16 - On the rise of On-demand Workers and the Future of Work, a conversation with Jeff Wald
A conversation with Jeff Wald, Founder of Work Market (now an ADP company). Jeff has founded several other technology companies including Spinback (eventually sold to Salesforce). He is an active angel investor and startup advisor, as well as serving on numerous public and private Boards of Directors. Jeff is the author of The End of Jobs: The Rise of On-Demand Workers and Agile Corporations.
Lessons from past industrial revolutions
The real size and impact of the on-demand labor market transformation
Robotics and Automation
The challenges of upskilling
The $10M "Future of Work Prize"
Getting the facts right: There are not 60 million freelancers in the United States. There are about 58 million on-demand workers of which 15 million are freelancers.
We can learn a lot by looking how companies, workers and society came together to adjust to mechanization, to electrification, to computerization - the last 3 industrial revolutions.
One of the big lessons learned is that history doesn't like a tremendous imbalance of power. Companies accumulate so much power in their relationship with workers because of new technologies and then they abused that power. As people that are at the bottom of that pyramid are not seeing increases in real wages and standards of living, they get upset, which leads to the rise of counterbalancing forces: regulation, the social safety net and the union movement that act as a buffer against too much power going to companies. Companies get restrained, those who can will see an increase in union activity, leading to more worker rights within a company, more worker money being taken out of the relationship and better working conditions. You can see it as the rise of regulation constraining companies power.
Companies are not abusing workers the way they used to - you're not seeing Amazon locking workers in its warehouse to make sure they don't go outside to take a break. We have evolved as a society, which is good, but real real wages have not risen for workers because companies have such pricing power in the market - it comes down to supply and demand because of increases in productivity. We need fewer workers to perform the same tasks, therefore workers' bargaining power decreases. Jeff is not optimistic that there is much that change in that dynamic in the near term, save for regulation changes in the social safety net to provide a cushion for workers as they may lose their jobs or aren't being paid.
An amazing example of how workers can get some power back in this relationship: there was a movement in the United States called “Fight for 15”, which was started by the unions but it morphed into a grassroot non-union activist led campaign all around the country to change the minimum wage laws to $15 an hour. They have been incredibly successful in several States that changed their minimum wage laws to slowly move towards $15 an hour. This is an example of workers bonding together in common cause, but not in traditional union structures, but instead using social media and their common interest to push for regulatory change.
On-demand work will continue to take market share from the traditional full-time employee, but not as much as we think. People have this general idea that over the last 10 years, on-demand labor has grown tremendously. Statistically, it has taken about 3% market share over a 10 year period (0.3% a year, which is substantive but it is not the scenarios of the United States on-demand workforce becoming 50% of the labor force). On-demand labor is between 25 and 30% of the labor force, it's grown a little bit over the last 10 years, and Jeff doesn't anticipate it growing much more into the future.
The “agile corporation” is the flip side of the on-demand worker. The more a company can variabilize (turn its labor force into a variable cost) the more agile it can be. The ideal structure for a company is a small fixed cost center - usually senior executives, a few other people that their functions have to be full-time and everybody else done on-demand. That's ideal for every company, and yet there are very few completely agile corporations. Most companies have their largest costs labor as predominantly a fixed cost.While that might be the ideal structure, it runs into two important impediments.
One is business process. Most functions can't be outsourced. You can't do them with templates or you can't do them with freelance labor. The business process itself doesn't lend it. You want that full-time employee because they have customer touch points, institutional knowledge, have intellectual property and a host of other things. There is a huge ramp up time to productivity.
The second thing is regulation. You can want employees to be freelancers, but you're not allowed to do that.
The robots are not going to take all of our jobs. According to studies, 10 to 15% of jobs will go in the next 20 years. Not to minimize that change in any way - that is a substantial movement in a labor market that impacts communities and families, something to be taken very seriously. It is not half of our jobs, it is 10 to 15%, but 10 to 15% of jobs will be created over that period.
The big challenge is not jobs being lost, it is how to retrain workers from jobs that are lost to jobs that are growing. Historically this always happens at the beginning of an industrial revolution: there is a fear that all the jobs are going to be lost, yet historically it never turns out to be true. We end up with more jobs, a higher standard of living with people working fewer hours.
The other thing that we can learn from history is that societies do this retraining poorly. And the more we sweep this under the rug and don't address this issue of how do we get people from industries, from functions, from geographies, where jobs are dying into the places where they are growing, the more difficult this transition will be. While every industrial revolution did end up with more jobs, higher standard of living and people working fewer hours, the transition from the beginning of that industrial revolution to the end where we get to that better place is a difficult one.
The challenge with re-training and up-skilling is a lack of understanding of who owns this problem. Is it the worker's responsibility? There is a powerful trend in the world of work around personal responsibility. Is it the education system that needs to change? We should be teaching more of the applicable skills in high schools. Do companies own this? German society does a very good job at apprenticeships. Is it about on the job training? Is it some combination of the government's mandate and companies that do on the job training? Do they mandate them when you're letting workers go? A lot of retraining fails because workers don't want to be retrained. They don't want to go back to school.
You have to constantly be upgrading your skillset, constantly re-skilling in order to make sure that you have a monetized package of skills. That goes for every worker, not just for the on-demand workers.
The entrepreneur mindset is becoming pervasive. 10 years ago, if you had said to somebody that you are a freelancer, the general notion was that you're unemployed. Now, when somebody says they're a freelancer, people think that you're an entrepreneur. Important shift. We've seen companies going from the traditional story of starting in a garage to everybody's using that product, from small startup to unicorn. This kind of mind shift needs to flip because entrepreneurs are always trying to reinvent themselves and start something new and looking for holes and opportunities in the market.
Companies wants to be agile so they can remain flexible and take advantage of opportunities - thus people need to be agile, and they need to be able to respond to what is going on in the market and take advantage of an opportunity. The more agile they are, the more agile society is. History has shown how creative destruction happens: companies that get too set in their ways and aren't innovating or aren't responding to customers can get taken down by new companies that think about what the customer really wants and how to address their need and solve a problem. That's what allows us to move society forward.
Jeff puts a $10M prize for the future for work. Whichever one of the contributor to his book that makes the most correct prediction as deemed by a vote of all of them in 2040 will be awarded the prize.
Priorities for business leaders while looking at the future of work and the impact of the COVID pandemics:
(1) Take advantage of the remote work construct, not to allow people to work in other cities and move far away, but to allow them to have more flexible work arrangements. The could be in the office only two days a week or only in the mornings. The idea that you need to be in your office nine to five, five days a week is laughable at this point. By engaging flexible work arrangements, you can engage an entirely new pool of labor that you might not have engaged before.
(2) Systematize the engagement with their workers. Currently it's not recorded in two ways. First, most of the work with on-demand workers is captured on spreadsheets still. You don't actually know who's doing work for your organization. Unless you systematize everything, you can't get a sense of everybody that does work for your organization: who are they, where are they, what's their availability and what are their skills?
(3) Know the skills in your organization? Most companies do not know what their skills actually are, what their employees are good at, what they're not good at, what type of environments they work well in.
If you don't know what skills you have across all labor assets you can’t effectively manage that transition. •