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 Our traditional thinking about a job and a career is badly out of date.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.)
Well, it's not for nothing that social science talks since a decade or so about the "casualization of work" and the "fall of the middle classes". What progressives should do, is talking about the new reality of (global) capitalism (call it postfordist or whatever) where the opportunities for most people are squashed, amidst the overabundance of material wealth.
ReplyDeleteFree lancing is analogous to an under capitalized business enterprise. That kind of business basically goes into hibernation at the end of each sole customer contract. That kind of company begins living on its stored fat, its savings, until it wins another contract. Uniform and predictable cash flow is a major problem and potential creditors will so note that fact. Bankruptcy is a frequent and real risk. Short term rentals have traditionally been a useful tool in these situations. So the free lancer may go from a car leasee-owner to a public transportation user and from a home owner to an apartment renter...sometimes from a generous relative who will wait for the cash to start flowing again. The overall effect on the economy is obvious. House sales will fall, foreclosures will increase. It remains to be uncovered, but the last 30 years that free lancing has been ever increasingly required of the workforce my be what triggered the 2007 crash.
ReplyDelete"These developments imply a rapid deepening of inequalities in the future between people with good education and training and those without."
ReplyDeleteI don't see this. When a company posts a problem on-line, anyone anywhere in the world can attempt to answer it, regardless of their level of training. This has two consequences. First, people in rich countries have to compare with equally smart people in less well-off countries, which tends to pull down the wages of rich country workers and pull up the wages of poor country workers. Great for reducing global income inequality, perhaps, but not so good for rich country workers.
Second, when all workers have to compete for employment in the spot market, work goes to the person who is prepared to accept the lowest wage, all else being equal, putting downwards pressure on wages.
Finally, and most importantly, when it comes to problem solving, it's the ability to solve the problem that counts, not education and training. The two are not one and the same.
"According to this executive, almost half of workers in the US economy are self employed or part-time or temporary."
ReplyDeleteI question this, but let's take the numbers at face value. Then
--The self-employed generally report their income as sole proprietors or as an S-corp. In any event they will still pay and receive Social Security and Medicare.
--Part time and temporary who work for someplace like Kelly, or for a small employer, will also generally have social security and medicare payments.
The only population that might not pay into or collect against entitlement programs are those working "under the table", and I'm not sure how large a pool that would be.
So I'm not sure how this follows:
"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."
Many companies have already reduced retirement contributions, healthcare and long-term disability. Retirements in the form of defined benefit plans were long ago dismantled into 401(k)s with a very weak employer match, while health and disability are largely funded by employee deductions. So how does a social movement in the direction of outsourcing alter the benefits to the employee?
Agreed, the logic in the article seems a little disconnected from my real world experience. I found that my retirement savings increased when I became self-employed, as the benefits I provided myself far exceeded what a traditional employer would have, and the tax advantages of making large contributions to first my SEP-IRA and later my self-directed 401(k) made it attractive to do so. Americans in general appear to be lousy savers because they are foolish consumers...the current shift to self-employment made my retirement savings possible, while my neighbors wasted money on a new car every two years and other forms of conspicuous consumption.
DeleteThis article outlines an HR issue similar to Supply Chain Management Supplier ,Manufacturer, customer issues.
ReplyDelete