Professors Andrew Burke, Dean of Trinity Business School, Na Fu, Associate Professor of Human Resource Management, Ms Yue Sun, Research Fellow, from Trinity Business School, and Jimmy Sheehan, Managing Director at Contracting PLUS explore the key characteristics of the independent workers who compose the Irish “project economy” and how they contribute to Ireland’s economy.
The Irish Project Economy: When self-employment rhymes with high-skilled independent contractors by CoBS Editor Félix Dubois-Aubecq. Related research:Burke, A., Fu, N., Sun, Y, & Sheehan, J. (2022) ‘Ireland’s Project Economy 2022: A Barometer of independent professionals, Contractors and Solo Self-Employed’. April 2022. Dublin: Trinity College Dublin Press. ISBN 978-1-911566-32-8. DOI https://doi.org/10.25546/98363
Independent contractors account for a significant part of the labour market. In the United States, a McKinsey study found that 36% of civilian workers were independent in 2021. An increase from the same study conducted in 2016, which concluded that 27% of the US workforce were self-employed. In the EU, the situation is similar. For instance, 12% of the French population is independent, 22% of that of Italy and 9% of that of Germany according to OECD data on the self-employment rate.
However, the self-employment model has often prompted more of a dubious glance, if not outright concern about the insecurity it brings compared to the employee model than anything else. One of the first times light was shed on self-employment was with the development of the “Uber economy” and its equivalents (Lyft, Deliveroo, etc.), which have exploited the potential of micro-entrepreneurs. As such, the debate has focused on a part, significant, of the self-employed, characterized by job insecurity and a social precariousness.
But these debates do not adequately describe the independent contractor labour market segment, an entire part of which is instead composed of highly skilled and above average paid professionals. Professor Andrew Burke, Na Fu, Ms Yue Sun and MD Jimmy Sheehan’s report, Ireland’s Project Economy, aims to analyse precisely this part of the workforce.
Irish independent professionals in a nutshell
Burke, Fu, Sun, and Sheehan’s description of independent contractors is very far from the portrait of the precarious task-based contractors where the common imagination has often depicted.
On the contrary, their study focuses on the independent contractors in Ireland who are highly qualified: 85% of them hold a higher education degree. Of these, 42% have a bachelor’s degree, 38% a master’s degree and 5% a doctoral degree. Finally, only 5% of Irish self-employed have a leaving certificate (the remaining 10% have an advanced or higher certificate).
These results highlight two points. On the one hand, the level of independent contractors’ education in Ireland tends to be particularly high, which contradicts the idea that these workers constitute an unskilled labour force. On the other hand, the level of self-employed contractor qualifications is also higher than the average level of education of the Irish population. While 85% of independent contractors have tertiary education, 53% of the population aged 25-64 had tertiary education in Ireland in 2021.
These results are also reflected in the professional positions held by these self-employed workers. The study shows that in 2022, 96% of the independent contractors are high-skilled contractors: 20% are managers, directors or senior officials (SOC1); 69% are professionals (SOC2); 5% are associate professionals (SOC3); and 2% are skilled trades*. The share of SOC1s increased by 6 percentage points between 2021 and 2022, while the share of professionals decreased by 6 percentage points. This suggests that a portion of SOC2s were promoted to SOC1 positions and that the number of SOC1 positions increased this year.
Similarly, the conception of the self-employed as precarious workers does not hold true. On the contrary, independent contractors in Ireland are on average better paid than in similar positions as employees. On average, their average daily rate is €565, with a median of €500. These figures vary according to the age of the respondents: while independent contractors over 60 years old have an average daily rate of €650, those under 29 years old are paid €384 on average.
The remuneration is also not the same according to the sectors where they work. The highest rates are in public administration (€762), real estate (€738), construction (€732) and professional activities (€702). In contrast, activities in transport, water supply, agriculture, fishing or forestry are paid below the average for self-employed people.
The reason why the average daily rate of independent contractors is higher than the national average is certainly linked to the risk taken by these workers. Their status offers less job security and social benefits than employees. A higher average salary compensates for this risk-taking. But these lower benefits do not necessarily mean lower job satisfaction.
Here again, Burke et al’s (2022) report goes against the common idea that self-employment is accompanied by high social insecurity. On average, respondents expressed high job satisfaction: 85% were satisfied with their work; 85% were satisfied with the flexibility of their working hours; 83% with the location of their job; 81% with the possibility of telecommuting; 75% with their pay; 73% with their work/life balance. Finally, 83% said they were satisfied with their lives in general.
The only point that would mar the picture of independent contractors is job security. On average, their contracts last 16 months, with a median duration of 12 months. 44% of respondents only have contract lengths of 7-12 months, suggesting that a significant portion of their business also involves seeking new contracts on a regular basis. Since 2021, however, the average contract length has increased and the number of contracts longer than 24 months is also higher. As such, the stability of their work has improved.
Independent contractors are more versed in the “project economy”
Once again, the collective imagination about freelancers and self-employed people tends to have forged the image of workers performing repetitive, short-term tasks. This type of work has a name – gig work.
Surprisingly though, the report reveals that most independent contractors are more accustomed to project-based work in the project economy. In fact, 85% of independent contractors are project-based contractors, compared to 15% of gig/task-based contractors. Unlike the latter, project work “is typically more continuous and engaged with the organization as the contractor tends to work with employees to ensure that the performance targets for the overall project – and not just the freelancer’s own input – are achieved”.
The “project economy” tends to add more value than the “gig/task economy”, both in terms of contract volume and remuneration. Moreover, it is 7 times more important than the “gig/task economy” in terms of remuneration, while it is only 5 times more important in terms of the volume of contractors. Consequently, these results show that independent contractors in the gig economy are on average less well treated than those in the project economy.
However, their situation is not as bad as debates on insecurity and precariousness in the self-employed sector might lead one to believe. In fact, over the years, freelancers working in the gig economy have tended to see their pay catch up with that of project-based contractors. In 2022, their average remuneration is 91% that of the latter. The difference is not significant: on average, project economy-based contractors are paid €123,925 per year, against €112,282 for gig/task-based contractors.
Generally speaking, the industries in which both types of independent contractors’ work tend to require a high level of qualification, as they require a high level of knowledge and skills. The pharmaceutical industry, the information technology sector and financial services account for 48% of the self-employed. Other sectors are telecommunications (3%), insurance (3%), medical devices (6%), life sciences (4%), medical locum (3%), engineering and technical activities (5%) and other services (such as construction, industry, etc.).
A call to nurture and recognize the distinctiveness of the self-employed workforce
If there is one point to be retained from this study on the Irish project economy, it is that the image usually portrayed of the independent contractor as a precarious worker, always repeating the same tasks, is unjustified. It certainly corresponds to the reality of the freelance market. The Trinity College Dublin report does not deny it. However, it calls for a clearer distinction between these two extremes: on the one hand, precarious workers, who certainly need greater social and labour protection; on the other hand, high-qualified independent contractors.
Without such a distinction, the risk would be to make the independent contracting model lose its appeal. However, it is proving to be particularly interesting for companies themselves, which are increasingly resorting to these self-employed workers. All in all, the report highlights the fact that companies tend to understand more and more the value independent professionals can bring to their business and organization.
The Project economy: Awareness – and new action
Fuelled by the debates on the “Uber economy” and the strong media coverage of the precariousness of some self-employed workers, the debate on self-employment has focused primarily on the risk associated with these activities. The Ireland Project Economy report comes to nuance this vision, revealing that most self-employed workers are on the contrary high-skilled, above-average-paid professionals.
But what about other, more society-related findings that are useful – notably the gender gap? The report highlights, for example, the inequality between men and women in access to independent contracting work. In this, it is in line with a widely noticed observation in entrepreneurship in general[1]. Meaning that further work is called for on the world of self-employed to make it both more equal, attractive and more productive.
[1] The entrepreneur gap facing women and minorities, Knowledge at Wharton, 2016.
*The Standard Occupational Classification (SOC) system is a common classification of occupational information. Within the context of the classification, jobs are classified in terms of their skill level and skill content where the lower the number, the higher the skill.
Useful links:
- Download the full Report: Ireland’s Project Economy 2022
- Link up with Na Fu and Jimmy Sheehan on LinkedIn
- Read a related article: Entrepreneurs: Your 7 fears and 4 solutions
- Discover Trinity Business School, Trinity College Dublin
- Apply for the Trinity MBA.
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