Automation and Artifical Intelligence (AI) are spurring an economic and cultural shift toward customizable multi-stream contract work as demand for traditional jobs are eliminated. Independent contractors and freelance workers (gig jobs) have risen beyond 53 Million or 34% of our labor force. Roughly 50% of Millennial workers are already a part of the gig world according to the Wall Street Journal. Current trends project the majority of US labor will be freelance by 2027. Think of Uber and Airbnb growth. Just 3 years ago New York City had more Yellow cabs available than Uber and Lyft ride-sharing vehicles combined. By last year, Uber and Lyft ride-sharing provided 50% more daily rides than Yellow Cab and quintuple the cars in service.
What a world! Ride-sharing, Car sharing, Residence sharing, food deliveries, smartphone banking and freelance taskers. Airbnb has grown from just 3,000 listings in 2009 to 2.3 Million in 2017 with bookings growing at a 40 to 50% clip. They now have far more listings than the worlds 5 largest hotels combined. Airbnb had 80 million users in 2016 and 100 Million in 2017 and appear to have locked in many more years of rapid adoption in new countries.
There are more than 2 million Uber drivers globally (about 65% are in the US), over 50,000 TaskRabbit freelance contract workers and thousands of food delivery drivers (Ubereats, Doordash, Postmates).
Lawrence Katz of Harvard and Alan Krueger at Princeton found that “94% of net job growth (10 million jobs) in the past decade were in the alternative job space with more than 60% a result of freelancers. https://contently.net/2016/04/29/trends/6-takeaways-from-the-katz-kreuger-study-on-freelancing/ Working the traditional “9 to 5” or W-2 salaried job is in decline.
These “1099” independent contractors working in customized side gigs or full time are rising rapidly along with a cost shift of health needs away from traditional corporations. Some estimates show that 35% of freelancers will choose not to be covered by the Affordable Care Act (ACA), which is spurring new endeavors for preventative care, better self-insurance and competition such as the proposed gang of three (Buffet, Bezos, and Dimon) plan to provide cheaper coverage.
The combination of the mass retirement wave of Boomers and the rise of gig workers has created one of the largest gaps in unfilled job openings in history. The economy is currently accelerating, but limited in its growth rate due to an inability to acquire workers. This, of course, increases the investment in innovation and intellectual property (IP).
While the overall decline in the often debated Labor Force Participation Rate (LFPR) can be largely attributed to our aging population, the decline in prime working age labor is more complicated, likely being reduced by a portion of gig workers that are are not properly tracked by the Bureau of Labor Statistics (BLS). With almost 3 years of record traditional job openings available, it’s unlikely able-bodied 25 to 54-year-olds are all living in their parent's basement unable to find work. As traditional W-2 employees stagnate and 1099 workers grow, there are likely Millions that have fallen through the cracks of measurement, working multiple part-time jobs that earn less than the required ,700 reporting threshold. (59% of cryptocurrency investors don’t report to the IRS). Would an Uber driver making k and also owning an Airbnb making k or as a freelance programmer even report his income without an accountable employer? The new tax law offering discounted rates for pass-through business is likely to further accelerate the trend towards contingent labor.
There is plenty of optimism for small business and entrepreneurs in this growing Gig economy. With 42% of small business using contract labor, it’s cheaper and more flexible to add workers. A record amount of 2017 Venture capital went into startups and AI-themed ventures — including machine learning, advanced robotics, and self-driving vehicles — and they are expected to grow into a $13 trillion market opportunity by 2025. These shared economy workers will have unmet needs in job finding, health insurance and tax advisories that will continue to grow and innovate.
The dynamic digital era growing symbiotically with freelancers spurs Intellectual property (IP) which now accounts for over 38% of the US GDP, over $6 trillion a year, and 30% of US employment. Despite IP’s obvious importance to our economy, no major American university has offered a basic course in IP for entrepreneurial undergrads. Self-driving cars and AI will be disruptive and potentially scary trends to manage in the years ahead, but it can also be a very exciting and innovative period full of opportunities to prosper as a worker, entrepreneur, and investor. The Gig is up and it's not over yet.
