Freelancing – at what cost?

(Oslo Foodora riders on strike, Nordic labour Journal)

The number of freelance workers increases every day.  A major part of this growth is due to the advancements in technology and the so-called platform economy allowing people to work remotely and flexibly. 

The platform economy is a digital economy facilitating products (Amazon, eBay), payments (Paypal, Square) and services (Uber, Foodora, Airbnb) between people online. It provides a free market system in which temporary positions are common and companies contract with independent workers for short-term engagements. This allows them to acquire customers through matchmaking in their digital platform. You may also know this as the Gig Economy or the Sharing Economy.

Interaction within the platform economy - diagram
 (The interaction within the Platform Economy)

A growing economy

The Platform Economy in the U.S. is at an all-time high with an increase of 78% from Q3 2018 to Q3 2019 (Payoneer, Forbes 2019). On a global level, it is expected to quadruple by 2024.

The freelancers working in this new economy are diverse and spread across different industries with different motivations. There is the earner who makes all or part of his/her earnings like this by necessity, and on the other side there is the casual earner who merely wishes to augment their primary income:

primary income vs supplemental income by choice or forced - statistic
(Source, Mckinsey 2016)

Norway has not yet seen the same rise as in the U.S. In fact, the largest groups of freelancers are still found in the traditional freelancer industries such as the media/entertainment, construction and transportation industry. Still, the platform economy has seen a steady but definite growth these last few years also in Norway. 

What’s at risk?

When working as a freelancer you can freely choose the type of work you want. You have the possibility to create your own routine, and you can receive jobs and get paid globally. However, the potential challenges that could arise when working independently are many, these are some:  

  • No steady source of income
  • Income fluctuation
  • Not knowing how much to charge
  • All alone when dealing with legal issues.
  • Planning for own pension, insurances and taxes. 

Sometimes the work is fluctuating, you may be fully booked or you may have no work lined up. In the midst of this financial instability, you still have fixed expenses that are due every month and some unexpected ones. With this in mind, saving money for rainy seasons becomes inherently more important for the freelancers. In fact, if you are starting out as a freelancer, the number one tip is to start saving money – now. Another aspect to consider when working as a freelancer is that if you get sick, you simply don’t get paid:

“As a freelancer, you’re not entitled to sick leave, holiday pay and even have disadvantages when it comes to insurance and pension policies. These practical issues can directly influence your happiness at work if your only source of income is your freelance work.”
– Freelance musician, research interview, Norway.

The freelancers working in the platform economy are the most vulnerable group of freelancers. Of the top 10 fastest growing freelance markets, half of them were countries with developing economies (Pakistan, Serbia, Philippines, Ukraine and Bangladesh). When you look at the demographics within this new way of working, a rapidly growing group is young and/or immigrants. This can be explained by freelancing being a lower barrier for entering the workforce. Unfortunately, the wages are low and working conditions bad in certain parts of the platform economy. 

Uber demonstrations for better worker conditions - photo
(Photography by Michael Short / Bloomberg / Getty)

With the promise of immediate job opportunities, digital platforms such as Uber, Lyft, Foodora and Fiverr have managed to normalize low pay with no insurance or benefits. Fortunately, independent workers are now beginning to demand more for themselves. California recently passed a bill forcing companies to treat their workers as employees rather than contractors. This means that Uber drivers get access to insurance, pension schemes and so forth. 

The call for better working conditions and wages is also emerging in Norway.  Earlier this year, Foodora’s employees went on strike demanding higher wages and compensations for their bikes. This might be the start of a movement where freelancers unionise to fill gaps left by legislators. Statistically, the number of freelancers that are unionised is still relatively low.

Freelancer co working area - photo
(Photography by Shridhar Gupta)

The need for flexible banking and insurance

Freelancers face immense risks and instability in their every day work-life. Unfortunately, they are still largely ignored when it comes to receiving financial services like banking, investments and loan services. Due to their income fluctuation, they receive a poor credit score which prevents them from accessing credit and loans. Almost all banks require a stable job, preferably permanent and a good credit score in order to offer credit and loans. For example, if you want to apply for a loan in Norway, you have to provide the last three paychecks you received in order to qualify. This shows that traditional banking and insurance products are designed for people with a fixed salary and/or a permanent employment contract. 

In 2019, Uber released Uber Money where they give credit to their drivers – thus providing them with credit in the same platform they work and get paid in. This could be viewed as a stepping stone to a full financial cycle where all your finances are centralised. This move makes sense as platforms like Uber has all the necessary data to provide credit to their contractors – they know their work patterns, income history and can predict your credit score far more accurately than traditional banks. 

As the platform economy grows, the need for financial services supporting fluctuating incomes and flexible work patterns increases. Ideally, these services could also help freelancers manage their income and expenses as they navigate uncertain and risky labour. By adjusting their services, financial institutions could open up an entirely new market and increase the financial stability for our most vulnerable workers.

About the author

Hodo is a UX Designer at Finstart Nordic. She previously worked at Sparebank 1 where she helped design the mobile banking app. She has a Masters degree in Informatics and interaction design from the University of Oslo.