I am thrilled to now be writing a bi-weekly column for the Globe and Mail, Canada’s national newspaper. See my first here – it is a look at how the gig economy is in force but our social policies are woefully out of step with it.
I am thrilled to now be writing a bi-weekly column for the Globe and Mail, Canada’s national newspaper. See my first here – it is a look at how the gig economy is in force but our social policies are woefully out of step with it.
Is there a better way to see the future of work than to follow the drama that is Uber? The ride-hailing service burst on to the scene in San Francisco just about six years ago and nothing has been the same ever since. From how to manage a gig workforce through to how technology is destroying some jobs and creating others (more on that in a minute) Uber is the maybe-not-that-reluctant poster child for the story of workforce change, the latest instalment of which takes place in London, England.
For those who have managed to miss it, last week London decided to revoke Uber’s license to operate in the city. As always, when it comes to Uber, emotions run high and the London decision apparently brought out the strongest of those. Some (led by traditional London cabbies) are jubilant at the decision, effectively calling Uber a not-fair upstart staffed by criminals. Others called the decision everything from Luddite-like to racist. Customers of the ride-hailing service are not thrilled.
There are lots of pieces to the drama, but for me one of the key parts is this: the jobs of London cabbies used to be protected by the fact that that they had a knowledge base that could not be easily replicated and now they are not. In fact, the test they take to be allowed to drive a cab is called ‘The Knowledge’, and it requires memorizing something like 25,000 London streets. Not surprisingly, preparing to take the test can take years and those who pass it are understandably proud to have done it. As a system it all worked fine until GPS technology and Uber came on the scene.
With the advent of GPS, it is as if robots have replaced the taxi drivers. That is, rather than being required to know every street by heart, every Uber driver checks directions by putting the street address into GPS, and every passenger can do the same on their phone anyway. There may be other ways in which taxi drivers have it over Uber drivers, but the argument that cab drivers can get you where you want to go better has effectively been destroyed. Technology has de-skilled the function of the cabbies, meaning that if the world operated in a true free-market sense, the taxi drivers would see their wages drop and their jobs disappear. As Uber has expanded, London taxi drivers have undoubtedly seen their incomes affected, but the majority have struggled on partly in the hopes that Uber would just go away.
And yes, regulation does exist and markets are not exactly free. That is why someone gets to decide whether Uber can operate at all, which in effect means deciding the relative fortunes of Uber drivers vs. cabbies. With the London decision, the cabbies have managed a win for now but they have to know it is a temporary one. Uber (as well as competitors such as Lyft) is rolling in in more and more cities, and is proving to be a hit with those who prefer to pay less rather than more for a ride and to hail it more conveniently to boot. For sure, there may be regulations needed to ensure that Uber drivers are thoroughly checked, but there is little to suggest that the majority would be better off if Uber did not exist at all, no matter what London has decided for the moment.
And so the impasse continues and right at the moment cab drivers and Uber drivers seem to hate each other, in London and in many other cities as well. Then again, they should maybe think about banding together to map out their joint futures. After all, Uber all has never made a secret of the fact that they want to have driverless cars ferrying passengers sooner rather than later. As they get closer to that reality, neither ‘knowledge’ nor ‘GPS’ may be enough to keep any kind of drivers in cabs.
As driver jobs are eliminated, others will be created although job functions will likely come and go over the years ahead. Rather than thinking just about specific knowledge, perhaps what workers need to develop are skills in things like ‘flexibility’ and ‘adaptability’. They may sound like buzz-words, but if Uber has taught us anything it is that the work world is turning on a dime and it might be best to be ready for the next instalment of the drama.
I’m happy to have been able to contribute to Macleans’ list of ’75 Charts Every Canadian Should Watch in 2017′. My post was on the ‘Gig Economy’ and you can find it here (you have to scroll down to find it, but that gives you a chance to see some fascinating graphs first) but as I mention, wish the information we had on it was better. Are you listening Statistics Canada?
Maybe I’m late to the party, but it was only recently that I heard the phrase ‘side hustle’. Apparently it has been around a while: way back in 2013, Entrepreneur.com tacked up an online definition, calling ‘a way to make some extra cash that allows you flexibility to pursue what you’re most interested in’. It can also be your true passion – a chance to delve into fashion, travel or whatever it is you care about the most without quitting your day job. More recently, it has been attached to the Millennial Generation who apparently have the right mix of creativity, tech savvy and financial need to makes the Side Hustle something of a given. In fact, the Side Hustle may work well with another trend, that of people being unhappy with their work lives. As it turns out, having a second, compelling career may make you more tolerant of your day job.
This article from Quartz spells out the way that it works. Quoting the author of a book called The Happiness of Pursuit, Chris Guillebeau, the author makes the point that in this day and age there is no need for ‘occupational purity’. That’s a new phrase to me too, but I like it. For so many people, the skills they now have and the jobs they now occupy will have to be re-thought every few years in the future. That is true for all workers – think about unemployed 50 somethings who need to think up new careers – but especially true for those just entering the labor force. Telling a 20something to pick a profession and assume they will be working at it for the next four decades or so seems like poor advice to me.
And so you have the Side Hustle. It has always existed for some out of economic necessity: for those pursuing a dream (wanting to be a rock star say), their reality also may mean being a barista or whatever. Which one of those jobs is the side hustle is a matter of opinion. The new-style Side Hustle is the one where the full time accountant sings in a rock band on weekends, or the customer service rep makes jewelry and then sells it on Etsy after hours. The singing accountants have always existed of course, as have the jewelry makers. What has changed is the technology that allows the jewelry to reach a wider audience – and perhaps as well the attitudes that now say it is a good idea for the accountant to channel his inner-Steve Tyler.
So why does it make people happier to have that side hustle? Well, clearly it makes them less invested in your regular job, which as we all know is hardly to be a job-for-life these days. More simply though, the side hustle can just make people happier and more excited about life in general, and that no doubt will have positive spillovers for their regular jobs, however mundane they might be.
While I like the tone of the Quartz article and do not disagree that having a richer life makes you happier, I think that we are going to see side hustles rise at an exponential rate, but for reasons more related to economics. These days, more and more companies are getting less and less committed to having huge numbers of people on the payroll. That means we are moving to a world with a mix of full-time work, side hustles, freelancers, part-timers and temporary workers. A lot about that mix makes those who study the economy and the labor market uneasy and worried about what that means for income security and economic growth, and I would not disagree that those are valid concerns. If those ‘new work world’ workers figure out how to make themselves a little happier amidst all of that, that might constitute a benefit that is harder to quantify but is a benefit just the same.
Robots, joined by Gig Workers, are now making Twinkies, and they are doing such a good job that their parent company is going public. That’s a powerful statement about today’s manufacturing and economy, never mind our nutritional preferences.
Twinkies, those flaky, cream-filled snack cakes that are apparently beloved by many, have been a business news story several times over the past few years. Hostess, the company that makes them, has been around since 1919. Over the decades, it became a huge company that not only employed many unionized workers to the extent that that eventually had 372 separate bargaining contracts at one time. As this story from the Wall Street Journal details, the company ran into financial troubles in 2004 and ended up in bankruptcy court, nearly closing operations. Although the company rallied, troubles with union contracts sent it back there in 2012. It might have been the end of the line for the Twinkie.
The Twinkie rose again when the brand, along with the rest of Hostess’ snack food line, was purchased the following year by two investment firms, Metropolous & Co and Apollo Global Management. The company threw a bunch of money behind rebranding the product, with a huge amount of success apparently. Hostess reported revenues of $650 million for the year ended on May 31st of 2016, and according to the company has a gross margin of 43 percent. Earlier this month it was announced that Hostess would go public, allowing those who believe in Twinkies to actually buy shares in the company.
Thing is, although Twinkies do have a retro appeal, the business model behind them these days is very different from what it used to be. When Apollo and Metropolous set out to remake the company, they not only created new products (bread, a frozen-fried twinkie that will soon be released) they also poured about $100 million into investment. The number of bakeries used in manufacturing has been pared back, and larger ovens apparently mean more efficiency.
In reading the Hostess success story, however, two things really caught my eye. The first is that robots now pack Twinkies into boxes. That’s right, robots. For the most part, technology replaces workers in quite subtle ways. Word processing software and voice mail in one way or another did replace many secretaries, but that happened over time and was more about people not being hired than it was about anyone being fired and their job function taken over by machines. In this case, however, robots are doing exactly what human workers once did and getting Twinkies into boxes. That says a lot about the nature of manufacturing these days.
The other thing that stands out to me is that Hostess is now being sued by truck drivers in twelve states, saying that they are being called ‘contingent workers’ when they are actually (and would rather be) employees. To me, that one is perhaps even a more important trend than the Twinkie-packing-robots. Increasingly, workers are being shifted into the ‘Gig Economy’, a place where they get assignments rather than jobs. For top-tier professionals that can be an awesome thing that allows them to charge top dollar and set their own hours. For the truck drivers and others like them, it clearly means fewer benefits, less job security and probably a significantly lower income. Whether or not the drivers win their suit, the move to a new class of ‘Involuntary Gig Workers’ is a genie that has left the bottle.
At the end of the day, Hostess now employs just 1,200 people in its Kansas City factory, as compared to 19,000 at its peak. That is actually 1,200 more than would have been employed had the brand not be saved, which is a good thing. The stock offering this Fall is likely to get a lot of interest and potentially could be a bonanza for investors, and the infusion of capital is likely to allow the company to expand, which is also an economic positive.
You cannot get away from it though: Hostess is but one example of a company that is using robots and Gig workers to move forward. In an efficiency sense that is great, but now is also the time to take note of the trends and ask what they will mean in a broader economic and social context.
Twinkies, it would seem, are an economic indicator and one that we would do well to follow.
Amongst the problems with the Sharing Economy – and its offshoot, the Gig Economy – is the fact that shares in it tend to be pretty unequal. In fact, even more than is the case of a usual employee-employer relationship, oftentimes the ‘employee’ in this example (who is really a gig worker) ends up with a pittance compared to the organization that helps them find the work.
An effort to get more of the spoils of their work into hands of the Gig Workers is behind a new start-up called Stocksy.com, which is profiled in this article from the New York Times. Stocksy is a service that provides stock images by photographers for sale to users. Unlike other sites which provide similar services, it is structured as a ‘co-op’ owned by the photographers, who get a bigger cut than they would otherwise. Run by the former owners of iStock (a company that was sold to Getty Images in 2006 for $50 million) it is an attempt to more equally share profits, and to provide better incomes for Gig Workers who frequently find their Gigs pay a lot less than they would like.
Although I would think that photographers are less vulnerable to exploitation than many Gig Workers (more on that in a moment) the truth is that as structured right now the Gig Economy does not work all that well as an economic model for many. To start, in large part you cannot even buy shares in it, meaning that the vast majority of investors cannot participate in it. Companies like Uber and Lyft are based in Silicon Valley and backed with significant amounts of venture capital, and for the most part there is little indication that they will go public anytime soon. More problematically for those who work for these organizations, the companies tend to be structured such that the vast amount of profits go to the companies, making many of those who work this way very much what I would call ‘involuntary Gig Workers’, workers who would rather have ‘real’ jobs.
The fact that photographers are being drawn to Stocksy because they are unhappy with existing stock companies does surprise me a bit. Thing is, the photography industry has always had a large number of ‘voluntary Gig Workers’, those who work alone or in very small groups. Traditionally, they have sold their services to a series of buyers rather than a single client. The advent of sharing platforms such as stock photo sites, or even the advent of the internet at all is potentially a huge boost to them, since they can make their wares available to a much larger platform. In fact, a study by Gig site Thumbtack saw skilled professionals with differentiated services to be the big winners from the Gig Economy, and predicted that that success would continue over the coming years. In contrast, they saw those providing undifferentiated services (one ride to the airport is really the same as another) as at risk of losing their gigs altogether as technology such as driverless cars takes over.
Stocksy’s model, whereby they end up paying their members a dividend at year end (providing they have ‘surplus revenue’) may be copied by others in the Gig industry. Then again they might not – the big, Silicon-Valley backed players are a bit of a monolith against other players, and co-op based services will only work if a sufficient number of photographers choose to only provide services to them rather than others.
The big picture though, is that the Gig Economy is still a work in progress. There are things to be gained from being a part of it, but it is going to take some time before workers and ‘employers’ and buyers and sellers figure out the mix that makes the most economic sense to each of them.
Really, it seemed like the universal basic income (UBI), was going to be the hot new thing in economic policy. It sounds like such a simple solution to economic woes, so uncomplicated, just so basic really. Give every citizen in a country some form of stipend so that at the very least everyone has enough to live on, goes the argument, and the issue of poverty would be solved. Why then, if it such an elegant solution to a bunch of thorny problems, have the Swiss so overwhelmingly rejected a plan to implement the UBI, and why it the backlash against it growing
But voted against it they have. On June 5th, 77 percent of Swiss voters said no way to a proposal to give every adult Swiss resident about $30,000 Swiss francs a year (a little over $30,000 U.S.), and every child about a quarter of that. Although the proposal (which was not put forth by a mainstream political party) did stipulate that the adoption of a UBI would go hand in hand with the elimination of all country’s welfare programs, it did not provide a lot of details on how much it would end up costing and whether would need to be raised to pay for the whole thing. Not surprisingly, the voters were wary and voted ‘no’.
The Swiss might have opted out of the UBI, but it is something we are going to be debating more and more in future. It is an idea that has its supporters from the political left (primarily because they think it might be a judgment-free way to pay people enough to end poverty) and even more from the political right (who believe that it is a way to lessen the size of government and treat everyone the same). Ultimately, however, the real support for a UBI may come from a wide swathe of people who are concerned by what technology may do to employment, or rather to unemployment.
We are at an exciting and scary time in terms of the global economy. Technology, which has more or less been our friend up to now, is now at a place where it threatens to out and out replace jobs, leaving a large portion of the population unemployed or underemployed. It is not a change we have seen before. When cars replaced the horse and buggy, buggy whip makers were able to find work in car plants. This time round, however, the elimination of jobs as a result of automation and robotics may well take a much broader toll, encompassing more and more jobs at all skill levels. A recent report by the Bank of England said as much, suggesting that as many as 15 million British jobs (close to half of current total employment) may disappear as a result of automation. If you believe that, and if you believe that it is a trend that might be replicated in other countries, then it is clear that a sea change is afoot. Looking ahead to ten or twenty years from now, perhaps we will not have a fully employed populace and the ‘sharing economy’ may indeed mean sharing the jobs. In that case, maybe it does make sense to move to a Universal Basic Income and have governments sort out the payment details.
The problem is, most of the details regarding a UBI are not well fleshed out anywhere. Paying a basic income to everyone in a country would come at a whopping bill that would have to be paid for somehow. Most likely that would come from taxes on those who were also working, which would erase any benefit that they got and act as a disincentive for many to work (opponents to the UBI in Switzerland made that case, suggesting it would lead to a flat out shortage of workers). I suppose another way of paying for the UBI would just be to print money to pay everyone although that would be an out and out disaster in terms of inflation.
In theory a UBI might work if it came in exchange for you every single other welfare program or government expenditure, but that also seems crazy. Close the libraries and let everyone buy their own books? Okay, maybe. What about erase every kind of disability payment and figure the basic income covers it? Or get rid of drug benefits or food stamps and assume that everyone will make the right choices when it comes to meeting their kids’ needs? Maybe not . And all of that is aside from the question of how to keep those that thinks a UBI sounds cool from heading to the region that provides it. If one U.S. state offered it, they would probably have a flood of people from other states moving in. If it was a whole country providing the UBI immigration rules might make it difficult for everyone who wanted to enter to do so, but it would provide a policy challenge just the same.
At the moment Finland, the Netherlands and Canada are planning tests of the UBI (in the case of the latter, the province of Ontario will be pilot testing a UBI in an unnamed region this fall) and the idea is gaining traction in Britain as well. The UBI may not ultimately be the magic solution to what is turning out to be a sea change in the economy, but if it is not it is certainly time to discuss some alternatives.
Like it or not, the sharing economy is everywhere. I’ll go as far as saying it will be one of the big economic stories of 2016, although its influence will extend far longer than that. It’s a different way to do business, and it works for a lot of people and a lot of businesses. But not for everyone.
Two stories about the sharing economy got my attention today, and each had a quote that stuck out for me.
The first was a story about a borough in Quebec called Rosemount-La Petite-Patrie, whose leaders apparently see the potential of the trend. They are so all over it, in fact, that they want to change zoning bylaws in town to allow for more short term rentals. For example, if there is a church parking lot that is only used to capacity on Sundays, they would like to change the bylaws to allow the church to rent out the space the rest of the time.
“Don’t discourage a behavior that would be beneficial to all just because it happens to be against the regulation already in place that was put there a long time ago before all this was possible’, Guillaume Lavoie, the councilor spearheading the initiative, is quoted as saying.
Contrast that attitude with the words of a lawyer in California who, according to this article from Mother Jones, thought about lawsuits almost as soon as she heard about Uber. “Why should we tear apart laws that have been put in place over decades to help a $50 billion company like Uber at the expense of workers who are trying to pay their rent and feed their families?” says Shannon Liss-Riordan, an attorney who likes to sue large businesses on behalf of workers.
Changing the rules is not something that tends to get done without some dissent. And yes, it does require tearing apart laws that were appropriate at another time when different technologies were in place, and different attitudes as well.
What is wrong with Ms. Liss-Riordan’s statement is that it fails to recognize that the success of Uber does not just help the owners of $50 billion company. Rather, Uber’s existence helps everyone who is tired of the frustrations that go with using cabs and would prefer to try something else. The Ubers of this world do not prosper because someone in Silicon Valley wants them to; rather they take root when people want their services. Not to mention, having businesses do well rather than have them fail tends to be better for the economy as well.
And yes, as companies like Uber expand, they will change how work is done. Up to now, we have mostly spoken of the sharing economy as it relates to Ebay or Etsy or AirBnB or Uber, looking at the efficiency of the way that it can provide a sales platform. The flip side of things is that the sharing economy is about how the nature of work has changed. Whether or not they would have chosen it, Uber drivers are independent contractors, and sellers on Ebay and Etsy are running businesses. Like it or not, large companies are also moving to employing more working on a contract basis rather than taking them on for life.
It is a brave new world, and we may indeed need regulations to make sure it runs properly. But they need to be of-the-minute regulations, not something that was created for an economy that no longer even exists.