And then it's really hard to find a new job in this environment. And a lot of them have turned to freelancing.

So we think it's been a big, you know, opportunity for people there who are struggling to find something that's full-time. And they're able to work remote, and they have skills and they're trying to work. You know, it's a lot easier to find one client than it is to find a long-term full-time position. So it's easier to get started right away and not have to wait.

We also see that they're tending to be more skilled right now. So the new freelancers are looking for more skilled work. The two biggest sectors we've seen are computers and mathematics, which includes software design and programming. And we also saw business and finance. So those are the sectors where you're seeing the most new freelancers.

And the sectors where you're seeing a lot of people pausing freelancing are construction and education. So it's really sort of-- there's a big difference between where people are starting to freelance and where they're stopping right now.

BRIAN SOZZI: Joe Biden-- he has come out in support of California Assembly Bill 5, which Uber and Lyft have been fighting for some time with regards to freelancing and their business models. How detrimental would a president Joe Biden be for the freelance economy in the country?

ADAM OZIMEK: So I'm not the one to comment on AB 5 and AB 5-like policy specifically. But what I will say is that freelancing is incredibly valuable to the people who do it and not just the businesses who hire them, who it's also valuable for.

I think it's something that really is not appreciated, that for most freelancers, this is not something that they would rather have a full-time job. This is how they want to work. It provides them with flexibility that they lead.

For example, among new freelancers, 67% of them are caregivers for either a child or a parent. Now, right now, if you have your kids at home, and they're doing remote schooling especially, it's really difficult to have a full-time job, especially if it's one that requires going into the office. So freelancing gives them the flexibility to work when they want and how they want. It's just really hard to replicate that with traditional employment.

We also see always in our data that disabled people are much more likely to freelance, because you don't know exactly when you're going to be able to work for certain disabilities and you really need this kind of flexibility. So you know, sort of stepping aside from the politics overall, I really hope that policymakers across the spectrum sort of take an appreciation in the value that this way of working has for people.

It's absolutely essential for many of them, and for others it's just how they want to work. They want to have that flexibility and that independence. And you're not going to help them by trying to block those opportunities.