Tuesday, April 6, 2010

Future Shock Applied: employment shock

There are a few trends that are about to wreck into each other and cause a change that no one intended or wants.  It is inevitable.  We might can control the pace.  We might can avoid violence.  But we need to understand what is happening and prepare ourselves.

Increased high technology is enabling new types of work and employment.  Increased government is putting more pressure on the old types of work and employment.  The very nature of employment is about to change.  And almost no one will believe the change is for the better.

Individual Consulting Companies
During this period of high unemployment many unemployed and underemployed people are creating consulting businesses for themselves.  There are several driving forces.  Starting your own small business:
* fills the employment gap in their resume.
* is good experience for whatever future work they might do.
* gives them a new and interesting way to market themselves.
* makes it easier to do temp work and temp-to-hire work.
* gives them something to do.
* gives them the appearance of being busy (helps appease friends and family).

Let me clarify what I mean by their own consulting business.  These businesses are not actually doing anything.  They are all potential and little actual activity.  The only service that they have on offer is doing whatever work that the person would like to be employed full-time doing.  If the person does an odd job (mow someone's lawn) they might push that income through their consulting company in order to show some income to offset their expenses.  But these companies are really just providing the benefits listed above.

High Overhead on Employment
Payroll taxes are rising.  Healthcare taxes and premiums are rising.

If you want to reduce something, tax it.  That's the logic behind the sin taxes on cigarettes and alcohol.  But few can see that the high taxes on employment will have exactly the same effect.  When you increase taxes on employment you get less employment.

Healthcare Mandate
Individuals are at risk, if they cannot afford insurance.  But currently health insurance is predominantly provided through employers.  This is a classic case of punishing the victim.

What happens when you establish a policy to punish the victim?  You get fewer people admitting that they were victimized.  You don't get fewer victims.  You get fewer reports.

Lower Cost per New Client
The internet enables a company to service a larger number of clients than it could pre-internet.  For instance, an insurance company can now post forms on their website and write FAQs about those forms, and people can fill out those forms with little help.  The incremental cost per new client is much lower for companies that leverage the internet.

Work at Home or Anywhere
My cell phone has more processing power than the Space Shuttles.  My cell phone is several years old.  My home computer is more powerful than a high-end server from three years ago.

Software systems are now common for remote connections into secure networks.  Collaboration software is becoming ubiquitous.  Project Management software is all delivered over the web now.  Distributed workforce is becoming the norm.  We are building the infrastructure for plug-and-play workers.

Market Response
The market is about to start responding to these pressures and forces.  Companies will hire fewer employees and turn to individual contractors to fill in the gaps.  Unemployed people / individual contractors will find ways to get healthcare insurance through their individual consulting companies.  And traditional employment will never return.

Government will probably respond to this trend by imposing more rules on contract workers.  Companies will be forced to extend more benefits to contractors who have been on contract for a certain period of time, or for so many hours per week.  Companies will respond by offering shorter contracts.

The result will be that workers have less stability and security than they have ever had.  Many people will contract with several companies at once, doing highly-specialized micro-work.  Many more people will fail to keep up with the changes and will become twenty-first century Luddites.

What Should We Do?
First, take a deep breath.  All of this is inevitable.  It is only a matter of time.  How long will this take?  The biggest driving factor is the new government policies.  So much of the timetable will be set there.  The faster that the taxes and penalties rise, the faster this trend will accelerate.  But whether it is next year or next decade that you face this transition, this is the next transition you will face.

Fortunately, now you are armed with information that you can use to prepare.  We can also use this information together to drive better policies within our companies and governments.

* Increase your savings.  You need cash on hand to ride out the bumps between contracts.
* Get on the tech bandwagon.  You need to be tech savvy to make this transition.
* Invest in learning and improving your skills.  Certifications will become more important as you continually compete for short-term contracts.
* Invest in networking.  You are going to get these contracts through your personal and professional connections.
* Do high-quality work.  Reputation will be important to building that network.

* Prepare for the integration of HR and vendor management.
* Start outsourcing non-business-focus activities early.  You will need the practice.
* This new HR and vendor management function will be very specialized and time-consuming.  That's one of the first things to consider outsourcing.

* A complete reversal of the tax and mandate systems could dramatically slow down this trend.
* Barring that, don't attempt to stop this trend.  You will only succeed in making it more painful for the people in transition.
* There will be a new Luddite movement.  Focus on keeping the discourse civil.  Don't let the new Luddites get shut out of the process, or they will get violent.

No comments:

Post a Comment