As I continue to follow developments regarding the future of work, I recently attended an event co-sponsored by Cornell/ILR’s Institute for Workplace Studies in NYC and the McKinsey Global Institute (MGI) addressing MGI’s report last Fall entitled Independent Work: Choice, Necessity and the Gig Economy. The report examines the increasing numbers of self-employed, freelance and temporary workers in the U.S. and Europe which are currently estimated to comprise 30 percent of the working-age population and rising.  The report notes that many workers have chosen this autonomous path as their primary means of income, while others follow it to supplement income, and yet others have no other choice and would prefer a traditional job with fair wages and benefits.   Many factors have led to the return to this pre-industrial revolution independent worker model including the recession and the emergence of The Digital Age as workers are more mobile and have increasing access to new technologies which transform how work is performed and goods and services are bought and sold.

The independent model of work is not without its critics.  Not everyone is capable of managing themselves as an independent business.  Many fear that this model is more appropriate for highly-skilled workers who have special skills and can manage multiple engagements which they have cultivated and that are well paid.   For the majority of entry-level or non-specialized workers, however, this model may drive down wages and leave many others unemployed. Further, it is unclear how independent workers will be protected from pay disparities, discrimination, work injuries, unemployment and how they will obtain benefits for such needs as health care, retirement, or disability.  Many have argued that employers have moved toward retention of independent workers to avoid employment and benefits legal responsibilities and erode the traditional employer-employee relationship and benefits.

Shifting worker models are also caused by advances in automation and will accelerate with the transformations that will be ushered into the workplace with artificial intelligence, machines and robots that perform many current jobs and will perform jobs of the future.   In a December 2016 report from the Obama administration entitled Artificial Intelligence, Automation, and the Economy, it was noted that while the industrial revolution led to the disruptions to the lives of many agricultural workers, the technological revolution has led, and will continue to lead, to disruptions for workers in all industries. This will also continue to impact the professions (e.g., financial services, education, journalism, sales, accounting, law and medicine).   The increased use of automation and the demand for highly-skilled workers and those capable of abstract thinking and creativity will result in the displacement of many workers who perform routine tasks and in lower-skilled jobs.  Further, it is only a matter of time before robots are built with the manual dexterity to perform physical labor jobs.  As society advances and deploys AI-driven automation, a re-thinking of worker models, our educational system and the social safety net is crucial.

With this confluence of events, it is imperative that swift policy action is taken to prepare for the transition that lies ahead and employers have an important role to play.   As we have seen with the passage of the Affordable Care Act and proposals for automatic payroll-IRAs managed by states or local governments, there have been movements afoot for several years calling for more government-run forms of benefits in the U.S. which lend themselves to portability without attachment to an employer, but these models are also controversial for numerous economic and political reasons and are under attack.  Policy makers  continue to put forth ideas to require employers and independent contractor agencies to contribute toward a system of portable benefits for independent workers which may include multiple employer programs, pooled associations, and various types of government funds. The shifting tides will also require individuals to be financially educated and to save in their own health, retirement, and other insurance type vehicles apart from any employer-provided benefits. Employers in all industries will need to contribute to these debates and should consider the following:

  • Develop a Workplace Transition Policy.  As employers manage multiple generations in the workforce from the traditionalists, baby boomers, Generation X, Millenials, and Generation Z, and  as society shifts to new models in the workplace, including use of AI-driven automation, impact on existing traditional-model workers should be carefully addressed.   Immediate issues to consider include proper management of employee reductions and retirements (including fair and reasonable severance and related benefits (including career transitioning and re-training assistance), incentives for transfer of knowledge between generations (which may require ongoing consulting arrangements or staggered retirements), guidance for younger generations managing older generations and/or cobot relationships (which may require leadership training or new models of management training which address the newly envisioned workplace), integration of flexible work arrangements and job sharing, and deployment of AI and workplace technologies (with commensurate training and accommodations for their use). Improper handling of these issues can implicate allegations of violations of various employment laws from age, gender and disability discrimination to interference with rights to certain employee benefits.
  • Pay a Fair and Competitive Wage.  The call for fair wages, including a rise in the federal minimum wage, is not new. As more of the economic burden will fall on individuals to not only afford to live but also to save for all of their needs including health care, retirement, and periods of unemployment without employer assistance, fair wage initiatives are imperative and provide one way for employers to contribute to the eroding social safety net for all workers.  If this can be combined with financial  wellness and literacy type programs, employers can play a significant role in assisting their workers understand and meet their financial needs.
  • Provide Employee and Independent Worker Benefits.  It is widely noted that the erosion of employer provided pensions has contributed to the retirement crisis. Further,  employer provided health care also continues to be under attack.  Employer sponsored programs that address retirement savings and health care benefits provide a crucial safety net for workers and should be maintained lest these needs fall on the government to provide in order to fill the void.  Policy makers are also evaluating ways to make these benefits more flexible and portable and these developments should be monitored.  Consideration should also be given to making these benefits available to independent workers, which would resolve many of the worker misclassification analyses as it relates to impermissible exclusions of eligible workers for plans.  Among the many other types of employer-provided benefits, additional benefits such as tuition reimbursement and student loan debt repayment programs will also assist workers to train for future job skills and ease burdens of existing debts.
  • Contribute to Pipeline Development of Workers.  Educational systems are in dire need of reform.  Employers should consider how to partner with high schools, colleges and universities for job training, internships, and research endeavors to prepare next generations for the future of work.  Thought should also be given to retooling the current workforce to obtain the skills needed for the marketplace.  Ensure that the pipeline of workers obtains the needed skills for future jobs.   
  • Carefully Deploy AI-driven Automation and New Technologies into the Workplace.  The increased use of machines, robots and AI in the workplace will lead to new legal questions concerning data privacy and security, workplace safety, and far ranging employment and labor issues as individuals are required to work with, or be displaced by, these tools.  Whether a worker is an employee, an independent contractor, or another yettobe determined classification, the co-working relationship between humans and machines has yet to be defined and will require thoughtful planning.

Businesses that have goods and services to sell will need individuals to buy them.  If independent work becomes more of a necessity than a choice, the social and economic consequences can be dire.  As businesses gain from the increased profitability that is promised by the use of AI-driven automation, impending tax reform, and shifting worker models, it is imperative for employers to contribute to the policy debates and find ways to contribute to the economic security of the individual workers.

Gene ZainoGene Zaino, a nationally recognized expert in the contract workforce market, launched MBO Partners to re-invent the way independent consultants and organizations work together. MBO Partners provides technology solutions and personal service that both simplify and expedite business processes for self-employed professionals including: incorporation, contract setup, billing, financial management, payroll, tax compliance, and health and retirement benefit programs. MBO Partners also provides access to the largest network of “engagement ready” enterprise companies, as well as portable benefits to independent workers.  Zaino is a major force in the independent workforce movement, committed to making it easier for self-employed professionals and their clients to work together.

The meaning of the “workplace” continues to evolve in the Digital (also referred to as the “gig,” sharing or on-demand) Economy. From shared workspaces, to the introduction of machines, artificial intelligence and robots into the workplace, traditional employer-employee relationships that we have known in our lifetimes are being reconfigured at a rapid pace. I caught up with Gene Zaino to explore some of his thoughts in response to the following questions regarding a growing segment of the workforce-the self-directed or independent worker.

How do you define independent or contingent workers, and are they one broad category or would you classify them into different segments?

MBO Partners defines independent workers as adult Americans aged 21 and over of all skill, education, and income levels who turn to consulting, freelancing, contract work, temporary assignments, or on-call work regularly each week for income, opportunity, and satisfaction.

The entire contingent workforce is a broad category. Anyone working in a nontraditional job – that is, outside a 9 to 5 desk job – could be considered a contingent, temporary, or “gig” worker.  But the ride-share driver you frequently see on the road faces different challenges than the independent consultant working for a major accounting firm, so it’s important to make distinctions between these groups when discussing issues like providing portable benefits and meeting their business needs.

How much of the American workforce is currently comprised of independent workers, and how do you think that will change in the next 5 years?

There are just under 40 million independents in the American workforce, which includes 16.9 million in full-time positions, 12.4 million who work part-time, and 10.5 million in occasional independent roles. Based on our latest State of Independence report – the longest running annual survey of the independent workforce in the nation – we expect the number of independents to grow to an impressive 48.9 million by 2021. By this time, nearly one in two people will work independently, or will have done independent work at some point in their careers. Suffice it to say, the independent workforce is rapidly growing and the workforce we knew even five years ago will look vastly different in another five years.

What do you see as the main drivers behind the rise of the independent worker?

The numbers and testimony from our annual survey show that independents overwhelmingly find independent work is a satisfying, and self-determined, choice. Both full and part-time independents say their career choices stem from a desire to have greater flexibility, freedom, control, and purpose. In terms of flexibility, 63 percent of independents cite control of their schedule as a top reason to work independently, and 59 percent say their top motivator is the increased flexibility independent work provided not only in their careers but across all aspects of their lives.

Forty-seven percent of full-time independent workers report making more money on their own than they would in a traditional employment setting. Specifically, three million independents earned more than $100,000 last year, a 50 percent increase from the two million who earned the same just five years ago.

Generationally, Baby Boomers now constitute 31 percent of the independent population, driven in part by the desire to supplement retirement benefits that are facing sharp declines over the next decade. But the independent workforce is also growing younger, millennials accounting for 40 percent which is higher than their makeup among the labor force at large. In contrast to Baby Boomers, Millennials see independence as an opportunity to get a toehold in the labor force and as a resume-builder.

What are the main needs of independent workers?

One of the major needs of independent workers is the ability to maintain a robust network of clientele for future work. MBO ConnectTM, considered the industry’s leading preferred talent network and direct sourcing product for engaging independent workers, is just one platform through which independents might find future projects and connections.

Like all workers, independents also need benefits to support themselves and their family, including retirement/401(k) and health insurance. Since those benefits are often employer-provided, it can be difficult for independents to find security working on their own. MBO Partners helps by providing access to group plans for its qualifying associates as well as by educating independents on how to acquire portable benefits.

Do you find that independent work is more appropriate for experienced workers in their field of expertise, or can those new to the working world successfully embark upon independent work arrangements?

The independent workforce is diverse – it includes Americans of all ages, skill, and income levels who turn to independence for income, opportunity and satisfaction. We’ve seen a growth in the experience level thanks to the continuing commitment of more seasoned workers primarily from the Baby Boomer generation. Many independents report getting work assignments because they offer a specialized skill that requires certification, special training, or education. This often means added experience in the form of years on the job.

However, millennials just entering the workforce also represent a growing percentage of the independent workforce – up to 6.76 million last year from 1.9 million in 2011.

Are employers in particular industries more inclined to engage independent workers currently and will this change in the next 5 years? 

As the workforce continues to change, employers across nearly every industry are engaging and hiring independent workers, and we see the flow between traditional and alternative work arrangements increasing in numbers and growing in momentum over the next five years. By 2021, almost half of the private workforce is forecast to have spent time as independent workers at some point in their work lives. As a result, savvy companies are already competing to become a Client of Choice for top independent talent. Forward-thinking companies are already thinking of the best ways to engage independent workers compliantly and efficiently, often using a company such as MBO Partners to do so.

Does the proliferation of the independent worker erode the promise of the so-called social compact or “model social safety net” or do you see ways that these workers can obtain retirement savings security, and other necessary employee benefits? 

The growth of the independent workforce has changed the way we think about providing employee benefits, and companies like ours have adapted to that change. MBO Partners has provided portable benefits to independents for over a decade, giving our associates access to the power of their group purchasing to access healthcare, disability and business insurance, as well as 401(k) options for retirement savings.

Moving forward, the government will need to take steps to help the independent workforce. This may involve further discussion of portable benefits, the creation of a new classification of worker to help independents work compliantly with clients, or something else entirely. MBO Partners is proud to work closely with top leaders in Washington and on Capitol Hill to remain a part of these vital ongoing conversations, now and in the new administration.

 

Editor’s note: As the workplace continues to change, employment arrangements will evolve.  It will become increasingly important for employers to monitor changing employment -related laws and regulations and to ensure that adherence is given to current laws, especially with regard to worker classifications, overall workplace management, employee benefits and immigration issues.   As the nature of the very workers retained to perform services changes in unprecedented ways, new ways of thinking about these issues and regulating them will surely come to pass.