President Trump’s New Economy Challenge (Part 6 of 20). The Trump/Pence Campaign website page entitled, “Donald J. President Trump’s Vision on Economy” listed fifteen key issues affecting the U.S. economy. One major issue that was not listed is the Gig/Contingent Workforce Economy that is one of the largest and least understood elements of the U.S. economy. Today, 40% of all American workers do not have “standard workforce agreements” and make their living on a combination of part-time (a gig) or contingent (conditional, uncertain or random) work. By 2030, Jobenomics estimates that over half of the U.S. labor force will be contingency workers who earn substantially less than standard full-time workers. As evidenced by the eroding middle-class, the contingent workforce trend has to be one of the highest priority issues for the Trump Administration in order to achieve economic prosperity and “Make America Great Again.”
The Gig/Contingent Workforce Economy is defined as an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements. The trend toward a gig/contingent workforce economy is well underway. America’s labor force is in a state of transition from a standard full-time work force to a contingent workforce that consists of part-time, temporary, contract labor, independent contractors, consultants and free-lancers.
Most people incorrectly assume that the word “gig” is extrapolated from digital terms like gigabyte. The appropriate definition of gig is a job of short-term duration that was coined during the Great Depression. In the 1930s, a “gig” was a term largely used by musicians for a single engagement of short or uncertain duration. Today, due to uncertain economic conditions and the influence of the revolution in digital and network technology, about 40% of all Americans make their living working gigs rather than full-time jobs. According to a recently released Harvard study, from February 2005 to November 2015, almost all employment growth (9.7 million) in the U.S. labor force occurred in the contingent workforce (9.4 million) as opposed to the standard labor force.
Jobenomics forecasts that the Gig/Contingent Workforce will be the dominant (50%) form of labor in the United States based on seven factors: (1) increasing labor force losses versus labor force gains, (2) adverse corporate hiring and employment practices, (3) revolution in digital and network technologies, (4) automation of manual and cognitive jobs, (5) impact of the emerging digital economy, (6) shift from full-time, to part-time and task-oriented labor, and (7) cultural differences of new labor force entrants.
Increasing labor force losses versus labor force gains. According the U.S. Bureau of Labor Force Statistics data (Tables A-1 and B-1), the U.S. labor force took an ominous reversal at the beginning of the 21st Century when workforce departures dramatically outpaced the number of people entering the labor force.
Labor Force Reversal
During the 1980s and 1990s, voluntary workforce departures were 366% less than employment gains (40.1 million versus 8.6 million). From January 2000 to January 2017, voluntary workforce departures were 82% greater than employment gains (14.0 million versus 26.4 million). From a Jobenomics standpoint, this labor force reversal is largely due to the poor economic conditions, conservative hiring practices, use of technology to automate and outsource work to gig/contingent workers, and attractiveness of government welfare and means-adjusted assistance programs.
Without significant jobs growth in conjunction with a meaningful reduction of voluntary departures, the U.S. economy is not sustainable, middle-class wages will continue to erode, consumption (70% of U.S. GDP) is likely to falter, and another recession is probable. Consequently, it is imperative that policy-makers, decision-leaders and business executives aggressively create employment opportunities that will motivate citizens towards workfare over welfare and self-sufficiency over public/familial dependence. In the near future, the Gig/Contingent Workforce Economy will provide approximately half of America’s workforce opportunities. If these opportunities do not provide meaningful wages and viable career paths, the exodus of voluntary workforce departures will remain unabated and perhaps increase.
Adverse corporate hiring and employment practices. So far this decade (2000 to 2017), small businesses created 2.9-times as many jobs as big businesses. This figure should not be surprising since, most big businesses can make more money-on-money than on people-made goods or people-provided services. To combat the rages of the Great Recession, big business received numerous government incentives and low interest loans. Rather than using these incentives to recapitalize, most corporations understandably used the money to buy back stock, merge, acquire, invest in the stock and derivatives markets and invest in low-tax or cheap-labor foreign operations. The net result of these actions was stronger corporations and a weaker American labor force. If not for small business, the U.S. labor force would be much smaller than it currently is.
While it is essential that the United States maintain strong corporations, it is equally essential to develop a strong labor force. Government and big business must play a larger role in developing meaningful employment and small business opportunities. Corporate profitability must also remain a high priority but not at the expense of the American worker.
U.S. Transitioning To a Hybrid Economy
The U.S. economy is transitioning from a traditional W-2 economy with standard employees to a digital 1099 economy with “non-employee” contingent workers. From a corporate standpoint, non-employees (contingent workers) make a lot of sense. Outsourcing work to a task-oriented and temporary workforce can provide corporate managers more flexibility and higher profitability than maintaining higher-priced, full-time employees. Contingent workers are also a solution to corporations that are struggling to attract talented workers. Critical skill sets can often be obtained by independent contractors, flex-workers, freelancers and on-demand labor.
According to Ardent Partners, a U.S. research consultancy, “95% of organizations today perceive their contingent workforce as important and vital today not only to day-to-day operations, but also to ultimate enterprise success and growth.” In 2015, Ardent calculates that 54% of corporate top talent is concentrated on traditional workers, 20% on contingent workers, and the remaining balance (26%) a combination of traditional and contingent workers. By 2017, this concentration is expected to be 41% traditional, 25% contingent and 34% combined.
Unfortunately, corporate America does not have a common contingent workforce management framework. The same is true with government agencies at both the federal and state levels. In order to build a stronger U.S. labor force, leading corporate executives and government officials need to develop a strategic contingent workforce plan that will minimize exploitative hiring and contracting practices of non-employees as well as giving rise to contingency-oriented businesses that provide livable incomes for their workers.
Revolution in energy and network technologies. Today, the U.S. economy can be characterized as a hybrid economy that was formed largely by previous technology revolutions (the post-WWII Military Technology Revolution and the 1980s/1990s Information Technology Revolution) and is being transformed by two emerging technology revolutions (Energy Technology Revolution [ETR] and the Network Technology Revolution [NTR]).
The ETR and NTR have the potential to create millions of small and self-employed businesses and tens of millions of net new U.S. jobs. A substantial percentage of these new jobs will be high-end contingency work provided by a contingent workforce oriented professional services firms, consultancies, independent contractors and self-employed businesses.
The ETR and NTR will be both innovative and disruptive. Innovative technology produces new and more efficient products and services that create new jobs, businesses, markets and industries. Disruptive technology produces new and more efficient products and services that displace existing jobs, businesses, markets and industries. If properly planned and executed, the churn created by the ETR and NTR can provide significant benefit to the U.S. labor force and economy. Unfortunately, the United States does not have a strategic vision for either of these revolutions, nor does it have a strategy for exploiting the growing Gig/Contingent Workforce Economy.
Impact of the emerging digital economy. As discussed in the next posting, the digital economy has seven distinct but interconnected communities: (1) Electronic/Mobile Commerce Economy, (2) Sharing/On Demand Economy, (3) Apps/Bot/Artificial Intelligence Economy, (4) Platform Economy, (5) Gig/Contingent Workforce Economy, (6) Data-Driven Economy, and (7) Internet of Everything Economy.
The Gig/Contingent Workforce Economy is almost invisible to the American public and the least understood. By 2030, most of today’s economic and technical experts look to the Internet of Everything Economy as the force majeure. Jobenomics disagrees. Given current trends and stockpiles of cash, the Platform Economy is likely to dominate the global economic landscape with hegemonic power afforded to interlocking mega-platform conglomerates.
Predicting the digital economy at this early stage is merely a guessing game. The only reality that is known today concerning the U.S. economy and labor force, which is in a profound state of transformation, that it is generally underappreciated by policy-makers and the American public. Of the seven distinct but interconnected communities within the emerging digital economy, the Gig/Contingent Workforce Economy poses the greatest potential downside to prosperity and a vibrant American workforce.
The digital economy will be addressed later in greater detail in this series entitled, “President Trump’s New Economy Plan?”
Automation of the labor force. While the revolution in network and digital technologies can create tens of millions of American jobs, it can also obsolete tens of millions of American jobs. As more and more routine manual and cognitive jobs are displaced, the contingent workforce is likely to expand proportionally.
The Network Technology Revolution is not today’s version of the 1980s and 1990s Information Technology Revolution 2.0. While both the ITR and NTR incorporate revolutionary technology, the NTR portends to be significantly more intrusive than its earlier and more benign ITR cousin. ITR tools were designed to assist mankind’s productivity via rule-based computation of routine-tasks. NTR agents are designed not only to augment, but also replace human endeavor via automation of non-routine tasks. The NTR represents a perfect storm of technologies that emulates human form, attributes and intelligence. Not only does the NTR have the ability to create tens of millions of net new American jobs, it has the ability to eliminate tens of millions of American jobs via automation.
As skilled labor becomes less available or too costly, employers are turning to automation in order to augment, displace or replace the traditional workforce. While automation has been replacing routine manual labor tasks for decades, as evidenced by factory floor robotics, emerging NTR technologies, systems, processes and services are replacing non-routine cognitive tasks, skills, jobs and occupations at greater and greater rates.
From a Jobenomics perspective, low-skill jobs are the easiest to automate, whereas medium-skilled jobs are the easiest to bifurcate into task-oriented work that can be performed by a combination of humans and machines. While the NTR is creating new positions for high-skilled workers, it is causing increased competition for medium and low-skilled workers who are increasingly being replaced by artificially intelligent algorithms and machines. Increased competition causes workers to accept lower wage jobs or forcing medium and low-skill workers into the contingent workforce or out of the labor force entirely.
According to a 2013 Oxford University study on computer automation “about 47% of total U.S. employment is at risk over the next two decades.” If Oxford’s estimates are correct, out of the 150 million U.S. workers, 70 million jobs could be at risk. It is incumbent on policy-makers and decision-leaders to plan now to mitigate the automaton risk to the greatest degree possible.
Automation of the American workforce will be addressed later in greater detail in this series entitled, “Automated U.S. Workforce?”
Shift from full-time, to part-time and task-oriented labor. Via the NTR, the emerging digital economy, automation, outsourcing and job polarization, many traditional full-time jobs will be dissected into discrete tasks, which in turn will be addressed by temporary teams and virtual organizations staffed by a hybrid workforce consisting of standard workers, contingent workers and artificially intelligent systems.
Today’s software can divide complex jobs into smaller tasks, automate the routine work, and then recruit contingent workers through online network hubs to perform non-routine work. As automated systems learn human skills, these increasingly intelligent systems will assimilate anthropomorphic traits in order to perform more and more complex non-routine cognitive and manual tasks.
Team collaborative and management tools will further create “contextual” work environments that rapidly form, perform, and then reform to address subsequent tasks. Micro jobs, micro labor and micro tasks are becoming more common. Brick-and-mortar edifices designed to house full-time employees are giving way to temporary offices, mobile computing and home-based operations—environments ideally suited for a contingent workforce. Savings in infrastructure, utility and transportation costs are subsequently shifted from the employer to the employee or nonemployee.
Traditional versus Digital Business Models
In the Jobenomics lexicon, as shown, tomorrow’s organization will be a hybrid model that embraces both the traditional and digital business models. In a traditional business model, supervisors mandate goals to meet and achieve defined performance standards accomplished by hierarchically structured and stratified teams. While the contingent workforce is present, it usually is subordinated and a small fraction of the overall workforce in the traditional business model. In a digital business model, managers coordinate dispersed tasked-focused teams that play a much greater and influential workforce role. The formula for success for a hybrid labor force is to find the right balance between the models. Task-oriented contingent work is likely to accelerate in proportion to digital economy and e-business growth.
Shift from full-time, to part-time and task-oriented labor will be addressed later in greater detail in this series entitled, “President Trump’s Non-Standard Workforce.”
Cultural differences of new labor force entrants. Ethnology involves a branch of study that analyzes cultures in regard to their development, differences and relationships between various demographic groups. The ethnology of new labor force entrants will be increasingly important as 154 million NTR-savvy “Screenagers” (Generation Z, born 1996 to present) and “Millennials” (Generation Y, born 1980 to 1995) enter the workforce over the next decade. The vast majority of Screenagers and Millennials will form the backbone of the contingent workforce.
The global digital economy will be shaped mainly by the digital generation and the ideology of their mentors. Generation Z, called Screenagers by Jobenomics due to the excessive amount of time online screen time that youngsters absorb, are true digital natives. These digital natives will shepherd America into the Gig/Contingent Workforce Economy, the greater Digital Economy as well as the future Networked Era. Currently voting age and younger, Screenagers will soon be the fast growing segment of the U.S. labor force, standing aside their digital compatriots, the Millennials, who became the largest generation in the workforce in 2015 and the largest living American generation in 2016.
Screenagers and Millennials generally prefer contingent work over traditional full-time occupations. 61% of Millennials still at “regular” jobs want to quit within two years and be entirely independent. 72% of surveyed Screenagers want to start their own business. While much of this is wishful thinking, the NTR will provide many of these Millennials and Screenagers with business and traditional and contingent employment opportunities that will make their wishes come true.
Rather than trying to force-fit new labor force entrants into the baby boomer-oriented legacy labor pool, it is prudent to seek solutions that recognize the realities of changing workforce attitudes and help newcomers to productively pursue their unique self-interests to obtain self-sufficient lifestyles. As advocated by Adam Smith, the forefather of today’s classical free market economy, when individuals pursue their self-interest, they indirectly promote the greater good of society by producing vital goods, services and tax revenues for society. Accordingly, digital natives should be afforded the opportunity to be self-directed in the emerging digital economy. Jobenomics contends that micro and self-employed business creation is a viable way to accommodate the expanding Gig/Contingent Workforce Economy.
Stay tuned for the next installment in the President Trump’s New Economy Challenge series entitled, “President Trump’s Non-Standard Workforce” scheduled for release on 27 February 2017.
About Jobenomics: Jobenomics deals with economics of business and job creation. The non-partisan Jobenomics National Grassroots Movement’s goal is to facilitate an environment that will create 20 million net new middle-class U.S. jobs within a decade. The Movement has a following of an estimated 20 million people. The Jobenomics website contains numerous books and material on how to mass-produce small business and jobs. Monthly website traffic exceeds one-half million hits, which is indicative of the high level of public interest regarding economic, business, labor force and workfare solutions. For more information, see Jobenomics Overview and the Author’s Biography.