HomeCareer Management

The future of work

Like Tweet Pin it Share Share Email

Demonstrating once again that certainty and knowledge are inversely correlated:

One camp is absolutely certain federal workers are paid twice what private-sector employees receive. Another camp is absolutely certain they’re paid 24% less. The first is outraged at how overpaid federal workers are. The second is outraged at the propaganda leading to the outrage of the first.

As FactCheck.org reports, the studies cited by each camp in support of its position are so flawed as to be useless. The last credible comparison was conducted in 1990.

And so, as is so often the case, ignorance is the only honest position a rational person can profess.

It’s as Mark Twain said: “It ain’t what you don’t know that gets you into trouble. It’s what you do know that ain’t so.”

Speaking of which, my vote for the Stupidest Linguistic Construction Award goes to this popular jewel, “The fact is, next year thus-and-such is going to happen.” I don’t know much, but I’m certain of this: By definition, a prediction isn’t a fact because … ach, crivens! Anyone who needs this explained is beyond hope.

Keeping that firmly in mind …

Last week’s column started a discussion about the future of work in the United States. It made a case for the higher value W-2 employees bring to well-led, competently managed companies compared to their 1099 contracting counterparts.

Not all contractors loved the comparison, and I don’t blame them — the view was, while as accurate as I could manage, incomplete. Another, and perhaps better way of thinking about this might be that employees are part of the enterprise infrastructure. Like most other investments in infrastructure, investing in employees trades increased scalability for reduced flexibility.

The incremental cost of servicing steady business growth is lower when the work is performed by employees than when performed by contractors.

The trade-off: When business volume fluctuates, either cyclically or unpredictably, it’s easier to add and shed capacity through the use of contractors (and their close cousins, temporary employees).

That’s the short version. For a more complete view, read “Building a sourcing strategy,KJR, 3/29/2004).

Which brings us to you, not as someone who makes business policy but as someone who needs an income. You need to plot a course. To do so rationally you need a reasonable view regarding the future of work in the United States. (If you participate in a different employment marketplace, you’ll have to judge its similarities and differences for yourself — I’m trying to avoid the inverse correlation between knowledge and certainty noted above.)

To start, we can’t avoid taking a look at some long-term trends in the U.S. economy, the first of which is our three-decades-and-counting industrial policy, which, being as factual and objective as I can manage, has encouraged “financial innovation” and investment over technological innovation and investment.

By which I mean tax incentives and relaxation of the regulatory environment have encouraged a steady shift of capital investment and a lot of our country’s talent from inventing products with tangible value and building factories to manufacture them, to inventing and selling financial derivatives that are portfolios of debt obligations or portfolios of insurance policies hedging against debt defaults … investments that are based on debt and as decoupled as possible from any underlying assets with tangible value.

At the same time our economy has restructured itself so as to increasingly replace equity with debt on corporate balance sheets.

(These insights come from Michael Lewitt’s The Death of Capital (2010). It’s more than a bit ideological, excruciatingly dull, and overly focused on persuading the reader that Michael Lewitt is immensely erudite. Reading it is worth the investment nonetheless, because it peels the onion a lot more than any other analysis I’ve encountered that deals with our ongoing financial crisis.)

This matters to you, when planning your career strategy, because with an economy built on multiple layers of debt, volatility will be the norm, not an aberration.

And employers who expect volatility will prefer contractors to employees.

As noted above.

These are my premises and conclusions. They aren’t facts. You don’t need to agree with me on either. You should reach some conclusion about this subject, though. Anyone who doesn’t will end up with a career strategy built on mental habits instead of a clear view of the situation they’re planning for.

So there it is. The view from here is that you should build your career strategy on the expectation that employers will increasingly shift their emphasis from employees to contractors.

The devil is, as always, in the details, though, and that little Luciferian foray will have to wait until next week.

Comments (5)

  • Bob,

    Nice use of Pratchett. I believe that you are being too kind to financial engineering. Most of it appears to be fraud. This is due to a Gresham’s dynamic whereby if your competitor cheats, you have to cheat to stay in business, and then, it’s a race to the bottom as far as ethics go while profits appear to increase until the “control fraud” collapses. One could also argue that we don’t have much of any kind of policy, industrial or otherwise, since most industries are being offshored, even strategically important ones like rare earth minerals processing. China purchased the plants here, stripped them, and took the IP back to China. Not very smart on our part. Perhaps that’s the problem, though. The current tax and financial incentives encourage short term gains and profits instead of long term stability and profits. This is partly due to Wall Street and the fees it gains through M&A and corporate governance/executive compensation of senior level managers and their short lifespans (average 3-5 years). It doesn’t help that 99% of our economists didn’t see an $8 trillion dollar housing bubble and allowed it to collapse and almost destroy the economy. None of those economists or bankers for that matter have lost their jobs or their influence in making policy or business decisions. It can also be argued that IT has helped Wall Street gain even more profits from the use of computers to quote stuff trades (so called High Frequency Trading aka asymmetric price discovery). It’s kind of hard chart a safe course in the world of business if regulators or lawmakers favor one company over another, and laws are not enforced. The spoils may go to either the bidder with the most influence or the best cheater. Either course destabilizes a capitalist system because competition is either avoided or undermined. Innovation is lost as well since R&D is one of the first victims of cost cutting in the race to the bottom.

  • Bob writes: “tax incentives and relaxation of the regulatory environment have encouraged …”

    One could make the counterargument that taxes and regulations make it particularly expensive to hire Americans as employees, hence outsourcing, offshoring and contractors are preferable to onshore W-2 employees.

  • I’ve been waiting for Bob to write about this week’s subject. When we were told years ago that our economy was becoming “service oriented,” I got worried. Infrastructure and physical products may not be trendy or fashionable, but they are THE fundamental building blocks of any economy. Real “services” (like fixing your car and cutting your hair) are pretty close to fundamental as well. But financial services, insurance, and derivatives (whatever they are…) couldn’t exist without the fundamental building blocks.

    That’s not to say financial services offer no value, but they are not fundamental. They are secondary, often a virtualization of something “real.” America is in big trouble because we off-shored too much production of real products and this trend continues to gain traction. Employees are often seen as a “problem” rather than an asset. Our society has very little respect for those who work in factories, but we NEED those people more than ever.

    There’s another aspect of this that bothers me as well. Many bankers and investors evaluate financial performance as if service companies and manufacturing companies play on the same field. They don’t. Some service companies can generate profit margins of 20%, 30% or more. However most successful manufacturer’s margins are in the 5% to 15% range. As Bob noted, this is partly because manufacturing is more capital intensive than service. But the market often “punishes” manufacturers for their “lower performance.”

    The next major war will be exceedingly difficult for our country because our economy is more fragile than ever (as Bob explained) and we have little ability to produce products to fight a war. We’ll have to buy our weapons (which may be difficult with a fragile economy). Let’s just hope we have some allies who make them…

  • >Michael Lewitt’s The Death of Capital (2010). It’s more than a bit ideological, excruciatingly dull,

    For an alternative that’s fun, engaging, intelligent, and comes with pictures of Johnny Depp (for me) and Angelina (for my partner), try Vanity Fair. Their coverage of the meltdown has been excellent.
    The Big Short

  • Interesting column, as usual. I have 2 thoughts:
    1. Remember Kurt Vonnegut’s novel Player Piano? Are we closer to that story where more and more jobs are replaced by machines, or just disappear due to obsolescence?
    2. Federal Pay. It’s a complicated subject. I can only offer a couple of facts and anecdotes. Each year, the federal government convenes a “pay board” that evaluates pay for all jobs in the US and it makes a recommendation for the general pay increase for federal employees. This vehicle was established so that the federal government could remain competitive with the private sector. The idea is that the federal government, like any other organization, wants to recruit and retain quality employees. As a federal employee from 1975 to 2009, I was subject to 34 of these recommendations. Now, the law of averages would have called for the annual recommendation to be applied half the time, 17 out of 34 years. And the quality of the American economy from 1975 to 2009 would have warranted that the recommendation would have been used at least 20 of the 34 years. How many times do you think that the recommended raise was accepted by the president? The answer is 2. That’s right, twice in 34 years, the recommended pay raise was implemented. 32 times out of 34, the pay raise was less than recommended. This includes 2 years in the 80’s when the pay raise given by the president was 0% and inflation was in double digits. Imagine a company that held the line on raises to 0% for two years at a time when inflation was running in double digits. How competitive would that company be? I was a manager for the second half of my career, mostly in the IT area. I advertised lots of jobs for people with specific, complex skills, much as you would expect in the IT world. Quite often, my job announcements drew candidates from outside of the federal government and quite often, I was not able to hire the best candidates from the “outside” because I didn’t have enough salary to offer them. Imagine having to select the 2nd, 3rd, or 5th best candidate for many of your new hires. There is definitely a pay gap for many federal jobs. If you want to find an office clerk job, you would do well to get a federal job. But if you have a skill, (IT, lawyer, accountant, etc.), you will do far better in the private sector or as a government contractor.

Comments are closed.