We continue to act as if the job market should look like it did in the past. With the same occupations, the same pay and benefits and organized around relatively stable full time work for an employer. That job market is in permanent decline. A victim of globalization and technology––irreversible mega forces––and policies favoring employers––including weakening unions.
In this post I want to focus on the decline of stable full time employment for an employer. People filling a box on an enterprise’s organization chart. One of the books that most influenced my thinking about the economy when we started Michigan Future in the early Nineties was Job Shift by William Bridges. (Although it is almost two decades old, it is still worth reading.) It was clear to Bridges in 1994 that “When the work that needs doing changes constantly, we cannot afford the inflexibility that the job brings with it. … Jobs are no longer socially adaptive creatures, and so they are going the way of the dinosaur.”
Bridges predicted that increasingly work was going to be activity/project based. Workers hired for the life of a project. Project ends, employment ends. Time to find the next project or be unemployed. Bridges understood that in a world where globalization and technology made constant and unpredictable change the new reality, employers would increasingly seek to reduce the number of long-term employees.(Daniel Pink explores many of these same trends in Free Agent Nation. Also worth reading.)
Two recent New York Times articles chronicle this new reality. (We will look at one in this post, and the other in my next post.) Both worth reading and thinking about. Hard to read either article without understanding that many of our assumptions about how the economy works, particularly how it generates paid work, are no longer true. Particularly in the innovation economy that nearly everyone believes is an essential engine of future American economic growth.
In an article entitled “When job-creation engines stops at just one”, the Times explores the emergence of new businesses with very few employees. The opposite of the conventional wisdom that new and small businesses are the engine of employment growth. The article notes:
For more than a decade, start-ups have been getting leaner and meaner. In 1999, the typical new business had 7.7 employees; its counterpart in 2011 had 4.7, according to an analysis of Labor Department data by E. J. Reedy at the Kauffman Foundation, a research organization focused on entrepreneurship. … For decades, new companies have produced most of the country’s job growth. Without start-ups, the country would have had a net increase in jobs in only seven years since 1977. The number of people employed by new businesses peaked in 1999, the height of the tech bubble, and has fallen by 46 percent since then, to 2.5 million in 2011, creating a slow leak in job creation that has proved difficult to plug. “There’s this idea that we can somehow rely on entrepreneurship to get us out of the job crisis,” said Scott Shane, an economics professor at Case Western Reserve University. “That’s getting harder and harder, considering there are fewer and fewer of them, and they’re each employing fewer people.”
The article explores why this is happening by looking at an IT start up, Leap 2. As the Time describes, Leap2 manages this revolution from a tiny, shared office here in Kansas City with a few desks and a couple of white boards. … Rent is cheap. Perhaps more important, the rest of the overhead is, too. Leap2 rents server space, which means Mr. Farmer (Leap2’s CEO) did not need to hire people to build and maintain servers, as with his earlier start-ups. The company has access to programming language from Bing, Twitter and other established companies, so it does not have to build a new search engine to crawl the Web and index myriad Twitter posts. Leap2 also does not have any back-office workers to handle things like travel arrangements, human resources or accounting. That is partly because there are now Web-based resources to help with these functions, and partly because Leap2’s contracted developers pitch in on many of these tasks. “We recruit athletes, not position players,” Mr. Farmer said, meaning he believes his contractors can fill more than one role. … Mr. Carroll (Leap2’s co-founder) brags that Leap2 has been able to spend “almost 100 percent” of its budget on programming talent. That spending goes further because Leap2’s developers, as independent contractors, do not get benefits. Most of Leap2’s developers have staff jobs at bigger, established companies that provide health insurance. Because most of them have children, they tend to do their work for Leap2 after about 9 p.m. Only one contractor, Travis Williams, does not have a day job anywhere. He is a graphic designer who juggles multiple projects by choice, and he has health insurance through his wife, who is a kindergarten teacher.
The article notes that this way of organizing new businesses is not limited to high tech companies. The article states: This focus on leanness and streamlining is not limited to high-tech start-ups, according to Eric Ries, the author of “The Lean Startup.” He said the revolution began in Japan in the 1980s, when manufacturers learned the value of creating products in smaller batches and refining them more often, and has since spread. “Now you can rent the means of production instead of owning them,” he said.
Certainly not the job market your father participated in. Neither is it the job market your older sister participated in. How we earn a living––how work is organized––is changing and will keep on changing. Each of us as individuals needs to build the capacities to succeed in this new context. We also need policy makers to understand the changing nature of work so that they can design policies and programs that help us succeed in this new reality. Not tell us that they have the answer to bringing your old job back. That they can’t do.
