Our focus areas: The future of work

The nature of the jobs we hold as a population is constantly changing as a result of technology and sociopolitical movements. Centuries ago, the majority of the workforce — 90% by some estimates [1] — was employed in agriculture. With new machinery and techniques improving planting, seeding, fertilization, and harvesting, today only 2% of the US workforce are farmers. A similar shift has happened in manufacturing, where the number of jobs has declined by 37% since its peak in 1979 [2], the result of globalization and more efficient production lines. During this time, much of the job loss in farming and manufacturing was offset by gains in the service industry (e.g. education, healthcare, banking, and legal services).

Today, the most interesting labor shift we’re observing is the rise of the contingent workforce, composed of freelancers, independent contractors, part-time workers, and self-employed individuals. This group has grown from 30.6% of the workforce in 2005 to 40.4% in 2015 [3]. In fact, this implies that all of the net employment growth in the US between 2005 and 2015 can be explained by the growth of the contingent workforce, as total employment grew from 140.4 million in February 2005 to 149.4 in November 2015 [4].

It’s important to note that the contingent workforce is comprised of far more than those working in the on-demand economy (Uber drivers, TaskRabbit workers, DoorDash deliverers, etc.). For instance, there’s the masseuse or fitness trainer managing her own client base, the retail worker stringing together part-time jobs, and the electrician or plumber traveling to multiple job sites a day.

What does it mean to be part of this workforce? How is your life different if you’re an independent contractor or a freelancer versus a full-time employee? Here are just a few areas to consider:

• Finding & scheduling work — instead of a regular schedule, contingent workers piece together a schedule and/or client base on their own.
• Income volatility — instead of a regular paycheck, 41% of individuals now experience more than a 30% change in income on a month-to-month basis [5].
• Taxes — instead of employers doing tax withholding on each paycheck, independent contractors are responsible for tracking income and expenses, and often making quarterly estimated tax payments.

We believe that there are great opportunities for software and software-enabled services to play a role in serving this growing group of contingent workers, particularly as people increasingly grow accustomed to managing their work on their mobile devices. In this post, we discuss each of these areas and the problems we’re interested in seeing companies tackle.

Finding & scheduling work

Without customers, shifts, or job orders, there is no work. And this is the defining characteristic of contingent workers — unlike somebody working one full-time job, they are piecing together a schedule on their own. In the 2015 1099 Economy Workforce Report [6], ‘finding enough work’ was the most commonly reported pain point by 49.2% of respondents, and ‘optimizing my schedule to maximize earnings’ was the third most commonly reported by 31.5% of respondents. (‘Understanding tax or legal obligations’ was the second most common, which we talk about later.)

Because there are many different types of work ‘units’ for different types of workers — e.g. client appointments, work orders, or shifts, depending on what exactly you do — we see several different types of opportunity here. For example, for people who build their own client bases, we’re excited about marketplaces that connect and schedule them with new customers. For people who need to choose shifts, data that can help them optimize earnings across multiple platforms is extremely helpful. Despite existing tools in this space (39% of contract workers report using schedule optimization tools), many still see it as a pain point.

Income volatility

One of the defining characteristics of the contingent workforce is income volatility. Earlier this year, JP Morgan published a study that showed 41% of individuals experience more than a 30% change in income on a month-to-month basis [5]. This means if you’re making the US median wage of $2,336 a month [7], your income could easily range from $1,635 to $3,037 a month, a $1,402 difference. And this can mean the difference between making a home/car/insurance/etc. payment on time, versus missing the payment and accruing further debt in fees and interest.

The study also found that particular opportunities to save arise during five-Friday months and between December and March. The extra paycheck for part-time workers paid weekly or biweekly usually means positive cash flow, although the timing of these five-Friday months is usually unanticipated. And at some point between December and March, 61% of individuals experience a 5%+ increase in earnings, which is partially tied to increased hours during the holiday season.

Interestingly, there’s also evidence that “gig economy” and “sharing economy” platforms like Uber, TaskRabbit, and Airbnb are beginning to be leaned upon. Only 1% of the 1 million people in this study were making income from such platforms in any given month, but data shows that earnings from “labor platforms” (defined as platforms where workers perform discrete tasks) are used to offset dips in income, while earnings from “capital platforms” (defined as platforms where participants sell good or rent assets) are used to supplement income.

Overall, we feel this means there’s need for software and software-enabled services to play a role in tracking and predicting income, suggesting what’s safe to spend and what needs to be saved, and perhaps even recommending time to spend working on a labor platform in a given month.

Taxes

Independent contractors are responsible for their own taxes. For a full-time salaried employee, tax withholdings are taken out of every paycheck, typically leading to a more balanced outcome at the end of tax filing season. This doesn’t happen for independent contractors, which means they need to estimate tax payments to put aside to avoid surprises. On top of this, independent contractors who expect to pay over $1,000 in taxes need to make quarterly estimated tax payments to avoid an additional penalty to the IRS.

During tax filing, independent contractors file separate Schedule Cs tracking income and expenses for each type of “business or professional activity” they have participated in, in addition to the standard 1040. These business expenses need to be tracked continuously, as they can include home offices, miles driven, equipment depreciation and repairs, insurance premiums, and education expenses.

Here, we see opportunity for software to help independent contractors keep track of their expenses, find the right deductions, and predict and pay their quarterly tax payments, likely with integration into bank and debit/credit records and machine intelligence sitting on top of this data stream.

Concluding thoughts

Overall, this post covers only some of the areas that we feel are important when thinking about the tools and services that will become essential as the future of work evolves (there are so many more — e.g. education, training, insurance, retirement benefits, etc.). In each section, we mentioned a few use cases where software could help — some of these might be great opportunities standalone, while others would make more sense as a feature of a larger offering. If you’re a founder interested in shaping the future of work, we’d love to chat.

By the way: at the beginning of this year, our team decided to add two new focus areas to our existing six representing where we see the world going. They are the future of work and robotics. Post on robotics coming soon!