In the Future, Employees Won’t Exist

http://techcrunch.com/2015/06/13/in-the-future-employees-wont-exist/

by frostmatthew • 11 years ago

40 66 11 years ago

mschuster913• 11 years ago

The biggest problem with the "contractor economy" is that there is no form of insurance when you are sick.

At least in civilized countries (not sure about the US) the employer has to pay you even while sick and healthcare insurance will take over the payments after some time... but when you're self-employed, you get nothing.

Also (though this may only be relevant to Germany) health insurance for full-time contractors is private insurance with massively higher rates, instead of the "standard" insurance provided to employed people.

DrJokepu• 11 years ago

I actually pay for a form of contractor insurance that covers my loss of income if I get sick.

Havoc• 11 years ago

I suspect contractors will have to unionise to gain some form of leverage in insurance negotiations.

BjoernKW2• 11 years ago

Also (though this may only be relevant to Germany) health insurance for full-time contractors is private insurance with massively higher rates, instead of the "standard" insurance provided to employed people.

This isn't the case necessarily. The premium for private health insurance depends on your medical history and your age. If you're older and have chronic illnesses the premium generally will be a lot higher than say when you start out as a healthy 20-year-old. In that case you'll probably even save a lot compared to the compulsory health insurance for employees.

Besides, even if the premium for private health insurance in Germany often is higher than the corresponding premium for the state-run insurance the thing with the latter is that your employer has to pay the same amount, too. So, the actual premium for compulsory health insurance in Germany in fact is twice the amount mentioned on your payslip.

_ak• 11 years ago

You think you may save money in the short run, but private health insurances can hike their rates almost as they like, and they certainly do with people aged 40+.

yummyfajitas9• 11 years ago

In the US you get paid more while not sick. So if you consume at "civilized country" levels while earning at US levels, you'll be fine.

It's a bad idea to force employers to take on large fixed-cost obligations when they purchase labor - this creates rigidities in the market and disincentivizes purchasing.

mschuster913• 11 years ago

In the US you get paid more while not sick. So if you consume at "civilized country" levels while earning at US levels, you'll be fine.

The problem is that for low-income jobs typical in the "contractor economy" like cleaning, driving Ubers and flipping burgers, the amount of cash available to the worker is not enough to cover e.g. a broken leg which puts you out of work for two months or more.

It's a bad idea to force employers to take on large fixed-cost obligations when they purchase labor - this creates rigidities in the market and disincentivizes purchasing.

In Germany we regard this form of security for the worker an accomplishment of the unions. In the sharing economy you can end up totally broke and fucked up even if it is not your fault at all that you aren't able to work anymore.

netcan7• 11 years ago

Long-term, these problems get solved in other ways. Whatever the system is in different places is the result of evolution & design. The role of individuals, companies and governments in dealing with things like sick pay, healthcare insurance, education and such varies a lot.

In poor countries and poorly functioning (or just poor) governments there is often a wealthy class that demands (and can afford) the sort of services usually provided (or regulated) by the state. Schools, health insurance.. In these places you will generally find pretty good alternatives to state run services payed for individually, by the company or some mix of the two.

We tend to think in terms of what we know. But, usually it's just a product of how the history of it unfolded and the economic structure of the country. How/good bad it is usually depends on "execution" rather than the macro structure (employe pays, government pays or individual pays). Those macro structures make a difference, but it is not like we have a clear and undisputed "best" way that works best everywhere.

For example, in a lot of western european countries (Germany, france) employers have a lot of responsibility to keep everyone employed and employable. This takes pressure off the social welfare system to a large extent.

There are a lot of downside to "employer takes care of things" whatever your ideological position is. I don't like the idea of employee-employer marriages too much. Feels off.

If this really is a major trend, I expect new "culture" will be built around it. Services, standards and common practices.

abandonliberty• 11 years ago

Canada here - Health insurance costs are inversely correlated with the number of people insured, so it sounds like we have a similar situation as you. My hunch is that this is an underlying principle of insurance - their risk is greater if only the unhealthiest people sign up.

_delirium2• 11 years ago

One possible way to handle this is to decouple social insurance from employment, so companies can hire and fire at will and aren't required to provide social support, but the state directly provides income security and social support to its citizens, to smooth out the resulting fluctuations (essentially socializing some of the variance/risk produced by a flexible labor market). In Denmark this policy is broadly called "flexicurity": https://en.wikipedia.org/wiki/Flexicurity

I think in the medium term this is a more stable approach, since it brings in contract work within the aegis of the social-support system, rather than fighting a rearguard action to defend social support bundled into full-time employment, against contract work without social support.

crdoconnor4• 11 years ago

The biggest problem with the "contractor economy" is that there is no form of insurance when you are sick.

That's a feature, not a bug.

Or at least, it is for those who are doing everything to make this 'contractor economy/road to serfdom' a reality.

hwstar2• 11 years ago

For remote work, W2 income is poisonous. You can't deduct health insurance premiums, mileage, or other expenses related to your work.

I much prefer 1099 income coupled with passive income from rental units and investments. With 1099 income you have to pay the other half of social security tax, but you get to deduct a lot of work related items including the social security tax.

facetube• 11 years ago

There definitely are remote W-2 employers out there that offer fully-paid health insurance, reimburse work-related expenses directly, and pay their FICA/payroll taxes.

hwstar2• 11 years ago

True, but 1099 work gives you another advantage which you don't get as a regular employee: The flexibility to perform the work as you see fit as long as it meets the requirement of the client. Regular employees are subject to internal processes set by management which that they must follow.

dataker• 11 years ago

For blue-collar jobs, sick days, maternity/paternity leave and most benefits are close to non-existent, undermining their well-being and lives.

For white-collar jobs, competition becomes insanely high, excluding such opportunities from non-Ivy League networks and/or considerably decreasing wages.

ExpiredLink• 11 years ago

For white-collar jobs, competition becomes insanely high, excluding such opportunities from non-Ivy League networks and/or considerably decreasing wages.

Most people don't consider this aspect of contracting. They are blinded by the pictured opportunities.

coldnebo• 11 years ago

"The people entering the workforce today value flexibility and autonomy; they choose location over career and job rotation over promotions."

This is so much bs. What chance of career? What chance of promotion? It's not that they value these things more than older workers (we do too dammit!) it's just that they have little choice.

With real wages stagnating, the only way to move up is to switch jobs. The entering workers have no choice in the matter, but they also are embracing the alternatives to extract new value out of the employer-employee relationship.

notahacker• 11 years ago

The next line is even worse - suggesting that rotational job placements are some funky new initiative from Google and Facebook and not something that big, boring public companies have done for a very long time, traditionally with the intention to finding out which department a talented graduate best fits with the idea of retaining them for the next few years. Though "work in our shiny new offices for three months and we'll give you lunch and a reference"-type graduate non-jobs seem to be much more widely advertised than they were back when I was actually looking for graduate roles...

Is the recent growth in contractors in the US really a byproduct of disruption via software, or is it a result of disruption by economic crisis convincing firms it's a good idea to keep some functions off the payroll until the economy picks up? I'd say the latter played a bigger role.

I mean, like the author I'm involved in a startup that's trying to build an infrastructure for self-employed professionals who would otherwise be employees of big companies, but you can take talking your book too far.

BrentOzar• 11 years ago

Uber was the wrong example to use for this hypothesis - taxi companies in the US never really had driver employees to begin with.

mlamat• 11 years ago

Brave new world of disposable people. What a horror show.

aswanson6• 11 years ago

My dad had 2 jobs in his career before he retired and last switched in 1975. I have had 6 so far halfway through my career, and I'm not an outlier from what the data seem to bear out.

The word employee should not even exist anymore, I prefer associate, as it is more truthful to the underlying relationship with the corporate entity. Its all business, never personal. I dont even decorate my personal workspaces in my environment with pics of my kids or touch it up to remind myself that this is a transistory situation. My advice 1) Keep a LARGE portion of your before and after tax savings in a combo of 401k, IRA, and stock picks (at least 15 percent). 2) Stay mobile. Do not commit to a large house, etc, in an area of the country where you can be tied down. Mobility, mobility, mobility. 3) Keep a close eye on the finanials of the business. A quarter or two of missed earnings (if public) or low salesforce numbers over an extended period of times screams "run" no matter the bullshit the ceo may be feeding you. 4) Skills, always have an ear and time investment in new ones. You should always be learning one core technology outside of what you use at work, especially if you work at a larger, established company. 5) Network. Always try to interact and build relationships with younger and experienced people inside and outside your job location. Young people see things in new ways and refresh you. Older people have battle scars they can donate to you without the pain of living through them.

wrk14• 11 years ago

I like many of your suggestions, but the article itself is total BS. First, Uber drivers are replacing taxi drivers, who were never employees to begin with. So it's not a valid example. Second, the headline should read "As long as US sticks to current policies, the number of employees in the US will probably decrease".

This is happening because right now in the US, capital (large corporations, billionaires) controls the political process, and they've used it to massively jack up the size of the labor pool:

* Illegal immigration -> unskilled jobs.

* H1B & other visas -> skilled and semi-skilled jobs.

* Free trade with Asia -> manufacturing jobs.

* Outsourcing -> IT jobs.

* Normalizing 60-80 hour workweeks -> increases the labor pool by 1.5x - 2x.

Basically right now we have about 2-3 billion people competing for jobs in the US economy, which is sized for 320 million people. They (capital) want you to believe this is the "future", but in reality they just jacked up the labor pool by a huge amount.

Any worker who comes to the US leaves their home country, so the employment dynamic in those countries is quite different. And notice that the EU, whose economy is larger than the US, has avoided this dynamic.

aswanson6• 11 years ago

Understood and agree. Im just giving the best advice I can on how not to get hit and run over by the oncoming train. Unless you're Superman and can stand in front of and stop it.

yummyfajitas9• 11 years ago

Wait a minute, how does free trade "jack up the size of the labor pool"? Did the foreigners who were previously forbidden from competing with natives not exist?

Oh right, better to have folks born on the wrong side of an arbitrary line continue to live on $3k/year in order to make sure American wages continue to rise from $40k to $60k. Be honest - your actual complaint is that reducing inequality sucks when you are at the top of the heap.

Actually "sucks" isn't even the right word, since I doubt you can name a single good or service that Americans have less of today than 20 or 30 years ago. (Expanding categories of goods, e.g. "health care", don't count.)

https://www.gc.cuny.edu/CUNY_GC/media/CUNY-Graduate-Center/P...

thomasfoster96• 11 years ago

You don't end up with 2-3 billion people competing for the work of 320 million. That makes no sense. You just end up with an economy of 2.32 or 3.32 billion.

The 2-3 billion require services and products too, so it's not like they're not consumers (even if their spending is lower if their wages are lower). Plus, the labor pool as a percentage of the population is shrinking in many western countries, and so immigration from countries where the workforce is expanding is required regardless

codingvelocity• 11 years ago

I agree largely with what you say but advice point 2 is an obvious smell in today's working world. I'm taking that advice as "don't do anything that would prevent you from moving tomorrow". That includes having a spouse that is employed, having family, having property, etc. Being mobile shouldn't be a requirement for the average person. If you are striving to be top in your field, then mobility might be a requirement.

aswanson6• 11 years ago

That one is rough, agreed. A better interpretation might be,"don't get bogged down on an illiquid asset, i.e. a fixer-upper when your cash reserve is low, and would be difficult to generate rental income from". The point is to not let that be an anchor if you lose employment for an extended period of time. It's as much a defensive as offensive posture.

coldtea2• 11 years ago

The word employee should not even exist anymore, I prefer associate, as it is more truthful to the underlying relationship with the corporate entity.

Or maybe "wage slave"?

netcan7• 11 years ago

A really interesting economist is Ronald Coase. In his (1937) paper he starts with the question 'why do firms exist.'

IE, why aren't we all contractors selling the services that we do at companies to each other? In a free market people can bargain to achieve more efficient economic outcomes than a centralised economy can achieve using prices. Why shouldn't this principle apply to firms? Why are firms run like a Soviet dictatorship with a hierarchy and planning?

His answer was "transaction costs.^" The cost of organising every activity that requires more than one person, negotiating terms and all the rest are bigger than the benefits.

The examples of contracting in this article (eg uber) are essentially market creators. I think the way to think about this trend (if it is a meaningful trend and not just a way of bypassing pesky restrictive labour conventions) is 'markets replacing firms' not 'contractor replacing employees.' If that is really the trend, I would expect to see average company size shrink and thus far, it is not.

If Google contract out the development of blue sky ideas to small companies or individuals and that yields products like gmail, that would be a sign. So far though, it's in house or acquisition (a form of contracting?) for really important things.

^Economists have an enormous tolerance for dealing with big hairy concepts like "transaction costs" without unpacking them. I personally that in addition to (or within... damned economists) 'transaction costs' is human beings' inherent skill at operating as a group with all sorts of unnamed dynamics replacing the quid quo pro. If you have an economy instead of a group that people feel a part of, you lose all that.

heimatau• 11 years ago

Market replacing firms. I like the way you phrased things. It's more precise than my current explanation. I don't have much to add other than I really liked your breakdown. We have an complex market, thanks for describing Coase's paper.

netcan7• 11 years ago

If you're interested, the original paper is very accessible. He also interviewed on econtalk shortly before his passing. Still sharp (and cranky about everyone misunderstanding "Coase Theorem" well into his 90s.

http://www.econtalk.org/archives/2012/05/coase_on_extern.htm...

_delirium2• 11 years ago

I like your hypothetical of Google contracting out its programming (maybe on oDesk?) instead of using in-house employees. I agree that that would be a major shift. Uber seems to be the go-to example in these kinds of articles, but is not very convincing as an example of a fundamental market shift, because the taxi market already operates similarly to how Uber operates. Taxi drivers are typically contractors, and companies like "Yellow Cab" just handle dispatch services and such in return for a cut [1]. So Uber vs. Yellow Cab is an example of a new market creator competing against an incumbent for the taxi-dispatch business.

[1] Example of a Yellow Cab "non-job" posting: http://www.yellowcabaustin.com/driver.aspx

netcan7• 11 years ago

I agree. I don't think Uber is a hard sign of change. It's the creation of a market with one big firm and lots of small contractors in place of a market with lots of small firms. This is a normal sort of restructuring that happens a lot.

Shipping in the early "age of the sail" was usually controlled and operated by monarchs or crown backed monopolies. The task was suited to this structure at the time. One big, expensive & risky journey. Technology has shifted this around a bunch of time before and after that time then. Before the medieval collapse of european trade those same routes were alive and well (eg Italy to China) but were handled by a "market" of camel drivers, corsairs, merchants, markets and who knows what all along the spice and silk "roads."

Transaction costs still played a big role and technology dictated the structure of the economy. Along the silk road items could be traded dozens or hundreds of times over years before reaching users who had no idea what strange distant people made them. Beautiful, but inefficient relative to a single flotilla traveling the whole way.

The internet has done these things too. eBay enabled tiny traders and decentralised retail. Amazon concentrated and centralised retail. This is normal creative destruction and it doesn't seem to have an obviously dominant current.

It seems to me that this is fact and metric picking.

OTOH, maybe those stats on "contractors" is indicative of some shift in our labour market conventions. Who knows.

jessriedel2• 11 years ago

I agree with your description [1]. However, I disagree with this:

If Google contract out the development of blue sky ideas to small companies or individuals and that yields products like gmail, that would be a sign. So far though, it's in house or acquisition (a form of contracting?) for really important things.

Blue-sky research is the classic example of the sort of stuff that is particularly hard to build a market around, hence most such research is publicly financed (shielded within universities and government labs) or privately financed by huge, private pseudo-governments like IBM, Microsoft, Bell, etc.

The fact that venture capital has allowed the market to compete with firms for certain kinds of "short term blue-sky research" (i.e., research that is very high risk, although still relatively short time-to-payoff) is certainly a great development. But that doesn't mean we should expect other blue-sky research to be the first area where the technological suppression of transaction costs allows markets to displace firms. Rather, it seems to me that the conventional wisdom is still mostly correct, and we should expect work that is more easily measurable than research to be freed from big firms first.

See also economist Robin Hanson for arguments and data that typical firm size will increase in the future, technology not withstanding:

http://www.overcomingbias.com/2013/09/expect-bigger-orgs.htm...

[2] I wrote a similar comment once, doubtlessly channeling Coase: http://slatestarcodex.com/2014/09/24/book-review-red-plenty/...

netcan7• 11 years ago

I think you might be using a different (more accurate) definition of "blue sky" than me. I didn't mean that blue. I meant something more like product development with a lot of rope.

ChuckMcM• 11 years ago

Oh I really would have liked to have talked to Coase, on your reference I tracked down his paper on the nature of the firm [1] and thought it was excellent. His point is a bit more nuanced than why firms exist but more why is it that markets can self organize and firms do not.

The interesting thing is that historically it seems that part of the reason was all the non-firm stuff that was needed. So doing payroll, providing benefits, managing coverage when people went on vacation, but those things arose in a large part because of labor unions. So as labor union's influence has declined, so has the value of the "package" provided by a firm to the employee, and the value equation of contractor or employee can more easily swing back over to contractor.

That is just such an awesomly interesting thing to think about. Thanks for the reference.

[1] http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0335.1937....

netcan7• 11 years ago

Check out this podcast. It's as close as you can get to talking to the man :)

http://www.econtalk.org/archives/2012/05/coase_on_extern.htm...

brador2• 11 years ago

Because information has value and is very difficult to protect.

Notice how all contractors are being shown NDAs as standard now. This is the replacement for employees having job security for keeping shut about the knowledge they have.

Now, sign an NDA and you secure the knowledge with legal threats and chilling effects. It works.

netcan7• 11 years ago

I think this would technically also be "transaction costs." IE, contractors stealing your (other contractors') ideas. All the lawyers you need to sue them when they do and NDA them when they don't.

jellicle• 11 years ago

This is just a set of political predictions. There's no reason such policies must exist in the future, except for the wealthy people pushing them.

For example, a country could pass some laws: "For all corporations over 10 employees, no more than 3% of their revenue may go to paying, directly or indirectly, independent contractors. Fines for violating this law are infinite. No more than 3% of employees may be scheduled for less than 40 hours per week. Fines for violating this law are infinite."

And boom, we've eliminated the phenomena of part-time, work on demand, transient workforces. Companies would quickly adjust to a new reality of 40-hour full-time employees. They would start doing things like investing in training, to make sure they have the best employees possible.

This is a policy choice, not some inevitable law of nature. Currently the people making the policy are choosing to promote part-time and work on demand. That's not a law of nature; that's politics.

Gamix• 11 years ago

I think the most scary thing is this and IA in the machines :/

In the Future, Employees Won’t Exist

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