Jobs Are Over: The Future is Income Generation- Part 4

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Future Is Learning

8 min readDec 2, 2014

This is part four of a four-part series on the changing shape of employment, the emergence of the collaborative economy, the potential impacts on higher education, and the need for a new social contract. Insights for this piece came in part from the recent Thomas Friedman Next New World Summit of thought leaders in education, technology, entrepreneurship, and consulting. Here are links to Jobs are Over Part 1, Part 2, Part 3, and an interview with Future of Work Researcher Stowe Boyd based upon the series.

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This is not just about social justice but paying high wages is also smart business. When wages are low, uncertainty dogs the marketplace and growth is weak. But when pay is high and steady business is more secure because workers earn enough to become good customers. They can afford to buy Model Ts.

Henry Ford, 1914

Jobs are Over: We Need a New Social Contract

Simply put, a social contract is a voluntary agreement between two parties based on mutual welfare and security. Fueled by the New Deal in the 1930s, notably the Social Security Act of 1935, American workers were assured as employees, if they worked hard and remained dedicated to an entity, they would be cared for when and if they became too ill or too old to work. They were ensured that by having a job that there was a safety net. But today, this is gone. For many workers, jobs have become contingent work absent of a safety net where the engagement often provides only enough cash flow for monthly personal operations with little for investment or savings, aka a personal safety net. As Henry Ford understood, we collectively have an interest of economic growth for all, which has historically been fueled through a strong (and consuming) middle class.

1942: The Birth of the Employer-Based Social Contract

On October 3, 1942, in effort to stave off the pending threat of inflation, Roosevelt issued an executive order fixing wages and salaries in accordance with the Stabilization Act of 1942. Unable to provide higher salaries to attract top talent, employers began offering insurance plans, health care packages, and other fringe benefits, thereby launching the employer-based social contract[i]. Since then our society has viewed an individual as productive when they are contributing to society through working and unproductive when he or she is unable to contribute due to illness, age, or disability. Those deemed unable to be productive were supported by a safety net provided by either the government or jointly by their previous employer and the government. People were educated earlier in life and once deemed educated, barring an accident or illness, typically remained productive until retirement age (see graphic below).

Market demand for human talent kept jobs relatively stable, so if you worked hard, society seemed to promise to protect and keep you. Today, however, this premise has crumbled and so too with it, the social contract embedded in our expectations of life in the U.S.

The Erosion of the Social Contract

The erosion of the social contract was best framed by Stewart Wallis, Executive Director of the New Economics Forum Foundation, in his talk at the World Economic Forum on the Social Contract for the 21 Century. Wallis believes that the erosion of the social contract is based upon four failures:

Risk: Individuals now bear more operational, financial risk than ever before, notably from pension and asset instability, rising food and fuel prices, and the devastating effects of natural disasters from climate change.
Jobs: As discussed in Jobs Are Over Part 1, we have seen an erosion resulting in large losses of middle class jobs since the 1980s.
Fairness: Wallis sites the dramatic rise of income inequality, notably that 80% of the increase in income from 1980–2005 went to the top 1% of the population.[ii]
Loss of Trust: He believes a general loss of trust stems in a large part from the fallout from the great recession of 2008, where politicians and their supporters benefited the most from the bailouts and subsequent recovery. Time Magazine concurs in their report “The Big Winner of the Great Recession is… (Large Corporations)[iii].”

Gigs vs. Jobs: Income and Assets (Do More With Less)

The graphic below, while wildly speculative, does dramatize the realities of this new contingent workforce. Many individuals still able to own homes have far less equity in them for future harvest, their savings accounts are the lowest in a generation[iv], and their pension (a defined benefit) from the 1980s became their 401k account (a defined contribution) if they could still afford it. So when we look the individual safety net, the asset pie is much smaller, and we predict the sharing or collaborative economy is a partial, albeit incomplete, solution to fill the income and asset gaps.

Rise of the Collaborative Economy: Leveraging Contingent Workforce

The collaborative economy has emerged as a very beneficial response to the great recession. In it, one can earn multiple income streams by leveraging more of what one has — a notion good for both the pocketbook and the planet. These new business models have offered benefits well beyond the financial and environmental value as airbnb now highlights in their “belong” campaign — it is about reestablishing trust and recreating community. This trust is backed by social media fueled systems that offer transparency so you can trust but you can also verify. Many companies, notably Uber and Airbnb, have reached multi-billion dollar valuations in five years or less by, leveraging this strong brand affinity while tapping into a distributed infrastructure with low overhead costs. The venture capital community favors this economy for its low downside risk, brand evangelicalism, and speed to scale. Uber, for example, scaled to a valuation of over $18 billion in less than five years, by leveraging — thus paying — independent drivers with their own vehicles. However, none of that $18 billion is shared equity enjoyed by the drivers. One of the largest investors in Uber is Google Ventures. Google Ventures is currently piloting driverless cars, a disruption that could ultimately render all these Uber drivers out of a gig and without a safety net. This is yet another reminder to remain agile — every business model is in beta. Many have aligned the collaborative economy with either a final dismantling of the original industrial revolution or the third industrial revolution (the second industrial revolution being the birth of the internet and related technology infrastructure). The first industrial revolution gave rise to unions and organized labor protections for workers.

New Social Contract

What should this new social contract include? A new social contract should prioritize the creation of a safety net that favors both productivity in individuals and quality of life. A new social contract should frame education as frequent or ongoing past the age of 20, necessarily relevant or affixed to change, whether desired or demanded by an individual’s circumstances, more efficient than our current models, and more affordable. A new social contract should also have mechanisms to protect contingent workers with access to affordable healthcare, disability insurance, unemployment coverage, and sick pay. It should not restrict entrepreneurs from leveraging this contingent workforce in order to enact and support innovative ideas that do more with less, creating financial, social, and environmental value, like the collaborative economy. As new business models rapidly replace old business models, market demand for human talent may increasingly fluctuate. As such, workers may cycle in and out of periods of high productivity with life-long learning embedded in both times of contribution/production and times of lesser productivity or preparation (see graphic above). Efforts by the Freelancers Union to aggregate protections for individual workers (such as benefits for adjunct faculty) are encouraging, but this direction likely will need to be a public-private partnership. Further, given our extended life expectancy we will need to engage and contribute productively for a longer period of time than ever in human history. The notion of retiring at 65 when the life expectancy reaches 100 is neither a realistic economic model nor a socially-engaged community model. Beyond the realm of productivity and worker protection- what do we want and need to be a healthy society? We have historically had a military to protect our national interests, which has become a focus on the protection of our access to oil. As the limits of our national resources become real and felt, should we develop a similar force to ensure long-term sustainability of water and clean air? The contract should encourage innovation, entrepreneurship, and experimentation to create an optimal social, environmental, and financial economy through discovery of models that maximize BOTH human productivity AND quality of life. As an entrepreneur, Ford believed it is best for a strong society if your workers make enough money to also be your customers.

[i] The New Social Contract: http://www.nytimes.com/2007/09/07/opinion/07brooks.html?_r=0

[ii] The United States of Inequality: http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html

[iii] The Big Winner of the Great Recession Is… http://business.time.com/2012/01/18/the-big-winner-of-the-great-recession-is/

[iv][iv] Pew Charitable Trust Finds Post Recession Boomers and Gen-Xers are Less Prepared for Retirement Than Older Generations http://www.pewtrusts.org/en/about/news-room/press-releases/0001/01/01/pew-finds-postrecession-boomers-and-genxers-are-less-prepared-for-retirement-than-older-generations

This was previously published on LinkedIn

About the Author:

Heather McGowan advises presidents, provosts, and other senior leadership in higher educational institutions to work with faculty and staff to make the transformational changes necessary to thrive in this emerging new normal. Most recently she advised the President and Provost of Philadelphia University on the creation of the Kanbar College of Design, Engineering, and Commerce— the first undergraduate college in the US focused exclusively and explicitly on innovation. This college has won national awards, was endowed with a $20M gift, and is the subject of the collaboratively written book, Disrupt Together: How Teams Consistently Innovate (Pearson 2013). Ms. McGowan recently began advising the President of Becker College in Massachusetts on their strategy to transformation Becker College to Becker University with an explicit focus on addressing the complex, changing landscape of higher education.

Ms. McGowan also provides strategic visioning work (single frame visuals to represent problem statements and opportunity spaces) to corporate clients.

Follow Heather on Twitter: https://twitter.com/heathermcgowan

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