Can P2P Networks Stop Wealth Disparity?
Who can remember Post War America? A time of white picket fences, good paying jobs and a reliable Christmas bonus. Let’s face it, it’s not coming back, probably ever. It’s an actual memory to some, but a complete unknown to younger generations who are more likely to accept a job because of a cool cafeteria.
From the end of WWII through approximately 1970, hourly wages of non-supervisory workers grew hand in hand with economic productivity. The time period provided stability for workers, who generally remained in a field for an entire career and loyal to a company for decades. But something changed. Let’s fast forward to the mid 70’s, to what marks the beginning of growing corporate profits. Profits are a good thing, except that real wages (earnings adjusted for inflation), have been stagnant ever since. This has primarily been a byproduct of market economics, and from that point until today, productivity and corporate profits have been growing steadily while the economic gains have not made it to the workforce.
Today, the workforce is struggling with the following challenges:
· 3% Savings Rate · 78% Living Check to Check
· Stagnant Wages · Rising Cost of Essentials like Healthcare
These factors are all contributing to the blatant issues of wealth and income disparity. Much of the global workforce still struggles with simple barriers to financial inclusion. Luckily, emerging technologies are presenting an opportunity to create a tremendous amount of economic value for the global workforce at a critical period in time.
There has been a shift in the workforce composition that has been gaining momentum for several years. The freelance economy tripled the growth of the overall workforce since 2014 and contributes $1.4T to the US economy and an estimated $2T to the global economy in just the few countries we measure.
This phenomenon is growing for different reasons and has different implications for each global region it impacts. Developed economies experience freelancing as a result of employee displacement, imposed regulations and the market pressure for corporate profitability. For developing economies, freelancing represents financial inclusion and opportunity. As high as 35% of the world still has no access to banks or the global financial system. For these economies, freelancing represents the opportunity to earn income in a global marketplace and there are specific regions like Sub Saharan Africa that have proven financial inclusion creates economic growth.
But the entire existing Freelance Economy is inhibited by the current financial systems themselves. Optimistically, we are headed into a new phase of globalization and connectivity that can change that.
With the implications of automation, machine learning and artificial intelligence, the demand for workplace solutions is enormous. The task of defining a path for the workforce in the indefinite “Future of Work” represents one of our greatest challenges. However, this is also an opportunity for the greatest period of value creation to a global audience in generations.
The innovation of first generation internet marketplaces for labor, which are referred to as freelance or gig platforms, has supported the freelance economy growth thus far. Consumers and workers connect using these platforms to source and complete projects ranging from software development to housekeeping. And it’s not just independent consumers using them either, 4/7 recently polled fortune 500 companies were already using platforms to outsource labor and have plans to increase their usage.
These platforms have created value for their users, both consumers and workers, by redistributing a portion of the value added, traditionally taken by an employer. However, this is just scratching the surface of what’s possible through peer to peer, or P2P networks. Emerging technologies, like blockchain, are providing an opportunity to develop P2P platforms that potentially eliminate the need for any third-party intermediary, like banks or existing platforms, along with the influence and tax they impose. They create a direct transaction channel between users, allowing them to retain virtually 100% of the value they create from the work being performed. Of course, the users would incur costs of doing business, but the cost of bureaucracy would be significantly reduced or eliminated.
At a time when the global workforce continues to fall further and further behind in their ability to create sustainable wealth form their work, emerging technologies have the potential to change the course of history. The combination of blockchain, which enables cryptocurrency, with smart contracts, which limits bureaucracy and human influence creates a structure that redefines the value proposition of work. This structure allows the retention of value through multiple means. And just how much value are we anticipating as we embark on P2P initiatives? If you simply estimate value through only the fee savings of current industry platforms, 15% average on revenue of $2T, that’s $300B of potential value. And we have not even discussed productivity gains, given that 90% of the current working population feels unfulfilled by their work or the value in the efficiency and transparency of emerging technologies.
Peer to Peer probably cannot stop global trends. But certainly the potential impact is significant on a global scale and companies like LaborCrypto are on it.
