The Maverick Manifesto: Rethinking Employment

Today, the president is holding a domestic summit on job creation. It’s appropriate, then, to share with you my ideas on the state of job creation in the domestic economy and argue that old expectations concerning employment can no longer be made.

The main metric we use to track unemployment in this country is the unemployment rate. In and of itself, this is a fictitious number: it doesn’t really represent real unemployment and hardship experienced by millions of people because of the factors and criteria that define unemployment. The “Real unemployment rate”, as it’s called, is actually a more honest and more accurate measure of unemployment.

Below, find a graph of unemployment rates in the US from 1949, the highest points reached in the 4^th quarter of 1982 at 10.8%, as acquired today from the US Bureau of Labor Statistics:

Today, unemployment is measured at 10.2% and is expected to climb. The real unemployment rate is 17.5%. In fact, economists do not foresee significant job creation in the economy for the next three years, so it is difficult to see how the US economy’s labor market is going to improve without more direct government stimulus. On the other hand, the American people have already voiced their opinion regarding excessive federal spending and the administration will find it politically difficult to inject more money into the economy and thus create more jobs. It’s also questionable how much the federal government can actually do to provide more confidence to the private sector to induce hiring. Business owners are responding to the problem of fear and uncertainty in the economy by clinging to capital, and it’s difficult to foresee that changing any time in the near future.

Myself, I feel that – once the official unemployment rate surpasses 10.8%, the highest benchmark we have had in that statistic since World War II, and there are all indications that it will next year – we are witnessing a systemic change in the condition of labor and unemployment in this country. We’ve entered into a new age. Not a slow-down, not the result of the Great Recession, but instead, evidence of a systemic, economy-wide shift in the very nature of work. One that defies the way we measure work, wealth, and prosperity in this economy, and a shift that will require all of us to re-evaluate priorities in our lives.

The End of Work

I wrote on this subject in July 2009 and I also wrote recently about network economics. What I’m essentially saying in these pieces are that the regular relationship shared between labor and productivity used to be direct. That is: higher productivity yielded higher employment – you needed more labor to achieve higher productivity, and greater productivity lends itself to even greater revenue and profitability. However, that model has changed, and continues to change. Through the strategic application of technology, we continue to disintermediate (get rid of intermediaries) in our supply chains and distribution cycles, and offer self-service solutions to end consumers. In effect, we have diminished the need for labor while streamlining our business operations to maintain ever-higher volumes of business. Thus, we’re able to do more with less labor, changing this dynamic. Higher productivity can be achieved with less labor, and profitability goals can be met by reducing or eliminating the excessive variable costs associated with labor. Business can then be more profitable while reducing the most expensive overhead on their balance sheet (people) while investing in depreciable assets at fixed (and more predictable) costs.

Don’t believe me? Just count the number of industries going through consolidations and extinction; most of them have to do with traditional media (print, radio, and television). Entire sectors of the economy are being eliminated.

When evaluated in the context of network economics, what this means is that business can invest in automating their business processes, improve profitability, handle increasing volume through favorable economies of scale, and don’t need people. In fact, labor becomes an extensive liability. In the current situation, businesses need to house labor, pay rents and leases for labor, put them in cubes, pay for direct and indirect benefits, provide annual COLA increases, and somehow manage their retirement, health care, and medical planning. This isn’t competitive – especially in comparison to global competitors who don’t have these expenses – and continues to drive costs through the roof for American business, draining their resources and defraying needed investments in R&D and new products/services.

So, this is the first part of my message and this reality has to be embraced: businesses will continuously and deliberately reduce their dependency upon labor to achieve network economic benefits. They must in order to survive and remain viable.

Macroeconomic Consequences

It doesn’t take a rocket scientist, then, to be able to draw some inevitable conclusions. Diminished employment:

1. Means less income and less borrowing potential for credit lenders.

2. Less access to income and credit will put downward pressure on consumer demand.

3. Less consumer demand contracts business borrowing and hiring activity.

4. Businesses continue to automate to reduce expenses and maximize profitability, reducing labor.

5. The cycle perpetuates.

If we take even a broader view, we see exactly what is in store for our country for at least the next three years:

1. The irrational access to credit over the last 20 years created an economy fueled on fiction.

2. The growth experienced since 1990 must contract back to more rational, 1990 levels.

3. There are too many laborers and not enough demand. Labor markets will continue to contract.

4. This will increase transfer payments from the government in the form of welfare and unemployment compensation.

5. Borrowing will need to take place as all levels of government – federal, state, and municipal – must adjust their forecasts for substantially less tax revenue, and contract their spending even to inoperable levels. Some governments will financially collapse; California comes to mind.

6. Interest rates on the federal debt drive up inflation and the dollar becomes substantially weaker. Investors turn away from the United States.

7. Already hit by staggering medical and health care, education, transportation and energy expenses, the American consumer depletes whatever discretionary income they had, and they don’t have access to easy credit or equity value in a home to draw upon. It’s a struggle to survive and simply make subsistence payments.

8. Over 70 million baby boomers are about to retire. When they do, vacancies will arise in the public and private employment sector. However, faced with making a hiring decision, will the employer choose to invest in automation and reduce their labor overhead, or, fill a vacancy? I believe the trend of doing more with less will prevail, and employers will look at this event as an opportunity to retool and reorganize, disintermediating more middle-management, and reducing line-level employment rolls.

9. Baring some technological revolution in energy or war, future domestic economic growth in the US is stagnant if at all, anemic at best, and this scenario is rosy: it’s not even considering the impact of energy costs – particularly the rising costs/demand of oil – in order to create more jobs and push people around in the economy, the eroding value of the dollar, globalization, or, the diminishing quality of the American laborer as compared to math and science scores to be able to stimulate further investment in the United States.

So, in the broader economic context – going beyond just employment as a concern – we see tremendous downward pressure on growth and the ability of the US economy to create new jobs. This sours the competitive position of American firms and introduces ever more fear and uncertainty into business decisions, which – again – perpetuates the problem.

A Macroeconomic Remedy?

Most analysts would suggest that the only way the private sector is going to create new jobs is through additional government stimulus, and, it’s the federal government’s role to introduce spending when the private sector cannot. Unfortunately, there is tremendous political pressure not to do this, although the government may be forced to transform itself into a stronger, more socialist force within our society, to provide basic services and income to a widening economic base of poverty. Bottom line: the macroeconomic situation is dire and bleak, and it cannot improve radically or quickly.

Who is to Blame?

There is nobody to blame but ourselves in the form of naked consumerism and weak political will. It is fashionable to blame the current federal administration for problems concerning unemployment, but I feel that is truly misguided. If we’re beating the past and entering into a new era of employment, then it wouldn’t matter if a democrat or a republican was in power. The same problems would be facing us, and both parties would have access to the same fiscal and policy tools to solve the problem.

So, the second part of my message is that the broader economic context works in defeat of growth and in creating more jobs, and – in fact – works against job creation. This will shrink the middle class in the long term, and reduce the standard of living for all middle and lower-class Americans as wealth shifts from the US economies to more emergent economies abroad.

What Can You Do?

One of the reasons why I’m preparing this blog post is to explain my ideas on the macroeconomic condition, but to also correct a misguided attitude that I see among my friends, clients, and students. There seems to be a state of optimism about the economy, like, “It will get better”, or, “a job is waiting for me when I graduate.” I’m here to say that it won’t, and, there are not. I think it is critical that we immediately dispel the myth that the systemic changes presently underway will lead to similar employment results in the future. I think it’s important to get aggressive – instead of passive, waiting for something to happen – on how you will sustain yourself and reshape your role in this emergent, highly-competitive global economy. I think it’s important that you take ownership of that and start re-imagining work and wealth for yourself. Right now. Immediately.

I would break-down a response to this problem in the following way.

• Re-define Your Ideas on Wealth and Lifestyle.

• Plan for Distanced, Freelance Employment.

• Take Control of Your Own Finances, Health Care, and Retirement.

• Think About Barter, Entrepreneurial Opportunities, and Your Brand.

• Prepare for Continuous Education.

Re-define Your Ideas on Wealth and Lifestyle

The American employee has an unrealistic perspective on wealth relating to concepts of upward mobility and competition. We measure wealth and value through materialism. This will change. It’s important to re-examine what’s important to you. Perhaps it’s time: time to pursue other interests, hobbies, experience life with your children, sports, retire. Perhaps it’s cause: addressing the social problems of our day is more important to you than a fat paycheck. Maybe it’s exercise and health: now might be the perfect time you need to redefine the way that you look, feel, and respond to the world. Perhaps it’s self-publishing, self-actualization, spirituality? And maybe it’s family: you now have the ability to pay attention to what really matters.

What’s important about this exercise is to know what to negotiate for. When you’re looking for employment, the employer may only be able to offer you 20 hours, or, five hours. What else can you bargain for – what else do you want? This is also important for your own goal setting on a daily basis. Instead of waiting around and worrying when that call will come in to hire you – because it’s not – get going on your personal projects. Set yourself up with a discipline that allows you to feel self-approval, confidence, and joy in something other than work. This will take a lot of retooling: we’re programmed from elementary school to feel that employment equals value as a person; you will need to redefine this for yourself now. And it’s important that you do this right away as to give yourself much needed confidence and pride in the years ahead.

Plan for Distanced, Freelance, Temporary Employment

Employers realize that full-time equivalent (FTE) employment is excruciatingly expensive and they have creative options in solving that cost problem. Reductions in indirect and direct compensation, terminations and layoffs, automation, reducing work hours, shuffling shifts, and acquire temporary labor over FTE labor to control their costs. For many employers, this will be heartbreaking: they don’t want to go this route with their employment strategy, but those same employers will face the hard reality – they must in order to remain viable.

This will give you an opportunity to take on more work with other employers as a contract employee. Through working two or three jobs part time per week, you may be able to acquire a living wage. Think about your re-definition of wealth: maybe now would be a great time to throw five hours of time per week at that non-profit; learn a new skill in a service sector; take on a job at UPS; dish-washing; dog walking; cleaning; something.

In technology, we have a number of options available to us: freelance database, web design and application, service and support, and software development work is everywhere. Sign up today at liveperson.com, guru.com, freelance.com – just Google “freelancing” – and get started immediately. If you’re not in technology, visit with your local placement offices like RHI and Kelly Services and learn how your skillsets would be made more attractive to employers. Put the power and reach of agencies like these to find temporary work and place you in it.

What’s important to you will dictate the kinds of alternative, temporary work that will become available – it is unacceptable to wait around for the dream job that will never manifest, or, compete for those scarce positions. Instead, take what you can get, what makes you happy, and build on it.

On a side note, in a perfect world, you’d want to consider freelance work from your own home. Consider what is happening to energy prices and oil: what can you do to perform all of your work without having to go anywhere? Whether or not it’s telecommuting, or, doing call center work from your home. The point is to create your own wealth-generating engine that doesn’t require you to spend any of it on the increasing costs of transportation.

Take Control of Your Own Finances, Health Care, and Retirement

If you don’t have software to manage your personal finances, go to mint.com and start managing them now. It’s absolutely critical that you are aware of your expenses and you seek to reduce and eliminate as much debt from your life as possible. Nobody else is going to do this for you. Control spending through educating yourself on the nature of your lifestyle, and this will force you to re-evaluate it. If you need help managing your finances, there is a universe of free information available to you right now on how to do it – just Google “manage my finances”.

Clearly, the more you understand your personal finances, the better you’ll be at contingency and long term planning. You can then look seriously at financing health care insurances and retirement planning on your own. In the future, as employers move away from hiring FTE’s and government starts taking responsibility for the health care of its citizens, employers will shed these obligations to remain competitive. To get a leg-up, you must start making these decisions on your own. Research what options are available to you in this field and execute the minimum amounts to provide a reasonable safety net. Stay on top of the health care debates currently raging at the federal level, and be prepared to pounce on any subsidized health care you can acquire independent of an employer. You must become an expert of your own future. Today. The era of your future being a cooperative and joint exercise between you and an employer is ending.

Think About Barter, Entrepreneurial Opportunities, and Your Brand

In my line of work, I can do a lot of things for people. I can trade my computer expertise for something else that I might need. Think about what you can do and trade as a skill, and offer a barter relationship to colleagues and associates. You will, over time, establish a reputation and it may even be the first step towards a compensated relationship with a potential employer or client. Through barter, you could make new contacts and build trusting professional relationships that could develop into future opportunities.

Now is the time to think entrepreneurial. I think anyone in business would say that the best time to start one is when your back is to the wall and you have to force yourself to succeed. Creating a company and developing a system of tax shelters is extraordinarily easy in today’s digital economy. Ask around; talk to accountants and experts that may be in your circle of acquaintances. Think about how you can create another tax paying entity in order to shelter you from additional risk, write-off expenses, and fiscal obligation. Further, think about what you’re passionate about, and how that could translate into a revenue-generating engine of success. There is a mountain of resources available to you, right now, on the web, to do all of these things.

Think about your brand. If you’re to look at social networking and social media as a means to promote yourself and advertise your core competencies, you can get started using Twitter, Facebook, LinkedIn, blogs, YouTube, or any digital playground to start building your personal brand. In the future, as each individual is freelancing, you’ll need to be competitively presenting your personal brand in a way that separates you from your direct competitors: other contractors! What can you do, say, write about, promote, explain, or elaborate on that gives you a competitive edge and that distinguishes you as an expert? Each of these ideas – barter, entrepreneurialism, and building a brand – fit into each other. What value do you bring to a freelance gig, or, to full-time employment, that sets you apart from everybody else? And leverage that differentiation to re-invent yourself as a trustworthy partner to businesses and professional acquaintances.

Prepare for Continuous Education

We’re presently leaving the Information Age in favor of the Aggregation Age. This economic transition is no different from the Agricultural Age to the Industrial, or, the Industrial to the Information Age. If you’re unfamiliar with this term, I recommend you Google it.

What is different is this: we’re doing so at a much more rapid rate – a rate much faster than what we can retool for as a society and we’re feeling its consequences. One massive competitive differentiator between you and somebody in Guatemala who can do the same work you can – except at $3/day – will be your background, skills, and training. Absorb all of the training opportunities that you can get access to; train yourself using online resources; think about attending night school and tapping into extraordinarily inexpensive loans from the federal government (while they’re here) to go back to school. We are entering an age of extraordinary scarcity and intense personal competition. Think about your brand, and, think about how you will continuously need to reshape yourself and your skills to meet the dynamic needs of the market.

A Final Thought

Some may read my Maverick Manifesto here and think that I’m a pessimist crackpot. Perhaps; I may, in fact, be misreading my tea leaves. Rationally, though, I cannot stand by and allow those within my sphere of influence to sit idley by, waiting for their circumstances to change, hoping for the best, thinking that better days on the horizon. I’m a realist and – realistically – what’s on the horizon is a standard of living that was much different from our parents’ generation, and a highly competitive environment that will strain the very ideas of capitalism. Change isn’t bad; it’s actually a very exciting time to be alive! What you do now, though, will influence the opportunities that you can acquire for you and your family. What you do now sets in motion your attitude, your perspective, your edge… in an increasingly difficult labor market.

I know this was long. Thanks for reading.

R

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