Friday, October 19, 2012

The talent supply chain


I had an interesting discussion with a senior executive of Kelly Services that provided some very striking new perspectives on the world of work. Kelly Services is a global workforce solutions company, providing temporary and medium-term workers with a very wide range of specialized skills (link). One thing that was particularly striking is the fact that Kelly provides advanced technical and scientific expertise to corporations and government agencies as independent contractors. In fact, according to their website they have over 11,000 scientists and engineers available for placement. On any given day they have placed roughly 150,000 workers around the world, and are administering another 100,000 or so who are provided by independent contractors. So Kelly Services has a strong real-world knowledge base about the talent needs of the current global economy.

The most striking part of our conversation is this. Our traditional thinking about a job and a career is badly out of date. We think of the normal work situation as fulltime longterm employment in a specific location and with a salary and benefits. But this situation isn't even the majority situation anymore. We know that a lot of employers don't offer benefits, but that isn't the big news. According to this executive, almost half of workers in the US economy are self employed or part-time or temporary. These workers don't have benefits usually, and they don't have job security. What they have is a specific set of talents to sell in a national or global market, and their standard of living depends entirely on the value of this set of talents.

Think of the crowdsourcing system that has gained some visibility recently. Amazon's Mechanical Turk system is an example (link), and InnoCentive provides an example for problems at a higher level of difficulty (link). Here is how it works. A company has a problem to solve. It formulates a clear and unambiguous description of the problem and posts a prize for the first one or two people who come up with a solution. There are an unknown number of people who are earning their livings through his kind of work.

Or think of this challenging idea. A company like Kelly can reposition itself as a "talent chain management" company. They enter into contract with a large corporation to take on some or all of the company's talent supply needs, from custodians to junior accountants to research scientists. The company is relieved of the costs of recruitment, human resource management, benefits, and sometimes supervision. The company gets high quality work at the time and place it needs, and Kelly manages the process. (Here is a report from the Wharton School on "Talent on Demand" (link).)

So what are the foreseeable social consequences of these changes in the ways that work and talent are mobilized? Several are quite straightforward. These developments imply a rapid deepening of inequalities in the future between people with good education and training and those without. As governors in many states are saying, high school dropouts won't find decent jobs in the future because they haven't cultivated the skills and talents that bring a high rate of return. And as Secretary of Education Arne Duncan says on every possible occasion, all workers need some post-secondary education or training. Simply a willingness to show up and perform repetitive labor won't support a decent life.

But this also has consequences beyond income. If more and more work is performed by private contractors and freelance individuals, the elements of the social security net that have traditionally been provided by employers will be gone -- retirement contributions, healthcare insurance, longterm disability insurance, etc. All of these would need to be funded by the individual or socially through national insurance plans. Self-funding works for workers at the high end of the salary range; but it doesn't work for people at the lower end.

These tendencies are at work already. The growing separation between incomes in the top end of the distribution and the lower quintiles reflects these tendencies; so does the shrinking labor market for "good" manufacturing jobs; and so does the declining percentage of employers who offer health insurance to their workers.

So the conclusions are stark. Encourage all young people to invest in their educational opportunities; make sure that these opportunities are provided for rich and poor alike; but prepare for a world in which there is more and more deprivation for the bottom 60% of society. Progressives will want to address this coming crisis of poverty and deprivation directly by reinforcing the safety net and improving educational opportunities for disadvantaged people, and conservatives seem more willing to ignore or even justify the inequalities that we will see. But one way or another, it's hard to see where the opportunities for a "middle class" life will come for more than half of society.

(Kelly Services has created an iPad app called Talent Project (link).  The app provides a portal into a collection of research papers and data on the future of work.  There is a mountain of interesting data and research on the talent economy here.)