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Steve King is a partner at Emergent Research.
Tim: Steve. I just want to thank you for taking the time to do this. Let’s start. What’s your background in dealing with temporary and contingent work?
Steve: We’ve been studying the growth of the contingent workforce now for over a decade so we have extensive experience in this space. We do surveys, interviews and focus groups. Our clients range from companies that are hiring these people to companies that are providing services to independent workers. We’re trying to figure out how to make life better for independent workers. We’ve looked at it from a lot of different angles.
Tim: Some people say technology is finally destroying more jobs that it will create. Others say human innovation will, as it has in the past, create new jobs to make mass employment viable. Where would you put yourself on that spectrum and why?
Steve: I fall more on the “there will still be jobs” perspective on this. I don’t have any doubts that automation is taking jobs away, but automation has always taken jobs away. The six words that are the most wrong in forecasting are: “This time it will be different.” Right now, there’s absolutely no empirical evidence that automation is destroying jobs faster than it’s creating them. There are some studies suggesting that it could happen. The Oxford study is the one that gets cited all the time, but when you to get under the hood you’ll see that they’re being very clear: there’s no evidence that this has happened yet. They don’t even say it’s going to happen. They just say, “Here are some jobs that could be automated away.” And in the past, even in the recent past, you can look for evidence. There are more bank tellers today than there were in 2000. Think about bank tellers. We have more ATM machines, the banking industry is consolidating and shutting down branches, there’s online banking, and yet with all of that we have more tellers. We have fewer tellers than we had 2007 before the recession, but we have more tellers than we had in 2000. And yes, there will be fewer tellers 10 years from now but there will still be a lot of tellers.
I go back to the 1980s when I worked for Lotus Development, the spreadsheet company. We came out with really the first truly successful broad-based spreadsheet and everybody said, “Oh my god, think of all the jobs that are going to be destroyed.” But of course what happened was instead of destroying jobs, the spreadsheet allowed people to do more and they did. It actually created all sorts of jobs. What I love about this comment about destroying jobs is it’s all coming at the time that we have historically low unemployment rates and job creation is moving along at a reasonable clip. What I think is happening is that automation is helping create polarization of jobs, which is hollowing out of middle income jobs. What’s going on here in Silicon Valley is a great example. We’re not gaining enough high income jobs to replace the middle jobs. And so a lot of people unfortunately are falling into lower income jobs. And so if you ask me if it’s a changing structure of the work force, I say yes. And I would say that it’s increasing income equality, and it’s increasing the bifurcation of jobs into high paying and low paying jobs on a relative basis. But overall, it’s hard to find any evidence that there’s going to be this wholesale “end of work” kind of scenario that we hear so often out here.
Tim: So is technology changing the way we work?
Steve: It’s changing both the way we work and the way companies choose to deploy and use assets. And labor is one of the assets that they’re looking at. Technology is making work more mobile, it’s making it more collaborative and it’s making it more knowledge-based in the higher-end cases. It’s definitely changing work in a lot of ways. The other thing that it’s doing is it’s increasing the rate of change and the speed of which organizations and the economy operate on. And so that all is leading to greater levels of economic uncertainty. And when a corporation is faced with economic uncertainty what they try to do is reduce fixed costs and raise variable costs. And one way to do that is by outsourcing, partnering, using other people’s assets, and we’ve seen that across the economy as more and more firms are choosing an outsourcing path. It started with manufacturing outsourcing. And now business are outsourcing all over the place. All of that increases agility and flexibility, and reduces fixed costs, which are all good things. In terms of people, what companies do is raise the percentage of people in the workforce that are contingent because if they are contingent there are not a fixed cost. And we always talk about how in the United States labor is at will and can be fired anytime, but the truth is corporations don’t behave that way. They don’t behave that way because there’s a bunch of laws protecting labor, so they can’t just fire everybody at once very easily.
Obviously there are also emotional and brand reasons. Layoffs are just very hard to do. Employees are effectively long-term commitments. And so the way to cut long-term commitments and fixed cost is to turn them into contingent workers. There is data from all sorts of sources showing that corporations, large and small, are increasing their use of contract labor of various kinds: statement of work consultants, project consultants, even in key positions across the organization. And technology has reduced the friction of doing all this. It’s as simple as becoming an Uber driver in about 24 hours. Ten years ago if you had to get a part-time job, you had to find the job, you had to apply for the job, you had to interview for the job and you finally got the job-—there was all this friction associated with that process. Today much of that friction is gone. I can be up and running in 24 hours and I don’t even have to talk to a human being if I don’t want to. I can work the hours that I want. I don’t have to deal with a boss.
From a corporation’s standpoint, those same technologies are giving them just-in-time access or real-time access to talent, and the cost and the effort of finding, organizing and managing that talent because of technological innovation has fallen quite a lot. The friction associated with hiring contingent talent has fallen a whole lot. Economic uncertainty also gets more corporations to focus on reducing their fixed-term costs, on being more flexible and agile. When this reduced friction through technology is combined with economic uncertainty, the economy moves towards contingent labor. When I share this with others, everybody says, “Oh my god, everybody’s going to lose their job and everybody’s going to be contingent.” No, large and small companies and businesses are still going to have a lot of traditional employees. It’s just that they will be in the core areas of the companies. We’ve already started to see this shift.
There’s a lot of discussion around Facebook and Google and Apple because they don’t hire very many people relative to IBM in the 90s, or what GM did in the 80s. It is true that they don’t have very many traditional employees. Apple has about 90,000 now and GM back in its heyday had two and a half to three million. But if you look at the ecosystem around Apple or the ecosystem around Facebook, the number of people actually earning their living because these companies exist一the independent app developers, the third-party support, the business operations service provider一start to add up again. Those just aren’t traditional employees.
Tim: Instead of economic participation within one entity, it’s more of it’s an ecosystem of economic participation that’s anchored by Apple. I can be an app developer for Apple, but I simultaneously can be a Google app developer. I am able to participate in multiple ecosystems. Maybe the role of the corporation is shifting from employment to the creation of an ecosystem that allows people to participate in various ways.
Steve: And companies are unbundling intentionally because it’s more economically efficient. In the old days, vertical integration was more efficient. There’s a lot of discussion about the theory of the firm and Thomas Coase’s original work from the 30s, but the reality is in the old days you had to be vertically integrated to make things happen. Now you’re better off not being vertically integrated because you know you’re not a specialist in all things. So you bring in other people who are specialists and across the whole ecosystem you have greater efficiency. Maybe my organization is not particularly good at procurement or logistics, but UPS is good at logistics so I use them. It’s an example. What technology is doing is giving us the ability to coordinate activities more efficiently, which we couldn’t do before.
One of the projects that we do every year is the State of Independence study. This is a case study of coordination across entities. The client, MBO Partners, contracts with us. We then contract with a research firm to help us. That firm then contracts with specialty research firms to collect the data. Meanwhile we also contract with another firm to help us with the data analysis. And so there are six firms involved in this one project. Fifteen years ago that would’ve all been done by my firm. We would have needed to be big enough and integrated enough to do it all otherwise we would not have gotten the work. But today my little two-person firm can easily coordinate these six other firms and we’re the main producer of the project. And this is because I’m unbundled. I don’t have to maintain those resources full-time. I can rent those resources and the technology allows me to coordinate it across the group.
This is happening across all chains of commerce. In some places, that means you’re outsourcing to another company or you’re hiring in another company. You may be hiring another company to do your marketing, but along the way those people are also hiring independent workers to help them. Even the big companies are hiring more independent workers. It’s part of that whole shift.
Work is changing fundamentally, but 10 years from now over half of working Americans will still have traditional jobs. Much of the growth right now is in people working on the side part-time and with multiple sources of income. We looked at sites like Upwork. A third of the Americans on those sites have traditional jobs and are using the sites for side gigs. Side gigs are growing very, very rapidly. The number of independent workers is growing and it’s growing faster than the overall workforce, but it’s not growing at an astronomical rates. We have it growing 4% to 5% a year with the overall workforce only growing at 0.8% a year. The workforce changes are slow. There’s inertia, there’s investments, there’s the way people think, and so it takes a long time for that stuff to shift. But it is all shifting and the leading edge right now, in terms of the rate of growth, is people working side gigs. It also should be noted this that this type of work is still small relative to the overall economy.
Tim: What parts of the contingent work discussion are expected and what parts are surprising?
Steve: It depends on your point of view. The thing that surprises us the most is how many myths there are around what’s going on in the contingent workforce. I read an article today about how the vast majority of independent workers are forced into this. But in every study that’s ever been done of independent workers, it’s very clear that a majority of them chose that path. All the private studies and certainly all of our work reflects that: that a majority of people chose the path. The second myth is that people don’t like independent work. Again, every study that’s ever done shows that the majority of people like it. And then of course every study that’s ever been done show the majority of people want to continue independent work. The fact that those big three myths don’t seem to change, despite overwhelming research and statistical evidence, continues to fascinate me.
Part of this is because there are all sorts of people whose best interests are served by the perpetuation of these myths. Another part of it is people who aren’t independent workers are much more risk averse. They can’t believe that people actually are embracing this lifestyle. If you look at the people who are criticizing this field right now, most of them are academics and think tank people. These two groups are about as risk averse as you can get, and they have the most traditional of jobs. Academics, once they are tenured, never leave their job. The most risk averse people are saying, “Well this is too risky” while those who are actually doing it are saying, “No, it’s not.” And then the third group that is critical of contingent work are journalists. And their industry has not fared well in this shift to independent work so they don’t like it either. So there psychological reasons behind why these myths persist.
What I’d like to see is for people to recognize the fact that this is a viable path that a lot of people prefer over traditional employment. Now this doesn’t mean we don’t have to make it more secure and improve labor laws. I like the idea of portable benefits. I like the idea of a prorated, independent security accounts. We want to make this better, but right now there’s this theme that it’s just really bad. It is certainly bad for a subset. About 25% to 30% of the people who are working in independent work very much dislike it. They would much rather have a traditional job, and they feel that they are being taken advantaged of. We have to definitely address those concerns. But let’s not throw the baby out with the bathwater. In our zeal to protect those who don’t want to be independent or are abused as independents, let’s be careful not destroy it for the 60% to 70% of people that chose to work independently.
Tim: Is the emphasis on online platforms in contingent work warranted?
Steve: I think the online platforms are very important. I think they’re going to grow and continue to grow in importance. But when you get under the hood, like we did in this most recent study, you find that one of the big complaints you always hear is you can’t make a living as an Uber driver. There are two problems with that complaint. The first is: Compared to what? When you compare Uber work to traditional manufacturing jobs, they are absolutely worse off. But those manufacturing jobs aren’t here and are not coming back. Now if you compare driving for Uber to driving a taxi you’re going to see that an Uber driver probably has a slightly better life and slightly higher income. Neither group is very well protected. Eighty percent of taxi drivers in this country are independent workers, which is also confusing. There is this push to get Uber drivers to be employees because taxi drivers are employees一no, they’re not一most taxi drivers are independents. The second problem with the complaint about the inability to make a living as an Uber driver is very few people are doing it full-time. It is better to compare driving for Uber to a low wage part-time work and look at the trade-offs around flexibility, scheduling, work-life balance and income. When you make that comparison, you begin to see the reasons why these platforms are popular. Your earnings tend to be above minimum wage and you have this enormous flexibility and lack of friction in doing it. So for many people, these platforms provide acceptable work. The key is to know the facts and look at it in a segment by segment basis.
The woman that’s suing all these gig work platforms very consistently talks about the work as full-time work. I do think that the people that do full-time work with Uber and others are going to end up being classified as employees under current labor laws. Uber does exert enough control for that classification. But I go back to the fact that somewhere between 5% and 10% of the people that drive for Uber are doing it full-time. If she wins her suits and gets everything she wants, the 80% of people that are doing this work for flexibility will stop and that doesn’t make sense for any of us, in my opinion. She’s focused on one small segment in making a claim that works for everybody, but that is the wrong approach.
Tim: So how should workers be thinking about work differently? How should the worker be considering work today?
Steve: The first thing is work is definitely becoming skills based in all ways. To compete today you need to think about how to develop marketable skills that can be used to get work and to earn a decent living. And this is nonstop. People have to reinvent themselves, they have to study on their own, they have to learn on their own and they have to upgrade their skills constantly. If you’re not doing those things you’re going to have problems. Traditional education isn’t required, but it certainly helps. There is also this whole new world of online and short-term education emerging. People need to understand that part of what they have to do is invest in themselves regularly to create work for themselves. And that is whether you are on the low-end of the high end of the skill spectrum一everybody has to think this way. The other big shift everyone talks about is一and I think it’s fundamentally true一the lifetime career in one place is over for most people. It still happens occasionally. The government still has a lot of lifetime workers. There are private employers that still follow that model such as some utilities and insurance companies. But on average you have to be thinking about what your next next career is going to be on a regular basis. And so in many ways, you have to think like an independent worker even if you plan to be a traditional employee.
Tim: There is a lot of debate about W2 versus 1099 saying that one is employment and the other is project-based. But I believe work is becoming project-based across the board, whether you’re a W2 or a 1099, and it’s better to conceptualize work through that lens because of the point you just made. The traditional approach to employment just isn’t there anymore. All workers need to be thinking about perpetually retooling and their next thing, not just contingent workers.
Steve: One of biggest problems a lot of people looking at this are having is they’re equating W2s with the old style traditional work. How do we report for taxes is becoming increasingly disconnected from what we do. Temps report as W2s and so they’re not considered independent workers. If you have a 6-month contract with the company, you’re a W2 worker and you’re not considered an independent worker. Contract work is growing very, very rapidly. And so this idea that a W2 is fundamentally different than a 1099 is one of the things that’s really changing. Our company looks at it psychographically: How do people behave? When we interview someone who’s on a fixed-term, six-month contract, they know they’re not a traditional employee and they don’t behave like a traditional employee. But because of their tax reporting status they’re usually considered a traditional employee by people doing work in this field.
Tim: It sounds like the way we classify workers doesn’t have a lot of bearing on the reality of the work experience.
Steve: Right. So much of the work being done in this field is based on out-of-date government statistics that don’t reflect how work has changed and how employment has changed. What cracks me up about this is when you go talk to the Bureau of Labor Statistics they’ll tell you that it’s absolutely true. Nobody is hiding that fact. But most researchers still say that’s the data set I am going to use.
Tim: How should businesses be thinking about talent and work differently? How should they be thinking about recruitment and retaining talent?
Steve: There’s a couple of things there. Most businesses, on average, are increasing the use of contingent talent. And so businesses have to figure out what that means for the corporation and have a strategy around it. One challenge is that contingent talent increasingly holds key positions. There are talent shortages and they will continue to grow in certain fields. If you’re trying to find a mobile developer right now and you’re not a technology company, good luck. You’re going to be using contingent talent. You have to start to ask: How do I become the client of choice for that contingent of talent? How do I become the employer of choice for that contingent of talent? Companies think about this all the time for their full-time employees. They have to think more about it in terms of how they attract and retain contingent workers also because that is going to become a more important source of talent.
Within their full-time ranks, companies have done a horrible job, particularly since the recession, of treating employees well. Companies are not embracing the shift toward result-oriented work environments, which every survey shows every employee wants. And the companies that don’t provide good employee experiences will eventually find out that they no longer have good employees.
We’ve been studying the contingent workforce for ten years and we’ve been waiting for corporations to realize a big reason why a lot of top talent is leaving for independent work is traditional work sucks. They are capable of fixing that, but they haven’t yet. I think there has to be a renewed focus on the employee experience, and I think there has to be a new focus on making the contingent worker experience better so that you can be the employer of choice of both classes of workers.
Tim: What systemic changes, whether social or policy-oriented, do you think should be implemented?
Steve: At the policy level, portable benefits is the most logical thing. We started down that path with the Affordable Care Act, ACA. I do think we have to split at least some level of benefits off from employers, and that will help to a certain degree. I think we need higher minimum wages because a lot of jobs are becoming low end, and as a society it makes sense to sustain jobs that provide the ability to make a living. I’m very concerned about the fact that many of our existing laws that cover employees do not cover contingent workers, and I’m particularly concerned about safety laws. We have to expand our OSHA [Occupational Safety and Health Administration] laws and our policies so the contingent workers used in lieu of traditional workers have the same legal rights as employees when it comes to occupational health and safety.
Tim: What are your thoughts on basic income?
Steve: Yes, I had two reactions. One is politically it’s impossible. What Congress in the United States is going to vote for basic income in the next 50 years? And the answer is none. So the first problem is it’s politically infeasible. The second problem is we would have to gut all of our existing programs to pay for it. And so while in theory it sounds like a great idea, gutting all the existing programs would just be an enormous fight. But if you don’t gut the existing programs you simply can’t afford it. And the final piece is taking away the incentive to work is a bad societal decision.
What I think can happen is the expansion of the earned income tax credit. I’m a big proponent of expanding the earned income tax credit. If you look at the way people respond to that they don’t see it as welfare. Americans very consistently hate being on welfare. They think that they failed. They think that they’re a drag on to society. Americans want to contribute, and it would take a sea change in our attitudes to get people to feel a sense of contribution on basic income. But the earned income tax credit which is basically a pure handout almost, isn’t seen that way. It is seen as something that is earned because of work. I would like to see that expanded both in terms of coverage and in terms of the amounts that people are able to get. Yes, that system has been the victim of a fair amount of fraud, but that problem is much easier to surmount. That’s just a question of enforcement and doing a little better job at the backend with data collection. I think that’s a relatively easy thing to fix, whereas basic income thing was just a hornet’s nest.
The other great thing about the earned income tax credit is it was originally a Republican program that got upgraded by Bill Clinton during his administration by the Democrats. You got both political parties historically supporting it.
Tim: I just have two more questions. In this evolution of work, what are the top challenges that need to be addressed? What should we be focusing on as we have this discussion about contingent work?
Steve: To me there’s several challenges. One we talked about over and over again, I just think people don’t understand the data and what’s going on. I think we conflated the on-demand economy and Uber with the overall shift to contingent work. And I think that is a huge challenge going forward. We’ve always had this problem when we’re dealing with small businesses. One of the first things we have to do with every new study on small business is first ask the definition of small business because everybody defines it in a different way. The same thing is going on here. And so it’s very hard to come up with solutions to figure out what’s going on if nobody can agree to the terms and there’s currently no agreement to the terms. I think that’s an enormous problem and will continue to be a big problem.
Tim: It’s a taxonomy issue on a basic level.
Steve: Yes. And then it is too multi-faceted to understand. When you say future of work and the evolution of work, there’s technology involved, there’s social issues involved. One of the biggest drivers of change in workers is demographics right now with the aging boomers and millennials. When you have so many moving parts it’s hard to understand the linkages, it’s hard to understand what’s the driver and what’s not the driver. It’s just incredibly complex issue and I don’t think anybody truly understands it. I think it’s too complex a system to truly understand it, and so makes it very hard to figure out what to do with it.
Tim: Last question. What do you see as the big opportunity in how work is changing currently? What should we be trying to embrace and foment in what’s going on right now?
Steve: A lot of people have come to the conclusion that work needs to be more human and it needs to be more flexible and it needs to better reflect our life and our values as opposed to just going in and punching the clock. That’s a social trend that I think doesn’t get enough play. I think one of the reasons there is a growing number of contingent workers is people are chucking traditional jobs because they don’t feel it reflects their lives and it doesn’t allow them to live the lives that they want to live. And I think we now have the ability to give people traditional jobs and have that, and also have contingent jobs that have that. And so we do have an opportunity to make work much better from a social standpoint. We’re not doing that yet, and that’s why so many people are going independent to create it themselves. But I think there is a real opportunity for corporations to take a lead on that and some of them are. There is a golden era opportunity here if we get focused on the right things.
Having said that I’m pessimistic that we’re still going to have income inequality in a bifurcated workforce because the work is getting more complex and more skills-based. And the reality is a lot of people are not going to be successful in that kind of world.
Tim: What you’re saying is that as the skills gap widens it’s going to be harder and harder for people to catch up and to span it.
Steve: We had a system where average was fine. You could have a very successful life as an average person, as an average contributor. And the reality is most of us are average. Now, you have to be better than average. You got to find something that you’re better than average at. And there are a lot of people that are not capable of that, unfortunately. That is why improving safety nets is going to continue to be important.
Tim: Great. Steve, those are all the questions I had. Thank you.