Research Findings

How freelancers are disadvantaged when applying for full-time positions

July 14, 2020

Since the late-twentieth century, there has been an explosion of precarious work in the U.S labor market. The precariat comprises of a diverse set of workers, including but not limited to part-time, temporary, contingent workers, and independent contractors – or freelancers.

Freelancers make up a significant part of the precarious workforce. A survey reported that out of 57 million Americans who engaged in some types of nonstandard work in 2019, around 16 million considered themselves full-time freelancers. Despite its size and importance, freelancers remain understudied relative to other segments of the precarious workforce. Additionally, while we know a great deal about how workers transition out of traditional jobs to become freelancers, movements in the opposite direction received much less attention. My recent research explores how a history of freelancing affects workers’ subsequent career prospects.

One might be wondering why freelancers would consider transitioning to full-time jobs at all.It is true that freelancing comes with many advantages: it affords workers with the freedom to choose where, how, and with whom to work. However, the picture of life beyond the 9-to-5 cubicles is not all rosy.

Unlike full-time employees, freelancers do not have the luxury of knowing exactly when their paychecks are coming and what kind of numbers appear on these checks. Instead, freelancers deal with continuously uneven flows of projects and revenue streams. Insurance plans and employer-matched retirement accounts hardly exist in their world. Going on parental or medical leaves? Expect an income gap if you freelance. Additionally, not having a constant income stream makes freelancers undesirable candidates for mortgages and car loans in the eyes of lenders. Finally, not all freelancing is voluntary. Layoffs and changes in personal circumstances may force workers to freelance by necessity rather than by choice.

Due to the precarious nature of this type of work, the freelancing lifestyle is not for everyone. What happens to workers who undergo a short stint of freelancing and find out that this mode of employment does not work out for them? Naturally, some freelancers would seek to transition out of nonstandard employment to find full-time jobs.

In order to do so, they have no choice but to face the hiring process. At this juncture, candidates with freelancing background encounter hiring officials. How do these organizational gatekeepers appraise resumes with freelancing experience?

In my study, I aim to quantify the labor market penalty associated with a history of freelancing, and to explore mechanisms that underlie such penalties. Using a field experiment that involves submitting nearly 12,000 fictitious resumes to real job openings in 50 metropolitan areas, I found that listing a freelancing experience decreases workers’ likelihood of getting a callback by about 30 percent relative to maintaining continuous full-time employment.

To further dissect the stories that underlie the gap mentioned above, I interviewed 42 hiring officials. Respondents held titles such as HR managers, HR specialists, recruiters, and talent acquisition specialists in various industries. What did these gatekeepers have to say about freelancing candidates?

Research in the past indicates that employers look for signals of competence and commitment when they evaluate candidates. They search for an ideal worker, one who is proficient and fills an immediate gap in the new workplace, and one who would remain committed to the organization in the long run. It turns out that freelancers are neither.

According to hiring officers, these candidates might very well be capable, but it is challenging to assess their qualifications since most of their skills are endorsed by themselves rather than by credible companies. Organizational gatekeepers also overwhelmingly see freelancers as non-committal job-hoppers with a short-term vision. In other words, freelancers send murky signals of competence and poor signals of commitment.

With respect to competence, while hiring officials saw some upsides of freelancing experiences, two-thirds of respondents had their skepticisms. One respondent stated:

“The extent of what they know[ . . . ] how proficient they are [ . . . ], sometimes it might be a little difficult to say. [ . . . ] When they’ve worked at a company and we’ve hired from that company before we can say: “Oh, we know that [Firm] does a great job at training people with this program.” So when you get a freelancer, it’s a little difficult because we wonder how you train and develop yourself, what do you do to measure your proficiency as opposed to a big company that has training programs.”

Contrastingly, hiring officials have a much easier time interpreting competence signals that full-time candidates emit. Unlike freelancers, these candidates have been hired, trained, and systematically appraised by credible organizations. The attachment to full-time employers make these candidates more legitimate and their skills more verifiable. The following quote from Earl, a hiring officer, captures this differentiation.

“I am intrinsically a skeptic while trying to be an optimist [ . . . ] I’m very cautious when someone says that they were the CEO of their own consulting firm. I want to know types of clients, types of works, deadlines, responsibilities, outcomes, KPI metrics that are relevant. If [ . . . ] the answers are sketchy, that will be a knock against them. Sometimes I can develop a story in my head that might be compelling enough to talk to the freelancer about why he or she wants a fulltime role. [ . . . ] But that’s something I have to dig out of somebody. Again, the common thread is that I can evaluate with less information someone who has been in the full-time role and has more of a traditional background. I have a lot more question marks for someone who’s coming from a freelancing role.” [emphasis mine]

The quote above illustrates how the lack of clarity in competence signal obstructs employers’ evaluation, and this is a critical mechanism that explains the labor market outcome gap between full-timer and freelancers that the field experiment detected. Freelancers are weeded out not because they are incompetent, but because the signals associated with their competence is unclear. Evaluating unclear signals is complicated and cognitively taxing. When faced with hundreds, sometimes thousands of applications, employers shy away from such cognitively arduous tasks. Instead, they lean towards more straightforward signals that they are used to seeing and appraising. These simplistic decision rules work to freelancers’ disadvantages.

Additionally, several respondents cited the lack of commitment as a deterrent to hiring freelancers. Employers highlight the substantial cost and effort to onboarding someone. One hiring officer stated:

“Bringing somebody on board is a lot of work. It’s a lot of training, development, how-to [ . . . ]. It is a big commitment; it’s something that you want to be worthwhile.”

They look for candidates that are “all in” and thinking “long-term.” In this light, they see freelancers as professionals accustomed to working on short-term contracts and pursuing short-term goals. Employers are hesitant to dedicate a lot of resources to hiring and onboarding freelancers only to lose them a few months down the road.

In sum, the case of freelancers illustrates that the linkages between attributes and evaluation may not be so direct as we once thought. Unclear signals can hamper the evaluation process and dampen the chances of candidates being selected. What can freelancers do to reduce uncertainty for hiring officials? They could increase their “personal branding” efforts. After all, aren’t we living in a neoliberal age of agentic entrepreneurialism? The jury is still out on the effectiveness of this strategy given how doubtful employers are about self-endorsed signals. Alternatively, freelancing jobseekers could supplement their portfolios with additional certificates and credentials to reduce uncertainty.

This study yields insights for workers who are considering a stint in freelancing. It is easy to leave one’s full-time job to become a freelancer. Moving in the other direction might not be as straightforward.

Read more

Quan D. Mai. “Unclear Signals, Uncertain Prospects: The Labor Market Consequences of Freelancing in the New Economy” in Social Forces 2020.

Image: Alltechbuzz via Pixabay (CC BY 2.0)

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