The gig economy continues to grow, both for highly skilled, mostly older independent contractors and younger, less-skilled seasonal workers, according to the report, "Illuminating the Shadow Workforce: Insights into the Gig Workforce in Businesses," by the ADP Research Institute.

For both types, one in six workers at any given company is a gig worker–and for about 40 percent of companies, that ratio increases to one in four workers, the study found. Use of gig work is growing: from 2010 to 2019, the share of gig workers at companies has increased from 14.2 percent to 16.4 percent, a 2.2 percentage point increase, or 15 percent. Both groups of gig workers, short-term W-2 employees as well as 1099-MISC independent contractors, contributed equally in this growth.

"Every indication is that gig work will only continue to grow, and with an already tight talent market, businesses will need to fully understand the dynamics of the contingent workforce — to optimize talent management, workforce strategy and the company's bottom line," the authors write.

The two types of gig workers have distinctly different demographic profiles: 1099-MISC independent contractors are typically older, highly educated and more likely to have a higher income, while short-term W-2 employees are typically younger, less educated and have a lower income.

"Companies often leverage 1099-MISC contractors for their specialized skills on a project basis — for periods when regular staff cannot manage the workload without training or on short-notice, or for commission-based work," the authors write. "Short-term W-2 employees…are typically seasonal or on-call hires. The disparity of income indicates the two groups are performing tasks that require very different skill sets."

Twenty percent of gig workers are over 55, and for independent contractors, it's even higher, at 30 percent, according to the study. Nearly half of older gig workers have retired from another career.

"This group does not appear to be working out of financial necessity alone – 'Doing what I enjoy' is of primary importance, which is far more important than to younger workers," the authors write. "1099-MISC workers in this age group are unlikely to believe they have interesting alternatives to contract work — only one-third of those 55+ say they can find a traditional W-2 job as good as their current 1099-MISC work, compared to two-thirds of 1099-MISC workers under 35, who say they can."

Most of the gig workers under the age of 34 actually consider themselves "traditional employees," reflecting an expansion of that term for millennials and Gen Zers.

"For 1099-MISC workers in this age group, they are more likely to be married and have children under 18, and more likely to be highly educated — with one in four possessing an advanced degree," the authors write. "Interestingly, while more than 50 percent of 1099-MISC workers under 35 say they would prefer to be a W-2 employee, the prospect of health insurance does not appear to change their job behavior. In fact, 74 percent say they would keep working as a 1099-MISC worker, even if they lost their current health insurance."

Other key findings include:

More than half of the 1099-M contractors work for the same company for 12 consecutive months just like any traditional W-2 employee. The average income for employees working for 12 consecutive months is similar, regardless of being a 1099-M worker or a traditional W-2 employee.
More than half of 1099-MISC contractors are engaged 12 months with the same company, while 23 percent of the traditional W-2 employees engage with a company for less than 12 months. The average 1099-MISC contractor is paid nine out of 12 months by the same company, compared to the average W-2 worker who is paid 11 of 12 months by their employer. The difference in average monthly income is also minimal — with 1099-MISC workers earning only about $330 more.
Recreation, construction and business services are the top three industries utilizing the gig workforce. In nearly all sectors, 1099-MISC workers earn more than the W-2 employees. However, gig workers do not fare as well in the education and information sector, which includes media, broadcasting, telecommunications, printing and research-related businesses that attract many low-paid freelancers.
About 90 percent of gig workers have health insurance. For 1099-MISC workers specifically, less than one-third purchase their own individual insurance, and most indicate that health insurance does not affect their decision to work as an independent contractor.

"Anecdotally, employers interviewed believe that many 1099-MISC workers have made an economic decision with their spouse — where one spouse works without benefits for higher pay and the other receives lower pay with benefits — resulting in a higher total income and health benefits for the household," the authors write.

The ADP Research Institute analyzed the anonymous and aggregated payroll data of more than 75,000 large companies, and supplemented it with a survey of more than 16,000 workers and interviews with 21 company executives.

Read more:

Instant Insights /

Companies' use of short- and long-term gig workers growing

More From HR Executive

Related Stories

Recommended For You