
In the Future, Employees Won’t Exist - frostmatthew
http://techcrunch.com/2015/06/13/in-the-future-employees-wont-exist/
======
netcan
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._

~~~
ChuckMcM
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....](http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0335.1937.tb00002.x/pdf)

~~~
netcan
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...](http://www.econtalk.org/archives/2012/05/coase_on_extern.html)

------
aswanson
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.

~~~
wrk1
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.

~~~
yummyfajitas
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...](https://www.gc.cuny.edu/CUNY_GC/media/CUNY-Graduate-
Center/PDF/Centers/LIS/Milanovic/papers/2014/Where14.pdf)

~~~
crdoconnor
>Be honest - your actual complaint is that reducing inequality sucks when you
are at the top of the heap.

While we're being honest, if you're working for a living rather than living
off investments (i.e. the labor of others) you are _nowhere near_ to the top
of the heap.

If you're living off the labor of others, opening the immigration floodgates
is great news. More workers to play off against one another. H1-Bs are even
better news.

~~~
yummyfajitas
tl;dr; I'm only in the top 3'rd percentile and I feel envy for the top 1'st
percentile, and I'm willing to cause millions to suffer dire poverty in order
to mitigate my feelings of envy.

~~~
crdoconnor
tl;dr _you_ are primarily concerned with the _exploitation_ of dire poverty in
third world countries for personal gain.

We both know that importing the best Bangladeshi talent to the United States
because it's 50% cheaper than the average American is not going to help the
average impoverished Bangladeshi. Quite the opposite, in fact.

~~~
yummyfajitas
_you are primarily concerned with the exploitation of dire poverty in third
world countries for_ mutual _gain._

Fixed that for you. FYI, I'm an American working for an Indian company. So
according to your theory, I'm the one being happily exploited by global trade.

By the way, according to your github profile, you live in Singapore. You were
born there (Colm O'connor sounds like a very Singaporean name) and never plan
to leave, right? Or is this a situation of "restrict their freedom to move,
but not mine"?

~~~
dang
> Be honest - your actual complaint is that reducing inequality sucks when you
> are at the top of the heap.

> [you're] willing to cause millions to suffer dire poverty in order to
> mitigate [your] feelings of envy

> By the way, according to your github profile, you live in Singapore

These things cross the line. It's fine to have a contrarian view but please
don't put an acerbic and personal spin on it when posting here.

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coldnebo
"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
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.

------
mschuster91
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.

~~~
BjoernKW
> 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
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+.

~~~
BjoernKW
While what you're saying is correct there is no single best option. The German
system is pretty much geared towards employees. For non-default cases such as
freelancers and entrepreneurs the system is convoluted at best and downright
broken in some respects. It probably still is one of the better healthcare
systems worldwide but there are so many stakeholders involved - the least
important of whom is the patient - that it has a lot of flaws that need fixing
but aren't very likely to be fixed in the foreseeable future.

------
dataker
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
> _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.

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

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

------
jellicle
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.

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hwstar
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
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.

~~~
hwstar
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.

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

