Tuesday, January 19, 2016

An inevitable response to the robot revolution?

We've spoken more than once in these pages about the danger posed by automation to the traditional job market, most recently earlier this month.  Now the Telegraph notes that more and more people in the UK are classified - or classifying themselves - as 'self-employed', so much so that they're expected to overtake employment in the public sector before long.

For most of the industrial era, there were really only two big blocs in the workforce: public [i.e. government] and private sector employees. There were a few self-employed people – a few company directors, some builders and the odd taxi driver. But the numbers were not huge.

Since the crash of 2008, that has all started to change dramatically. If you go back all the way to 1975, only 8.7pc of the workforce [in the UK] worked for themselves. By 2008, that had risen to about 12pc. Ever since, it has started to accelerate rapidly, growing to close on 16pc of the workforce now. The total grew as much in seven years as it did in the three decades before that. But here is the really interesting point: The self-employed may soon overtake the public sector ... It could happen by the end of this year, or perhaps next. At the very least, it looks inevitable that it will have happened before the end of the decade.

Indeed, the rate at which the gap is closing may well start to accelerate. The “sharing” economy, pioneered by the likes of Uber and Airbnb, is opening up vast new opportunities for working for yourself; so is the spread of broadband, and well-funded start-ups – all those “unicorns”, the billion-plus dollar start-ups – love to take on lots of freelancers and don’t object to paying them pretty well. At first the rise in self-employment could be dismissed as largely the result of the recession of 2008/9. Lots of laid-off workers were “freelancing” for a while as they looked for a new permanent job. But the labour market is incredibly buoyant, with jobs being created in record numbers. That tells us that most of them are deliberately choosing self-employment.

Meanwhile, little by little, but admittedly not fast enough, the public sector is getting smaller.

. . .

The rise of the “gig economy” will prove to be a powerful social trend, both in the UK and in most of the developed work. It shows no sign of slowing down – and it is going to impact the economy and the political system far more than most people yet realise.

There's more at the link.

I don't know whether there are any comparable statistical studies of the US workforce.  We read a great deal about the seemingly vast numbers 'not in the labor force', as CNS News reported earlier this month.

The number of Americans not in the labor force last month totaled 94,103,000 ... In December, according to the Labor Department's Bureau of Labor Statistics, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, reached 251,936,000. Of those, 157,833,000 participated in the labor force by either holding a job or actively seeking one.

. . .

Ahead of this month's unemployment numbers, the Labor Department released an article examining why people who are not in the labor force are not working.

It found that in 2014, 87.4 million people 16 years and older neither worked nor looked for work at any time during that year.

Of this group, 38.5 million people reported retirement as the main reason for not working. About 16.3 million people were ill or had a disability, and 16.0 million were attending school. Another 13.5 million people cited home responsibilities as the main reason for not working in 2014, and 3.1 million individuals gave “other reasons.”

Again, more at the link.

One wonders how many of those 95-million-odd people 'not in the labor force' were being 'economical with the truth' and simply not reporting their self-employed status and/or self-employment-derived income.  Is this why the IRS is constantly seeking more information from potential employers, sales outlets, etc. about ways in which individuals might be making money without declaring it as income?  I know eBay sellers have come under greatly increased scrutiny, and transactions using services such as PayPal and Western Union are under the microscope too.  However, it's more difficult to do that in the 'black economy', where cash is king.  I know of several building contractors, lawn and yard maintenance operators, etc. who have no business premises at all.  They operate over the phone and out of pickup trucks and trailers, arriving to do a job, accepting only cash in payment, and heading off to the next job as soon as they finish yours.  I daresay few of them pay tax on all of their income.  Considering the perennial and monumental waste of money by our government, I can't pretend to be too upset at the thought.

(This is probably what's behind some of the calls to do away with cash altogether, forcing all transactions into electronic form through one or more bank accounts.  If every transaction can be traced, the 'black economy' would be strangled.  As far as I'm concerned, long live cash!  We don't need an even bigger Big Brother, thank you very much!)



STxRynn said...

I read a self-published book back in the 90's predicting the end of our country. The premise was inflation was so bad, that you were paid in product. Folks at Remington UMC were paid in ammo, Winchester employees got a rifle, etc.

If they do move to a cashless society, I figure there will still be a black market, but it will be barter: skills for stuff.

Interesting how this ties in with the passage in Revelation 13:17, written 1900 years or so ago....

David Lang said...

While you are identifying a lot of true things, the other factor in high self-employment is simply the fact that with current technology and Software-as-a-Service offerings, it's now possible for one person (or a couple people working together) to run a business that in the past would have taken a dozen or two people

When you can use websites for taxes, payroll, accounting, sales, you don't need to have people on your payroll doing those things.

This makes a lot of businesses viable that would not have been so 20 years ago (even if the core business has nothing to do with high-tech products)

Anonymous said...

IF and I do mean IF, Government ever try's to "do away with" or "outlaw" cash you will se an almost instantaneous return to barter and coin. When every act is criminal the only way to enforce law is at sword point or gun point. We have begun seeing this in the west, but it has been a fact of life in Asia the Middle east and Africa since the tine of Sargon the Great. As there are always fewer enforcers than "criminals" control becomes imposable almost overnight. You want real "anarchy"? Try outlawing cash. That will pretty much "bring it on"---Ray

JK Brown said...

More significantly are going to be the political changes. Our politics/regulation are set up to abuse employers in favor of the employee. The large corporations even support this as they have the infrastructure, but the small business person gets crushed. But as more and more people become owner/operators, the impetus pushing the politicians will change to, hopefully, be more small business friendly.

Minimum wage laws are hostile to small business and will make some untenable, thus taking the life savings of some as the business fails. Mandatory health "buying club" membership is also pushing many small business out of business. Those owners may transition to owner/operator and dump the employees.

One thing not discussed when I was young is that after 50 you'd better have your own business or other means of income independent of employers, especially large employers or you'll find yourself unemployed and without prospects at some point before Social Security kicks in. I think the kids are seeing this with their late Boomer parents, who got the PR of corporate loyalty just as the corporations were losing their ability to be loyal to employees (late 70s and 80s).

Will said...

IIRC, the basis for the .gov to try to eliminate cash, was the estimation that the unregulated (underground) economy was THREE times larger than the official numbers, and they really wanted to get their hands on the tax money they expected would be generated by finally getting it on record.

What those idiots couldn't understand was that MOST of it existed simply to beat the taxes. When your taxable rate is progressive, there is a huge incentive to hide as much as possible, otherwise the increased tax would make the time involved not worth the effort. Some of it would be due to the activity being unlawful, but I don't recall if there was a number attached to it. IIRC, there are a couple counties in Northern CA that derive most of their economy from marijuana production, for example.

The result, if they are able to accomplish this, is to destroy the entire economy. You can guess the probable results.

Uncle Lar said...

I've been watching with considerable interest and amusement the plight of the burgeoning pot industry in Colorado. State legal but Federally criminal, the enterprises cannot use most forms of electronic payment, so must deal primarily in cash. Makes for curious and potentially dangerous situations, the most obvious being plump targets for criminal activity and theft.

Anonymous said...

just caught your article. The problem with the freelance/self employed society is that they pay no taxes. And in the first instance that sounds great until a few things pop up:
1. Something goes wrong. A boiler installed for Cash blows up killing people who do you sue, how do you even find the person if all you have is an abandoned email address and a pay as you go phone number ?
2. They don't pay taxes. Yipeee everybody says. But some "Public" services are a must, the Army, Police Force, Fireman, protection of Children from abuse via Childrens Services, Education etc etc. The problem we have in the UK as in the US is once you go self employed you effectively pay no tax witht the help of a clever accountant, especialy if you are using Cash. Just don't leave a paper trail at the Builders Merchant using an "account" just use Cash from the last job, always say you earned a little and pay a little Tax and you will not be bothered. The problem is the rest of us paying payroll taxes in the UK thats Pay As You Earn (PAYE)have to kepp paying more and more tax to make sure the free loaders who are self employed are taken care off. Because when there truck is quite inocently involved in a Crash they expect the Fire Service, Police and Ambulance to turn out to cut them free, save their life etc. As an example I have a colleague who is self employed and earns 3 times the amount I do, but pays a quarter of the income tax. He has 2 small Children who go to state schools, a wife who is a teacher yet he paysd hardly nothing in to the system. At some point those paying are going to say to those not GET STUFFED.
3. Large Corporations. Do the same, they expect their employees to pay tax but they are not going to. One well knwon coffee house chain in the UK turns over £2bn a year but has not declared a profit in the UK for over 5years even with ultra low Corporation Tax at 18%. Offshoring to Tax havens via "franchise deals" and "imagerights" means that the traditional source of income for Government is stoped. So again these companies want to benefit from the rule of law, a Legal System etc etc but not to pay for it. Even though the UK has had small Growth over the last 5 years Corporation Tax receipts have collapsed.
Ultimately as a Society we work if the essentials are done. I agree that over blown, bloated Government is wrong and inefficient but as stated at the start some things have to be done by Government. We are not going to fund private armies or navies or policeman or Judges. So fixing that problem over the next 10yrs is the next big challenge for society. Trying to convince people morraly they have a duty to educate the young, protect the disabled, feed the poor, pay pensions to old people rather than the I don't care I'm OK attitude that has infused our Business Community over the last 40yrs.
The Ginge.