The Digital Freelance Economy represents a key player in digital industries across the board, from software development to graphic design to digital marketing. There exists a clear hierarchy in the digital world, and it is not often spoken about. At the top is the startup company has received the venture funding. The startup founders are seen as master technologists who possess significant talent and Intellectual Property.
Startups often contract work out to digital agencies. This work can include software development and design, digital marketing, and even in-person event management and coordination. The lowest rung on the hierarchy, though not in all cases, are the digital freelancers. Digital freelancers typically are just starting out and have set up their own shop as a sole proprietor, or with a partner, to provide introductory services to agencies, but mostly people and firms who do not want to pay the agency cost.
In some cases, digital freelancers occupy a boutique or prestigious level of service, in that their design or software development work is particularly sought after within a specific niche. These digital freelancers are often able to command much higher fees for their service, though they can be susceptible to changes in trends and fashion.
Digital freelancers share many problems with one another operating often at the fringes of the digital services economy. We provide four key recommendations to improve the quality of work for digital freelancers. Digital freelancers are very important to the freelance economy because they largely represent the pipeline of new talent that is eventually hired by digital service agencies, etc.
Recommendation #1: A key challenge for digital freelancers, at any stage, is obtaining health insurance. Surprisingly, few local economic development agencies have been able to pool insurance policies together so that digital freelancers can establish a guild where their own health insurance needs are effectively underwritten using a template insurance policy. This is certainly a failure of Obamacare that has disastrous consequences for the digital freelance economy. Many digital freelancers will choose not to strike out on their own as sole proprietors because they cannot afford to give up a permanent position, even if that permanent position is not best utilizing their training and expertise.
Many digital freelancers will take contract work while they are launching a startup. So the lack of appropriate health insurance for the digital freelance economy not only lowers the quality of life for digital freelancers, but also stifles innovation and the number of new attempts that are made by startup founders.
Recommendation #2: Digital freelancers often lack the resources to manage their sole proprietorship. Additionally, digital freelancers may take on additional project work, even if they are employed full-time by an agency. Over the past two decades, the technology services industry have gotten into a poor habit of requiring digital workers to sign onerous non-competes that often bar the freelancer from producing their own innovation in their free-time, or taking on additional project work. Non-competes are beginning to change to become less restrictive, but just imagine if a construction worker was not able to paint their friend’s house in their spare time. There is so much informal labor sharing and trade that occurs in the economy, onerous non-competes stifle innovation. In the millennial generation, launching a new app will likely be akin to having a few beers while you paint with your friend.
Recommendation #3: There are many creative industries that better use contracts than the digital freelance economy does. The entertainment industry, for example, is very project-based and short-term in how work is completed. The entertainment industry has a tremendous volume of contracts, professional arrangements, and norms and conventions, that facilitate this short-term and project-based work. For example, virtually all entertainment projects are royalty-based. The equivalent of a digital freelancer, the actor in a movie, earns revenue royalty for a specified period of time after the film is completed is shot. It is surprising how unsophisticated the contract relationships are in the digital freelance economy. In fact, most freelancers shy away from this type of contract relationship with startups. Improving the digital freelance work experience includes creating more sophisticated contract relationships, both making those contract relationships available publicly, but changing the business culture and convention of the digital freelance economy. Royalty agreements, equity sharing, and delayed earnings are all widely used in other industries, but they are met with skepticism in the digital freelance services economy. This should change.
Recommendation #4: In the near future, based upon advances in Blockchain technology, not only can “royalties” be given to digital freelances, but also equity sharing can occur using the same Blockchain technology. Equity sharing is slightly better than royalty sharing because, through Blockchain technology, the digital services freelancer can have their equity ownership appreciate or depreciate over time based upon the success of the firm. From an economics perspective, that is an exceedingly efficient business relationship between freelancer and firm.
By establishing a culture where more digital freelancers’ labor is better protected with better contracts, and where they have a technology resource such as security tokens (Blockchain) that account for their labor appreciation over time, then not only can work experience be dramatically improved, but significantly more innovation can occur in the digital space.