Small Business Labs

How Many Employees Will Small Business Layoff?

Based on an industry by industry analysis of small business employment, our base case estimate is employer small businesses will layoff about 21 million employees through July (1).

This is about 36% of those working for employer small businesses, which are SMBs with an owner/owners and at least one traditional (W2) full or part-time employee (2). 

Our high case layoff estimate is 27 million (about 46% of employees of employer small businesses) and our low case estimate is 17 million (about 29% of employees of employer small businesses).  

Under the base case estimate, the overall U.S. unemployment rate would likely increase to about 22% (3) (4).  

The high case's unemployment rate would reach 28% and the low case 18%.  

The chart below (click to enlarge) shows the data for the base and high cases.  We excluded the low case so the chart would be readable. 

The layoff percentages are Emergent Research (that's us) estimates. 

However, they are based on recent estimates done by economists at the St. Louis Federal Reserve on contact intensive occupations and unemployment risk by occupation. 

The implied overall U.S. unemployment rate estimates assume small businesses will lay off 60% of those laid off over the next 4 months. This is similar to the small business layoff share in the Great Recession of 2008-2009. 

Just under 10 million Americans filed for unemployment insurance over the past 2 weeks, which means the current unemployment rate is likely already in the 8%-10% range.

So forecasting the rate to double over the next 4 months doesn't seem unrealistic.

Other current forecasts of the overall U.S. unemployment rate range from 12% to 32%.  

The highly regarded labor economics at the Economic Policy Institute, for example, are currently forecasting the overall unemployment rate will reach 15% in July. 

Let's hope we're wrong and they're right - or even better, the EPI forecast turns out to be too high. 

Notes:

1.  We've produced 3 layoff scenarios because the employment impact of the pandemic induced recession is still very uncertain. And given the high level of uncertainty, the actual layoff numbers could easily fall outside the range presented in these scenarios. 

2.  Our lay off estimates includes both full and part-time employees of small businesses. It doesn't include contractors or independent workers.  

3. The BLS doesn't include people who are not actively looking for a job in the unemployment numbers.  This means the unemployment rate may stay artificially low because of the pandemic keeping people who have lost their jobs from looking for work.  Because of this, changes in the workforce participation rate may be a better measure of the recession's impact on employment.

4.  Overall unemployment estimates are 45 million for the high case, 35 million for the base case and 28 million in the low case.  

The Stimulus Programs Gig Workers and Freelancers Qualify For

Congress passed and the president signed the massive Coronavirus Aid, Relief and Economic Security Act (CARES Act) economic stimulus package last week. 

The legislation contains a number of provisions aimed at helping independent workers (the self-employed, freelancers, gig workers, etc.) weather the economic storm caused by the coronavirus pandemic.

Below is our take on the legislation's programs we think will be most useful for independent workers (self-employed, freelancers, gig workers, etc). 

However, the final rules and details on how the various programs will work are still being worked out by the state and federal agencies tasked with administering them. Because of this, things may change.  

Cash Payments for Individuals

Independent workers, like all Americans, will be eligible for the general cash payments approved by this bill. Individuals earning less than $75,000 (based on their most recent annual tax filing) can expect a one-time cash payment of $1,200. Married couples would each receive a check and families get $500 per child.

The payments phase down above an income of $75,000 for individuals and $150,000 for couples and individuals making more than $99,000 and couples making more than $198,000 are not eligible for any payment.

Unemployment Insurance Now Covers Independent Workers

In what we consider to be a major government benefits breakthrough, under the CARES Act independent workers can apply for and receive unemployment insurance payments.

Under the Act, states will still continue to administer and pay unemployment to people who qualify. The amount varies by state, as does the length of time people can claim it (the national average is about $385 per week and most states cover 26 weeks).

The CARES Act adds $600 per week on top of whatever base amount a worker receives from the state. The additional payments last for 4 months.  

So if you're an independent worker and you've lost business, you should consider applying for unemployment insurance from your state. 

Having said that, state unemployment systems are not set up for independent worker applications.  They're also overwhelmed already due to the huge numbers of people applying.  Because of this, some states may be unable to process unemployment claims from independent workers for a few weeks (or more).  

See our previous article on this topic for more details. 

Economic Injury Disaster Loans (EIDL) and Grants

The Economic Injury Disaster Loans and Emergency Economic Injury Grants program provides SBA loans and grants to small businesses and most independent workers who have lost business due to the pandemic. 

You apply directly to the SBA on their website and within 3 days you're supposed to get a $10,000 advance on your loan. This $10,000 advance is a grant and does not need to be paid back, even if you are turned down for the loan.  

You can borrow up to $2 million via this program, although obviously few independent workers could qualify for this amount.  The loan can be used to pay for most business expenses. 

Qualifying for the loan is based on the borrower's credit score.  The SBA has not to our knowledge announced what the minimum passing score is.  

We recommend applying for EIDL loans as soon as possible. 

The act provides $10 billion for grants under this program.  We estimate that as many as 20 million small businesses and independent workers could quality.  So although most probably won't apply, the program could still run out of money. 

For more information and details, see the SBA's site and this document from the Senate Small Business Committee. 

Paycheck Protection Program (PPP) Loans

The Paycheck Protection Program is designed to provide a direct incentive for small businesses to keep their workers on payroll by providing each small business a loan up to $10 million for payroll and certain other expenses. 

If all employees are kept on the payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, or utilities. Up to 100 percent of the loan is forgivable.

Most independent workers are eligible for PPP loans. However, the process and related rules are complex and you have to apply to a bank or financial institution that provides SBA 7(a) loans and these institutions are planning on accepting applications starting this Friday.

Again, see the Senate Small Business Committee document for more details on PPP loans. 

An excellent resource on the CARES Act for independent workers is MBO Partners guide to the CARES ACT. It nicely explains the ACT and how independent workers can benefit from its provisions.  We highly recommend it.  

Independent Workers Qualify for Unemployment Insurance Under the CARES Act

Last week Congress passed and the president signed the CARES Act, a $2 trillion stimulus bill designed to help businesses and Americans weather the economic storm caused by the COVID 19 pandemic.

Independent workers (the self-employed, freelancers, gig workers, etc.) qualify for a number of assistance programs contained in the bill.  We'll be covering these over the next couple of days.  

But we want to specifically call out that under the bill most independent workers qualify for unemployment insurance. 

The reason for the call out is we're getting a lot of questions on this topic, likely due to the fact that historically the self-employed have not been covered by unemployment insurance. 

However, the CARES Act creates a new, temporary Pandemic Unemployment Assistance program through the end of this year to help people who lose work due to the pandemic.  This program includes the self-employed and most independent workers. 

Under the Act, states will still continue to administer and pay unemployment to people who qualify. The amount varies by state, as does the length of time people can claim it (the national average is about $385 per week and most states cover 26 weeks).

The CARES Act adds $600 per week on top of whatever base amount a worker receives from the state. The additional payments last for 4 months.  

So if you're an independent worker and you've lost business, you should consider applying for unemployment insurance from your state. 

Details vary by state, so you need to visit your state's unemployment insurance site to see if you qualify.  Also, expect long phone wait times and slow websites - most of the state systems are overwhelmed due to unprecedented increases in unemployment.  

Also, the state unemployment systems are not set up to provide benefits to the self-employed.  This means it's likely it will take several weeks (or more) for some states to process independent worker applications and send out the checks.

As mentioned above, we will go into more detail on the other programs independent workers qualify for in the coming days. 

For an overall of the legislation, see NPR's What's Inside The Senate's $2 Trillion Coronavirus Aid Package.  

Book Review: Gig Mindset

Gig Mindset is a different kind of book on the gig economy.  Almost all gig economy books focus on how to become a freelancer or some form of independent worker.

But Gig Mindset is about how companies and workers can use freelancers and other gig workers to save time, access needed skills and increase productivity. 

In other words, instead of focusing on how to become part of the supply of gig workers, it covers the advantages of using gig workers. 

The author, Paul Estes, was a busy Microsoft executive trying to balance work with life.

So to save time, he decided to off-load a few personal tasks to a virtual assistant.

This worked out so well he started using the virtual assistant at work and this quickly mushroomed into using a variety of freelancers in his work. 

This led to him working on Microsoft's 365 freelance toolkit, a set of software tools that help corporations hire, work with and manage freelancers. 

And it also inspired him to write this book.

The core of the book is about what Estes calls The T.I.D.E Model for integrating freelancers into workflows:

• Taskify — Break your roles and responsibilities down into a list of specified tasks and sequential steps.
• Identify — Clarify which work tasks you must do personally, and which tasks can be delegated to experts who can do them better than you.
• Delegate — Find the right experts in the Gig Economy, communicate your expectations, set milestones, and establish reporting and check-in systems.
• Evolve — Continue to grow and to find new and better ways to get more out of the Gig Economy for you and your company. This is where the real magic happens.

As Estes found in his work, approaching your job in this way increases productivity and improves work outcomes.

This is an important book because of it's focus on how to use nonemployee talent.  Anyone who employs freelancers or works with a firm that uses nonemployee labor will find it useful.

But freelancers of all kinds will also find this book useful. It nicely explains how they can effectively work with clients and fit into corporate workflows.

Our firm has long used a similar approach to integrate freelancers and other suppliers into our workflows. So we felt like part of the choir while reading this book.

We highly recommend it.

Ipsos Global Trends 2020

The large, global market research firm Ipsos recently released its Global Trends 2020 study.  It's based on extensive surveys and interviews across 33 countries and updates similar efforts conducted in 2013 and 2016. 

The study covers a lot of ground (the study report is 120 pages long) and identifies 12 key trends that Ipsos believes will dominate the world in the 2020s.  These are:

• Climate emergency and antagonism
• A world divided by its values
• Choices over healthcare
• Reactions to uncertainty and inequality
• Capitalism’s turning point
• Peak globalization
• Data dilemmas
• Conscientious health
• Authenticity is king
• The search for simplicity and meaning
• The tech dimension: technophilia and technophobia
• The enduring appeal of nostalgia

One of the interesting findings of this study is how much of an outlier the U.S.is on many of these trends.  

For example, 55% of Americans agreed that unequal wealth distribution is bad for society.  This was the lowest percentage agreeing of the 33 countries in the survey. The global average agreeing with this statement was 76%.

America also came in last on a question about climate change.  Only 66% of Americans agreed climate change is mostly being caused by human activity.  Globally, 82% agreed.

Americans have always gone their own way.

But it's easy to see based on the study findings why "a world divided by its values" is one of the 12 dominant trends.

The VanLife App

The San Diego Union Tribune's Would you live in a van? Two San Diego women launch startup for boho traveler movement covers a new app - conveniently called The VanLife App - targeted at VanLife nomads.

The article provides a good description of VanLife:

"For those who haven’t heard of it, “vanlife” refers to a recent bohemian trend of people buying cargo vans, old ambulances, school buses and other boxy vehicles, and converting them into livable apartments on wheels (think of it as a do-it-yourself RV). Many vanlifers are also “digital nomads” who work remotely online, such as freelance writers, software developers, or content creators. With no strings tying them to specific cities or towns, they wander from destination to destination for months on end."

Regular readers know we love new buzzwords here at Small Business Labs and we hadn't heard of the "boho traveler movement".  

But some quick research showed it's a contraction of the term "bohemian homeless", which dates back to the bohemian movement of the 1800s. 

But the recent use has been mostly fashioned related. Boho-chic refers to a mix of bohemian and hippy styles. 

And boho traveler has similar connotations. We think the term is a bit limiting because many #Vanlifers wouldn't describe themselves this way. But it's still a fun new buzzword.

The app providers traveling VanLifers with lists of campsites and other places to park overnight. More importantly, it provides a series of community features that allow VanLifers to find and connect with other travelers. 

This helps to connect people, reduce loneliness and add a sense of community, all of which improve the Vanlife experience. The picture below is from the app's website.

About 7.3 million Americans consider themselves digital nomads and many are VanLifers.  The VanLife App is an example of the growing support system of tools and services targeted at this growing group of travelers.

Americans Policy Priorities Highly Polarized

Pew Research's As Economic Concerns Recede, Environmental Protection Rises on the Public’s Policy Agenda covers a recent survey asking Americans about their policy priorities.

As their chart below (click to enlarge) shows, there is a wide partisan divide on the issues people think are most important.

The top 3 policy priorities for Democrats are the environment, healthcare costs, and education.

The top 3 for Republicans are terrorism, immigration, and the economy. 

The biggest policy priority differences are around the environment and climate change. Key quote from Pew on climate change:

Dealing with global climate change ranks at the bottom of the list of 18 policy priorities for Republicans and Republican-leaning independents (just 21% call it a top priority). By contrast, climate change is near the top of the list of issues among Democrats and Democratic leaners (78% call it a top priority).

One of the topics that interesting is global trade. Neither Republicans nor Democrats rate it as very important.

Because of this, it came in last out of 18 policy options with just 42% of the respondents rating it a priority.

The growing political polarization of America is a powerful social trend.  It's a major reason behind the growing urban/rural divide.

It's also a key reason our politics are so heated and our federal government is grid-locked. If you can't even agree on what's important, there's little chance you will agree on legislation.  

The Dramatic Growth of Internet Ad Spending

OK, it's well known that Internet advertising has been growing rapidly.  But even knowing that, the chart below (click to enlarge) is still stunning.  

The chart is from Adage's Marketing Fact Pack 2020 and shows that the internet's share of U.S. ad spending has increased from just 6.4% in 2006 to over 50% in 2020 and is forecast to reach 60% in 2022.

Print ads in newspapers are magazines, obviously, have taken the biggest hit share wise. But TV's share has also fallen about one-third over this period.

There's a lot of other interesting data in the Marketing Fact Pack 2020.  

For example, Accenture, PWC, Deloitte, and IBM are all on the list of the world's 10 biggest marketing agencies (they're 6th through 9th).  

A key reason these firms are doing so well is digital's share of U.S. agency revenue was almost 54% in 2018, up from about 33% in 2012.  This shift opened the door for non-traditional agencies to gain share. 

See the report for more fun ad-related facts and data. 

Report: Tech in 2020: Standing On The Shoulders Of Giants

Benedict Evans, who is a well-known VC and tech industry pundit, recently released Tech in 2020: Standing on the Shoulders of Giants. 

Similar in style to Mary Meeker's well known annual Internet Trends Report, Evans' report covers similar ground and is full of charts and data.  And like Meeker's report, it's long at 128 pages.

But it's well worth looking through as it has tons of interesting data on the tech industry.  

As the report chart below shows (click to enlarge), Evans suggests a number of technologies could be the next big thing in tech.

But he doesn't predict which, if any, will be.

Instead, he focuses on regulation and government policy likely being at least one of the next big things in tech. It's hard to disagree with this view.

Evans also has a free weekly newsletter that quite popular in the tech community. It too is well-worth reading.

Living as a Service and the Growth of Mobility

Landing recently raised $30 million to provide a "living as service" service.  The firm's founder describes this as:

" ...an all-inclusive long-term living experience that allows a new generation of renters the freedom to choose where and how they live."

Landing partners with property managers and apartment owners to offer apartments in 13 different cities in the U.S.  Renters join Landing by paying an annual fee of $199 a year.  This gives them the ability to pick up and move whenever they want.  If they're moving out the Landing network they need to provide a 30-day notice. 

But if they stay within the network, only a 3-day notice is required.

Landing apartments are fully furnished and completely turn-key.  This eliminates a lot of the hassles with moving to a new place. For example, there's no need to set up accounts with utility providers. 

The picture below, which is from Landing's website, shows the living room of one of their downtown Los Angeles apartments.   

The company currently has over 300 units across 13 cities in its network.  The new funding will be used for expansion and the firm hopes to be in over 30 cities by the end of 2020.

Landing is attempting to tap into the growing trend toward mobility and digital nomadism.  Key quote from the founder in Crunchbase's article on the company:

“We’re seeing a growing mobile workforce in need of more flexible living solutions that empower them to embrace opportunities as they arise–no matter where they’re located on the map,” he said. “Landing is the first company addressing this.”

The growth of mobility, distributed work and digital nomadism are trends we follow and are forecasting to get stronger.  We're looking forward to seeing how Landing progresses as it pursues this opportunity. 

America's Affordability Crisis Driving Growth of Gig Work

The Atlantic's The Great Affordability Crisis Breaking America covers how the rapid rise in the prices of housing, healthcare, education and childcare and their impact on Americans.  Key quote:

In one of the best decades the American economy has ever recorded, families were bled dry by landlords, hospital administrators, university bursars, and child-care centers. For millions, a roaring economy felt precarious or downright terrible.

Hyperbole aside (the economy hasn't been roaring, it's been growing moderately; "bled dry" is also a bit much), we agree that these costs are leading to greater levels of financial stress and instability. 

Coincidently, last week the McKinsey Global Institute released The New Social Contract in the 21st Century,

This report covers much of the same ground as The Atlantic article, but they report their findings more clinically. Key quote:

Among the findings: while opportunities for work have expanded and employment rates have risen to record levels in many countries, work polarization and income stagnation are real and widespread. The cost of many discretionary goods and services has fallen sharply, but basic necessities such as housing, healthcare, and education are absorbing an ever-larger proportion of incomes. Coupled with wage stagnation effects, this is eroding the welfare of the bottom three quintiles of the population by income level ... 

The report chart below (click to enlarge) shows the changes in U.S. consumer prices by category.  It is indexed to the overall inflation rate.  

McKinsey didn't include childcare in its report. But as The Atlantic article explains, childcare costs have also grown at a much faster pace than overall inflation.  

As we've pointed out in the past, growing levels of financial fragility mean more people turn to gig work to supplement their income - especially if they face a financial shock. 

Given the cost increases for non-discretionary items like housing are likely to continue outpacing inflation (and wage growth), it's likely more Americans will need to turn to gig work to make ends meets and/or deal with financial hardships.

Creative Professionals Pushing Back on California's New Gig Economy Law

California's new gig economy law, AB5, is not being well received by independent creative professionals.  Freelance writers, musicians, actors, artists, and other creative professionals are finding the new law is damaging their livelihoods.

Indie musicians are a good example. Key quote from the musician's Change.org anti-AB5 petition:

AB5 will have a devastating and catastrophic impact on independent musicians, their livelihoods and the music industry in general in California. Musicians’ businesses operate in a substantially different way than many other types of industries, and the changes brought by AB5 are not sustainable with our business model.

The petition also points out what we think is one of the biggest problems with AB5, which is the way the law is written is scaring off companies from hiring independent workers, even if they are properly classified as contractors. 

Again from the musicians' petition:

"We are, frankly, terrified of AB5 as it applies to us. The ABC test is so strict and the fines are so high that many entities will simply stop using California musicians altogether." 

And it's not just musicians that need to be worried about this. 

We're hearing from a number of companies that they either reducing or eliminating hiring California-based independent contractors in a wide range of professions due to AB5. 

They're doing this because they believe the law is so broadly and vaguely worded - and the penalties so severe - that hiring even independent contractors they believe are properly classified as independents is simply not worth the risk. 

Instead, they're hiring remote contractors, moving the work to other states or outsourcing the work to agencies of various kinds. 

The good news is the mounting backlash against AB5 has the California legislature's attention.  Because of this, they are working on various ways to clean up AB5 and reduce its negative impacts on legitimate independent workers. 

For more on how indie musicians view AB5, see Ari's Take's blog post I MET WITH SENATE MAJORITY LEADER OF CA ABOUT AB5. HERE'S HOW IT WENT. 

JWT Intelligence's 100 Trends for 2020

Each of the past 6 years the trends group at the global advertising giant Wunderman Thompson has released an annual trends report covering 100 trends to follow in the coming year.

Yes, they really do have 100 trends. And the JWt Intelligence Future 100 Report: 2020 takes 226 pages to cover them. 

The focus is on consumers and the report covers trends across 10 sectors, spanning marketing, culture, luxury, beauty, travel and more. 

Our favorite trend comes from the beauty section and is called "Lashes".  The picture below nicely describes and illustrates this trend.

As industry analysts with a data bent, we're not the best people to decide what is and isn't beautiful. But we vote against this trend.

We've covered the annual JWT Intelligence trends report since it first came out in 2015.  Their reports are always interesting, fun to read have great pictures.

They also have a free newsletter that's well worth subscribing to. The signup button is at the bottom of this page.

Non-Profit Sector Big and Growing Faster Than Overall Employment

The Johns Hopkins Non-Profit Economic Data Project recently released its 2019 Non-Profit Employment Report. 

There are two key findings.  The first is the U.S non-profit sector is big, employing 12.3 million paid workers.  

As the study chart below shows, this makes the non-profit sector as big in terms of employment as the U.S. manufacturing sector.

The non-profit sector is also growing relatively rapidly. 

As the report chart below shows, from 2007 to 2016 (the most recently available data) employment in the non-profit sector grew nearly four times faster than the for-profit sector. 

We've long covered non-profits because the vast majority of them are small businesses. Over 80% of all non-profits spend less than $1 million per year in total expenditures.

And since there are about 1.5 million U.S. non-profits, a quick bit of math shows that the average non-profit has 8.2 employees.  

We've also long forecast that the non-profit sector would outgrow the for-profit sector of the economy. We continue to forecast this. The trends driving this growth include:

• The Internet and other technology makes is making it easier to start and operate a non-profit and especially small non-profits.
• Baby boomers, looking for encore careers and a way to give back, are starting growing numbers of non-profits.
• Millennials, who have a strong interest in social service, are starting non-profits.
• Non-profits and social service organizations are in many cases replacing governments as the key solvers of social problems.
• Revenue generating business models have become more common, which is leading to more self-sustaining non-profits. 

One issue may detract from the continued growth of non-profits is changes in tax laws. Key quote from the Johns Hopkins report:

"... the Federal Tax Cut and Jobs Act passed in December 2017 included several items that could have a negative effect on nonprofits’ ability to generate private donations. For example, by greatly expanding the standard deduction available to individuals, the tax bill will eliminate the tax incentives for giving for millions of taxpayers."

While we agree this is a risk, we believe donors will continue to provide enough support for this sector to continue to grow.

Quibi Bets Big on Mobile Movies

Quibi is a startup entertainment company that has raised $1.4 billion in venture funding to build a new content streaming service designed exclusively for mobile devices. 

Founded by Hollywood titan Jeffrey Katzenberg and led by CEO Meg Whitman, a Silicon Valley titan, the company has additional star power because of who they've signed up to provide content. 

According to TechCrunch:

"Quibi has attracted big-name talent to help kick off its first year, including Academy Award winners Steven Spielberg, Peter Farrelly and Guillermo del Toro; directors like Antoine Fuqua, Lena Waithe, Sam Raimi and Catherine Hardwicke; and stars like Stephan James, Chrissy Tiegen, Laurence Fishburne, Dave Franco, Bill Murray, Emily Mortimer and Kevin Hart, to name a few."

Quibi, which is short for “quick bites” is going to offer short-form videos of 4 to 10 minutes on everything from movies and TV shows in the form of short chapters to daily news and sports reports. 

These bite-sized pieces of content will have Hollywood quality production values, meaning they're expensive to make.  According to MarketWatch's article on Quibi:

"Lighthouses,” the service’s premium videos, will cost about $100,000-per-minute to produce, on par with some of the most expensive shows on TV.

The question, of course, is whether or not people want and will pay for high quality, short-form video entertainment on their phone (Quibi is planning on charging $4.99 to $7.99 per month for access to their content). 

Key quote from Fortune from Jeffrey Katzenberg on why Quibi will work:

“Everything they’re being offered today is centered around the TV. This is about your in-between time,” he told Fortune. “It’s quick bites, on the go and in between. It’s a very, very different viewing habit that we know our anticipated customers already have.… There is an unbelievable amount of content being consumed today on phones on the go. It’s just not of this quality.”

The shift to mobile computing devices is one of the most powerful technology trends of the past decade.

Whether Quibi is successful or not, it's an excellent example of the continuing impact this shift is having.

The Growing Backlash Against AB5, California's New Gig Economy Law

California's new labor law, AB5, was meant to help Uber and Lyft drivers - and others - get hired as traditional employees with the hope this would increase their pay and financial security. 

But the broadly worded and vague language of the new law is leading to a wide range of unintended negative consequences.

It's also resulted in a growing backlash among independent workers as well as organizations that hire them.

For example, Business Insiders 'It feels cold and heartless': Hundreds of California freelancers have been fired before the holidays over a state law meant to help Uber and Lyft drivers covers a mix of freelancers who have lost work because of the new job. 

Key quote:

A new California state law meant to restrict the gig economy has caused companies like Vox Media to cut jobs for freelancers directly before the holidays.

The loss, or potential loss of work, has led to both freelance journalists and independent truckers filing lawsuits challenging the law. 

Uber, which already said it would not comply with the new law, also joined with Postmates to challenge the law in court.  

Translators and interpreters, another industry with a lot of independent workers, are also looking to the courts for help as they lose work.  

And some companies, with Wonolo being a good example, are simply leaving California because of the law. 

We've also heard from a number of corporations that they will no longer hire California freelancers. One thing they will do instead is hire freelancers in other states and beyond AB5's reach. 

We expect to see many more examples of the unintended consequences of AB5 - and related legal actions - in the coming weeks and months. 

Our hope is the legislature and governor will recognize the law needs to be reworked and do so. 

The Rise of Career Nomadism

Korn Ferry is a large, global organizational consulting and recruiting firm. Their research institute recently released their Top 10 Talent Trends for the New Year.  

All the trends are interesting. But the one that jumped out at us is the rise of career nomadism.

Key quote describing this group:

"... there’s an increasing amount of employees who actually want to make walking out the door a major part of their career. These “career nomads” are high-performing talented pros who have no qualms switching jobs, organizations and even careers. Millennials, people born between 1982 and 2000 and now the largest part of the US workforce, seem particularly disinterested in staying put."

Korn Ferry goes on to say that corporations are going to need to attract and keep these nomads happy or miss out on a key source of top talent.

We certainly agree. And we see this as one of the drivers of the growth of independent work (freelancing, independent consulting, etc.). 

Work is becoming more team and project-oriented, and the barriers separating traditional and independent work continue to erode. For an increasing number of workers, it’s not simply a matter of having a traditional payroll job or working independently. 

Instead, many are doing both, developing their professional lives by shifting back and forth between independent work and traditional employment. 

Often workers choose to go independent to explore new opportunities, learn new skills or gain flexibility. Later on, many rotate back to traditional jobs. 

The most extreme version of career nomads are digital nomads. And as with career nomads, millennials are particularly interested in spending some part of their careers as digital nomads. 

Talent mobility is a growing fact of corporate life, especially among highly skilled workers.  Hiring organizations need to accept and adapt to this new reality.

Happy Holidays!

We'll be back in 2020.

The Paradox of Increasing Business Travel; Skift's 2020 Travel Trends

Skift is one of our favorite publications. It covers the travel, dining, and wellness industries from a business perspective. Because of their remit, they report on a wide range of interesting trends.

The recently released their 10 Business Travel Trends for 2020. The 10 are:

1. The Power of Being There in Person
2. Designing Great User Experiences to Boost Adoption
3. Travelers Demand an End-to-End Experience
4. Winning the Price, Loyalty, and Experience Trifecta
5. Platforms Simplify the Ancillary Purchase Process
6. Expanding the Sharing Economy
7. Bleisure Travel is the New Black
8. Rethinking Corporate Travel Expenses
9. Business Travel Culture Drives Company Success
10. Taking Care of Business, the Traveler, and the Planet

While we like all of these trends, we find The Power of Being There in Person the most interesting. Key quote from the report on this trend:

Video and digital collaboration tools have transformed the modern workplace. Today,  employees can easily collaborate with co-workers around the world, offering a huge boost to productivity and what would seem to be growing opportunities to reduce travel costs. But in spite of the increasing potential of these digital collaboration tools to transform modern business, the importance of face-to-face meetings remains strong and critical to business success.

The chart below illustrates the fact that 9 out of 10 business executives surveyed agree with this.

We think this trend is similar to the paradox of place. This paradox is even though the Internet and connective technologies have made working remotely easier than ever, people and companies are increasingly clustering together in fewer, more valuable locations.

A related paradox is despite these same tools being able to substitute for business travel, business travel continues to grow. 

Our view is connective technology is, somewhat counter-intuitively, helping to drive the growth of business travel. It’s doing this in 3 ways.

1. Connective technologies have allowed business operations and workers to become more distributed. This means more travel as managers and employees travel to meet with those not co-located.
2. Connective technologies have also increased the number of people who work together regularly, but aren’t co-located. Thanks to the Internet and related tools, companies are more willing to create distributed teams and allow team members to live away from their teammates.  This leads to more travel and more people traveling because these distributed teams get together in-person.

3. Related to 2, connective technologies have led to more cross-organizational teams comprised of business partners, suppliers, customers and company employees. These teams are almost always distributed, which creates the travel need to get together.

We’re seeing signs that paradox of place is starting to shift, with work becoming more distributed. This likely means there will be more business travel in the near future.

We’ll have more on this topic in the new year.

The Rise of Esports

Quartz’s members-only article (meaning you have to be a paying subscriber to see it) The stars, teams, and investors turning esports into big business nicely covers the rise of esports.

Key quote:

“Tens of millions of viewers are tuning in to watch other people play video games competitively, and it’s becoming big business …  it is creating a new kind of sports star, and both the gaming industry and professional sports franchises have taken notice.”

As the Quartz chart below shows, esports' revenue is growing rapidly and expected to generate about $1.1 billion in revenue is 2019. 

According to the article, esports started in 1982 with a TV show Starcade, in which teenagers competed in arcade games. Alex Trabek of Jeopardy fame even hosted one of the episodes. 

Since then the industry has grown to the point where professional sports teams are getting involved. Again from the Quartz article:

“The Philadelphia 76ers have bought esports teams and are providing them access to training facilities —and they’re not the only ones. New England Patriots owner Robert Kraft owns a team, as does Los Angeles Rams owner Stan Kroenke.”

Esports is an excellent example of how technology is creating societal change – and new businesses and opportunities.

BTW, we find the Quartz premium membership service to be well worth its cost. We particularly like their weekly subject briefings, like this one on esports. 

HBR on How to Negotiate as a Freelancer

HBR's Now to Negotiate as a Freelancer provides an excellent overview of this important topic.  Key quote on 3 things that tend to cause freelancers negotiation problems:

First, they focus on the business aspect of the relationship to the detriment of building a personal rapport; second, they attempt to differentiate themselves from their competitors with price discounting, and third, they waste their negotiation time on the wrong clients.

We agree with this list and in our experience, the key to freelancing success is finding and cultivating the right clients.

From our perspective the right clients have 3 attributes:

• The work you do is important to the client.
• The client values your work and the relationship.
• There's a good cultural and values fit between you and the client. 

The article suggests using the following two-factor grid to help decide which clients to pursue and projects to take.

It takes time and effort to find and develop relationships with "good clients".  It's also true most freelancers will have to work with a number of "bad clients".  

But finding good clients - and delivering excellent work - are in our opinion the keys to freelancer success. 

Uber's Safety Report

Trust and safety have always been major issues with the sharing/gig/peer-to-peer economy. But data on the safety problems in this growing part of the economy have been non-existent. But that's starting to change. 

Last week Uber released a U.S. safety report that provides details on the number of sexual assaults, murders and fatal crashes that occurred through its platform in 2017 and 2018.

The New York Times article headline on the report - Uber Says 3,045 Sexual Assaults Were Reported in U.S. Rides Last Year - sums up the media coverage of the report, which has highlighted the number of sexual assaults. 

And 3,045 sexual assaults is a lot and the actual number is no doubt higher because of unreported assaults. 

But Uber also provides a lot of rides - 1.3 billion in the U.S. in 2018. This means the incident rate per ride was only .0002%. 

Almost half (44%) of the sexual assault victims were drivers.  This again is not good and too many. But it means the rider incident rate was only .0001%. 

Uber also reported 58 fatal crashes and 10 murders in 2018. 

interestingly enough, there's almost nothing to compare Uber's data with.

Similar national data does not exist for the taxi industry nor for most other forms of transportation. 

Uber is also the first rideshare company to provide this data (Lyft says it plans to do so in the future).

So we don't know how this data compares with other forms of transportation.

But we do know you're less likely to die in a car crash while riding an Uber than you are driving yourself.  This is because there is national data on car accident fatalities. Key quote from the Safety Report:

"The Uber-related motor vehicle fatality rate for 2017 was 0.59 fatalities per 100 million vehicle miles traveled; it was 0.57 fatalities per 100 million miles traveled in 2018. For both years, the Uber data is about half of the national rates."

Regardless of how you feel about Uber's safety data, it's good they've released it. Key quote from the NY Times article:

Sexual violence experts agreed that publishing the numbers was an important step in combating abuse across the industry.

“That a company is willing to peel back the drapes and let us look into what is happening is, to me, the success,” said Cindy Southworth, the executive vice president of the National Network to End Domestic Violence and a member of Uber’s safety advisory board.

The more data we have on this the better. And hopefully, Uber's release will lead to others collecting and releasing their safety data. 

Lack of "Good Jobs" Means More People Turn to the Gig Economy

One thing that comes out loud and clear in our research is many turn to the gig economy because of a lack of "good jobs".  

By "good jobs" we mean jobs that pay well, are reasonably secure and provide benefits.  But while the U.S. unemployment rate is low, the economy is creating more low wage jobs than middle and high wage ones.  

This leads more people to do gig work to supplement their income. it also leads more to turn to gig work in the hopes of being able to make more than low paying traditional jobs. And even if they can't make more, they can potentially have greater levels of work control, flexibility and autonomy.

The lack of good jobs is highlighted by the U.S. Private Sector Job Quality Index (JQI). 

As the chart below shows (click to enlarge), job quality has consistently declined since the 1990s and after a brief uptick is near its all-time low. 

The JCI divides U.S. jobs into two groups: “high quality” jobs that pay more than the average weekly wage and tend to have more hours per week, and “low quality” jobs that pay less than the average weekly wage and generally offer fewer hours. 

The current reading, about 80, means that there are only 80 high-paying jobs for every 100 low-paying jobs. That's a substantial decline from 1990 when there were 94 high-paying jobs for every 100 low-paying jobs.

The main reason for this decline is a shift from goods-producing jobs to service sector jobs, which tend to pay less. 

For example, employment in food services and drinking places has increased by 65% since 1990 while manufacturing employment has decreased by 30%.  Since food services and drinking places tend to pay below average wages, they have created a lot of low quality jobs. 

The growth of low quality jobs - coupled with rising costs for housing, education and healthcare - means more people turn to the gig economy as a second source of income.  

There's a lot of noise about making gig economy jobs better.  We agree this is a good idea.

But we believe it's more important to fix the traditional job quality problem.  As long as the economy creates more low quality than high quality jobs, people will struggle regardless of what happens with the gig economy. 

For more on the JCI, see Quartz's The great American labor paradox: Plentiful jobs, most of them bad. 

Remote and Distributed Work Driving Growth Outside of Major Cities

Citylab's Talent May Be Shifting Away From Superstar Cities covers research showing that the fast-growing "superstar cities" - New York, San Francisco, Seattle, Los Angeles, Washington, DC - may be slowing down. 

Taking their place in attracting talent are lower-cost cities and towns, mostly in the sunbelt. 

The data comes from EMSI's Talent Attraction Scorecard, which looks at six metrics by county: job growth, skilled job growth, net migration, annual openings for skilled workers (per capita), educational attainment growth (based on adults with associate degrees and above), and a broad measure of regional competitiveness.

In addition to finding talent is spreading out across the U.S., the study also found continued growth of remote workers - again, especially in lower-cost areas of the country. 

EMSI found about 7 million Americans report being full-time remote workers. This is about 4.7% of the workforce.  

As the study chart below shows (click to enlarge), many Western cities have a much higher percentage of remote workers than the national average.

There are several drivers of the shift away from superstar cities.  Key quote from the article:

The big knowledge and tech hubs which once had such a stranglehold on attracting talent seem to be losing their allure. Many places around the country now have bundles of amenities—renovated old buildings, coffee shops and good restaurants, music venues, and not least of all, more affordable homes—that can compete with the biggest cities. In other words, the amenity gap between superstar cities and other places has closed, while the housing-price gap has widened.

Another driver is continued improvements in distributed work technologies. With the advancements of video conferencing and online collaboration tools, it's become much easier to interact with and manage remote workers.

We believe the trend towards distributed work will continue and even accelerate over the next 5 years.  The economics of moving to lower-cost areas of the country are simply too strong for this not to happen.    

Renewable Energy to Pass Coal for U.S. Electricity Generation in 2021

According to the Institute for Energy Economics and Financial Analysis (IEEFA), renewable energy sources will pass coal in terms of U.S. electricity generation in 2021.

As their chart below shows, each of the sources will produce around 800 billion kilowatts of electricity in 2021.

Included in the IEEFA's definition of renewables are utility-scale biomass, geothermal, hydropower, solar and wind, plus small-scale solar.  

The fastest-growing of these sources by far are wind and solar. They are forecast to continue growing at the pace of the past couple of years (around 20% for solar and 10% for wind). 

Coal generation, as the chart below shows, has been rapidly declining since it's peak year in 2010.

Simply put, coal is not economically competitive with other sources. This even though many of the costs of coal (pollution, worker health problems, etc.) are not included in its price.

As cheaper and more efficient ways to store energy become available, there will be even less need for coal plants.

Expect coal's rapid decline to continue. Also, expect solar's growth to continue.

This is good news for both the economy and the environment.  Solar energy creates more jobs (and better jobs) than the coal industry as well as being much better for the environment.