Independent work: choice, necessity, and the gig economy

Exhibit 2
SOURCE:  Sundararajan, 
The sharing economy
; Lebergott, 
Manpower in economic growth
; BLS; 
Flexibility@work
; Tomka, 
A history of twentieth-century 
Europe
; McKinsey Global Institute analysis
Self-employment was more common historically but declined as advanced economies industrialized 
15
25
5
40
20
0
30
45
35
10
United States
80
70
2000
40
20
2015
France
Germany
10
90
60
50
30
10
1900
Unincorporated self-employment 
% of all employed persons
Independent work
Report
0928 mc
NOTE: Data shown for available years.

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25
McKinsey Global Institute
Independent work: Choice, necessity, and the gig economy
required a host of sweeping labor reforms, including the eight-hour day and the 40-hour 
workweek, a federal minimum wage, overtime pay, and restrictions on child labor. The act 
also contains definitions and exceptions that continue to shape today’s debates over what 
constitutes an employee-employer relationship.
18
 
European nations had developed many types of workforce protections decades before 
the United States. Germany was the first country to develop a social insurance program 
in the late 1800s, as Otto von Bismarck implemented workers’ compensation, a form of 
health insurance, and retirement benefits. The British followed suit, with the Beveridge 
Plan establishing the nation’s first unified social security scheme in the 1940s.
19
 Later 
unions gained strength and began to bargain with companies over hours, wages, working 
conditions, and more. The 1960s and 1970s were characterized by an increased level of 
regulations and protections in Europe: France raised the minimum wage from 40 percent 
of the average wage to 50 percent; Italy passed legislation governing procedures for firing 
workers; and Germany set policies using “harmonized action” (coordinating representation 
from unions, employers, and associations).
20
By the 1980s, however, some were faulting the rigidity in certain European labor markets for 
persistently high unemployment. Many countries took some steps toward deregulation to 
encourage companies to hire. Italy and Spain, for example, introduced “atypical contracts,” 
fixed-term contracts that could be used for any activity and required no or low levels of 
severance pay. While these moves lowered unemployment, they gave employers access 
to lower-cost labor and removed incentives to grant workers traditional employment 
contracts.
21
 In some cases, this has created two-tiered labor markets with traditional, 
full-benefit workers on one side and atypical workers with few protections on the other. In 
France, traditional contracts remain dominant, but the share of non-traditional contracts 
more than doubled from the mid-1980s to the late 1990s.
22
 In 2015, almost two-thirds of 
new employment contracts were for less than one month in duration—and the odds that 
these jobs will become traditional dropped rapidly from 62 percent to 25 percent in the past 
three decades.
23
In low-income countries today, most of the labor force is self-employed—just as it was in 
the United States and Europe before the Industrial Revolution took off. But as incomes rise, 
more people tend to move into formal jobs. According to International Labour Organisation 
(ILO) statistics, only about 30 to 40 percent of adults are traditional employees in the lowest-
income countries, a share that rises to 60 to 70 percent in middle-income countries and 80 
to 90 percent in high-income countries (Exhibit 3). 
Over the past half century, manufacturing employment in advanced economies has been 
shrinking as a share of total employment as service sectors begin to dominate—and for 
many jobs in service sectors, the rules that make sense on factory floors no longer seem 
relevant. Even more profoundly, this shift to a service-oriented economy has coincided with 
the digital revolution, which opens up entirely new ways of working, as we examine below. 
18
  For more on the passage and provisions of the FLSA, see Jonathan Grossman, “The Fair Labor Standards Act 
of 1938: Maximum struggle for a minimum wage,” 
Monthly Labor Review
, June 1978. 
19
  “From Bismarck to Beveridge: Social security for all,” 
Magazine World of Work 67
, International Labour 
Organization, December 2009.
20
  Horst Siebert, “Labor market rigidities: At the root of unemployment in Europe,” 
Journal of Economic 
Perspectives
, volume 11, number 3, summer 1997.
21
 
Precarious employment in Europe, Part 1: Patterns, trends, and policy strategy
, European Parliament, 
July 2016.
22
 Ibid.
23
  Anne-Sylvaine Chassany, “New world of work: Outsiders battle in France’s dual jobs market,” 
Financial Times
, 
August 10, 2015.