Driven largely by the rise in the on-demand digital economy, a new kind of self-employed entrepreneur is rapidly being added to the U.S. workforce.
Unlike their predecessors, many of today’s newly minted entrepreneurs don’t have storefronts, staffs or even business cards. What they have instead is access to the global marketplace by directly providing services to consumers.
Powered by the ubiquitous connectivity of the Web and the amazing ability of laptops, tablets and smartphones, entrepreneurs are opening virtual stores, consulting shops and individual businesses of every kind. In the process, they’re disrupting multi-billion dollar industries from taxi cabs to home help, as well as professional services, such as the medical and legal communities.
This stunning ease-of-entry would have been impossible just five years ago. Without an office, ad budget or need to travel, the self-employed can now connect directly with paying customers and start working almost overnight.
In fact, according to the Intuit 2020 Report, prepared for Intuit by Emergent Research, contingent workers made up only 6 percent of the U.S. workforce 25 years ago. That group has grown exponentially to roughly 30 percent of the workforce today, and is expected to exceed 43 percent by 2020.
Yet, as much as self-employed entrepreneurs are becoming a key economic driving force, it’s clear that neither government policy nor segments of the private economy are keeping up.
Traditionally, starting a business meant a substantial investment in legal, accounting, tax and employment compliance – on top of renting, building or buying a store, office or shop. And it presumed that entrepreneurs could fund their start-ups with savings, home equity, gifts or loans from a bank, family or friends.
But today, virtually all of those assumptions – and requirements – are being upended.
Research tells us that the new, self-employed entrepreneur doesn’t even think of himself or herself as a small business owner and that these back-office tasks are overwhelming the individual operator.
While there is a growing offering of support services emerging to address some of these challenges, including a product Intuit has developed especially for the self-employed, much more needs to be done to help grow businesses of one.
Similarly, regulators and policymakers need to adapt to these changes and reduce both the complexity and volume of requirements that may have historically been imposed on traditional small businesses.
Corporate regulations, taxes, retirement, insurance and more are based on a model of employment that, for many, doesn’t exist anymore. Forcing millions to navigate all of this while running their own business drains their time, and often their finances. It’s not just laws, but other aspects of running a business, such as loans, that need to be rethought to support this new brand of business owner.
All of us need to rethink the notion of entrepreneurship in the age of online auctions and independent drivers who can be summoned on a smartphone.
And other economic questions will emerge. Public policy related to traditional employer-employee-based social safety nets must adapt to new economic models in innovative ways. At the same time, the growing generational trend toward not only a sharing economy, but a renting vs. ownership economy, represents a further set of economic policy challenges. These will test not only national and local tax systems, but basic lifestyle decisions for a generation dealing with a growing burden of student debt.
Indeed, the emergence of new economic models is already too advanced to look back, and innovative public policy must emerge to keep up with the pace of change. But as with every prior era, this latest ‘new economy’ offers exciting prospects for opportunity and individuality that is very much consistent with the American experience and ideal over the last several centuries. The on-demand economy is here to stay, and it’s time for everyone – policymakers, regulators and the private sector – to start championing this exciting new definition of what it means to be an entrepreneur, and to create the innovative policies and tools needed to adapt to these new business models of a sharing economy. As with every prior economic evolution in our history, this emerging new economy will write a new chapter in the American adventure. We need to catch up with where our people are going.