Small Business Labs

Liveops Distributed, Work at Home, Independent Call Center Workforce

Liveops provides cloud-based call center services that utilize an on-demand workforce of agents who live in the U.S. The agents are independent workers who contract with Liveops and work remotely, mostly from home.

We met with Liveops last week and learned they have about 20,000 independent agents providing customer service and sales support to over 400 enterprise clients. They serve a mix of industries, including retail, healthcare, insurance, travel & hospitality and others.

One of their key selling points is the skill of their agents.

As the Liveops chart below shows (click to enlarge), their home-based virtual agents are older, more experienced and better educated than traditional call center workers.

And because their agents live in the U.S., they avoid the language and cultural issues that come with using offshore agents.

The independent agents choose to work with Liveops for the same reasons as others choose independent work – for the work flexibility, autonomy and control.

In particular, Liveop agents like the ability to work at home and choose their hours.

Like others working remotely via online platforms, the majority of Liveops agents work part-time. Many are parents or care givers and about 1 in 5 are semi-retired.

Liveops is yet another example of the growth of low friction, highly flexible work. It’s also an example of the growing use of a distributed, remote workforce.

And, of course, it’s another example of a firm using skilled independent workers. 

Poverty in America

In September the U.s. Census Bureau released the Supplemental Poverty Measure: 2017. It reports that 13.9% of Americans lived in poverty in 2017, which is statistically the same as in 2016.

This leads to the obvious question what is - and why is there - a supplemental poverty measure.

The reason is the "official" poverty measure was designed in 1963 and defined as three times the "subsistence food budget" for a family of any given size. Because of data limitations, the "subsistence food budget" was based on 1955 data on food consumption. 

If a family's gross income before taxes is less than 3 times the subsistence food budget, the family is considered poor. 

This methodology has a number of flaws. For example, It's based on pre-tax income. But bigger issues include is it doesn't factor in other cost of livings (rent, etc.), it doesn't include support programs like food stamps or the earned income tax credit and it assumes the cost of living is same everywhere in the U.S.

It also assumes we eat the same things as we did in 1955 and, relatively speaking, they cost the same.

Due to these problems, the supplemental poverty measure was developed in 2010. The chart below shows how the both the official and supplemental poverty rates from 2009 to 2017.

The good news is the poverty rate has been drifting down since 2011. The bad news is kids 18 and under have the highest poverty rate - 15.6%. This means about 1 in 6 American kids live in poverty.

More on the FIRE (Financial Independence, Retire Early) Movement, Independent Work and Edge Communities

Last month we covered the growing Financial Independence, Retire Early (FIRE) movement and how it relates to the rise in independent work. 

The quick summary of that article is the trends driving the interest in the FIRE movement are similar, and in some cases the same, as the trends driving the growing interest in independent work.

In particular the desire for increased work/life autonomy, control and flexibility are key drivers of both movements.

While the FIRE movement is definitely gaining momentum, it's not without it's critics. Famed personal fiance guru Suze Orman, for example, doesn't like it. 

In fact, in the interview below she says:

“I hate it. I hate it. I hate it. I hate it.”

Her main reason for hating it is if you retire early, you have to live a long time off your savings because you aren't generating income. She believes this is very risky and if something goes wrong, it could lead to financial ruin.

This seems like a reasonable criticism.

FIRE movement proponents have answered that it's not about not working, it's about financial independence and the freedom that comes with it. 

For example, according to the Mr Money Mustache (one of leading FIRE movement blogs) article What Everyone Gets Wrong About Fire,

Financial Independence does not mean the end of your working career ... Instead it means, “Complete freedom to be the best, most powerful, energetic, happiest and most generous version of You that you can possibly be.”

It goes on to point out that most of those achieving their FIRE point (what they call the point at which a person have saved enough money to live off) plan to continue to work in some form.

This is very similar to what we hear from independent workers. They want the freedom and flexibility to pursue work they enjoy.

The Fire Movement is a great example of an edge community, which are relatively small groups of people who are doing something that is behaviorally out of the mainstream. 

Much of our time is spent studying edge communities. We do this because that's where new trends and ideas often start. 

Another interesting feature of edge communities is some/many of the people participating in them are doing things that are considered anywhere from odd, to nutty, to even dangerous by the mainstream. 

But over time some edge community behaviors move into the mainstream. Examples include Christianity, hula hoops, yoga, rock and roll and many, many others. 

We're not suggesting that yet for the FIRE movement. But it has gained enough adherents and attention to warrant watching.

Bleisure Travel Continues to Increase

We first reported on bleisure travel, which is the the blending of business and leisure travel, back in 2015. 

AAccording to the folks at the expense reporting and management firm, SAP Concur, it continues to gain popularity. 

Key quote from their blog post Do You Bleisure? The Word We Love to Hate is Gaining Popularity Across the Globe:

... according to new SAP Concur travel and expense data gathered between January 2017 and December 2017 ... “bleisure” trips increased by 20% from 2016 to 2017. And during this time, more than 2.2 million bleisure trips were taken by business travelers around the globe, making up 10% of total business trips.

Back in 2015 bleisure travel was considered something that millennials mostly did.

But the SAP Concur data shows these days all ages are taking advantage of bleisure travel opportunities. Again from their post:

On average, millennials make up the largest share of bleisure travelers in the world, accounting for 38% of all bleisure trips in the Americas region in 2017, however Generation X (31%) and baby boomers (31%) are not far behind!

In case you're wondering where people go on their bleisure trips:  "In the Americas the top destinations are NYC, Chicago, and Los Angeles; in EMEA, Tel Aviv, London, and Paris; and in APAC, Tokyo, Singapore, and Shanghai."

These locations are not surprising. They're all major business hubs that also attract a lot of leisure travelers.

Also not surprising is Airbnb is a growing supplier of bleisure travel accommodations. 

According to Conur's data, 70% of expensed trips using Airbnb lodging include a Saturday night stay, compared to just 10% of trips with hotel bookings.

One of the most famous bleisure travelers is Marco Polo, so the the trend is not new.  But it seems to be becoming much more popular.

More on Agility from Gallup and Catalant

After posting on corporations looking to increase their agility on Tuesday, we found two new reports on business agility in our mailbox on Wednesday.

Gallup pointed us to their report The Real Future of Work: The Agility Issue. Here's their pitch on the need for increased business agility:

The old axiom "adapt or die" has never been more relevant than it is today. Consider just three rapid changes organizations are confronting:

• radically shifting customer demands
• lightning-fast advances in technology
• new demands from the emerging millennial (and even younger) workforce

Organizations that don't have the capacity to adapt quickly to trends such as these will be passed by their competitors - or even put out of business. 

In case you think increasing agility is easy, Catalant's report The Obstacles to Agility disagrees. 

According to this report everyone agrees agility is important. But most feel their organizations aren't good at it. Key quote:

According to pre-event survey data, respondents gave the selected drivers of business agility ... an average importance rating of 9/10. Yet, across the board, companies are struggling to achieve agility within their organizations. As noted by the survey results ... In fact, 61% of respondents gave their organizations an average agility performance rating of 6/10 or below.

The Catalant report chart below shows how other agility factors were rated.

This busy week of agility reports shows how big a topic this topic has become. 

Corporations Embracing Agility, Leading to Greater Use of Contingent Labor

Earlier this year McKinsey released another in their series of future of work reports, Skill Shift: Automation and the Future of the Workforce.

The key finding from our perspective is that corporations are increasingly agility as a key business requirement. Key quote on how companies define agility:

Agility has acquired a specific meaning in management terms, as the ability of an organization to renew itself, adapt, change quickly, and succeed in a rapidly changing, ambiguous and sometimes turbulent environment.

And according to the report, an important way to increase business agility is to use more contingent labor. Again from the report:

Another important byproduct of the move toward more team-based work and agile organizations is the potential for companies to hire independent contractors to supply specific skills at specific times. In our survey, greater use of various types of freelancers and temporary workers is one of the top organizational changes. When asked about what types of labor company leaders were planning on using most in the future, 61 percent said they expected to hire more temporary employees.

Because of this, McKinsey believes "the independent workforce could consequently continue its growth in the future."

In addition to greater use of independent workers and contingent labor, McKinsey suggests 4 other actions companies can take to build the workforce of the future. These are:

Retrain. Raise skill levels of employees by teaching them new or more advanced skills.
Redeploy. Shift parts of the workforce by redefining work tasks or redesigning processes to make better use of the skill capacities already available in-house.
Hire. Acquire individuals or teams with the required skill sets.
Release.  A nice way of saying staff reduction.

The report chart below - the major consulting firms are great at charts - shows the skills that will be needed more, and needed less, in the future (click to enlarge).

Not surprisingly physical, manual and basic cognitive skills will be needed less.

The State of the U.S. Heartland

Brookings and the Walton Family Foundation teamed up to produce The State of the Heartland.

It's a detailed study of the U.S. Heartland using 26 socioeconomic variables to assess how the region's economy has been performing since the Great Recession. 

The quick summary is The Heartland is doing just fine.

Their definition of the Heartland, BTW, consists of 19 mostly inland states, with the only surprise potentially being the inclusion of some of the deep south states.

No doubt the Walton Family Foundation's involvement influenced this definition. But we think it's useful to have southern states included. In fact, we'd like to see similar reports for all U.S. regions and states.

The three key study findings, according to the report, are:

1. The Heartland economy is doing better than is sometimes portrayed.  Growth measured by job and output growth have been steady, if not stellar, since 2010 with all of the Heartland states adding jobs and 18 increasing their output. Prosperity has also been slowly rising as all 19 states enjoyed increased standards of living, all 19 posted increases in the average wage, and 12 saw productivity increases.

2. The Heartland, however, is not monolithic: Its economy varies widely across place. In this regard, the region is a checkerboard of sub-regions, states, and local communities where some Heartland places are thriving while others are deteriorating—just as in other regions. 

3. Serious deficits in the region’s human capital and innovation capacity pose the most serious challenges to improving future prosperity. On this front the factbook’s indicators depict a region that is—in most places—struggling to amass the human and technology capacity needed to support broad-based prosperity.

The study website has lots of interactive features that lets you play with the data, including the ability to zoom in by state. It's well worth visiting.

Regular readers know we've long been bullish about the Midwest (we're also biased, since we're from that part of the country). We even included it in our Top 10 Small Business Trends list in 2013. 

We did this because The Heartland has a lot of offer, including low costs and high levels of livability. And as this study states, they need more human capital.

So if you're looking for a place to live, consider The Heartland.

Why Independent Work and Coworking Increase Mental and Physical Well-Being

McKinsey's The overlooked essentials of employee well-being focuses on how companies can improve the well-being of their employees.

But it also explains why the self-employed - and especially those that work in coworking spaces - report higher levels of wellness and work satisfaction than traditional employees do.

It covers two critical factors - job control and social support - that foster physical and mental well-being. Key quote on job control:

"Studies going back decades have shown that job control—the amount of discretion employees have to determine what they do and how they do it—has a major impact on their physical health. Recent research also indicates that limited job control has ill effects that extend beyond the physical, imposing a burden on employees’ mental health, too."

As we've often pointed out, job control is one of the key reasons the independent workers (the self-employed, freelancers, independent contractors, etc.) become and like being independent.

It's also one of the reasons independent workers report being happier and healthier because they're independent. 

But a drawback of independent work is loneliness. As the McKinsey article points out, a lack of social support is not good. Key quote:

Research going back to the 1970s consistently demonstrates a connection between social support and health ... The evidence shows that social support—family and friends you can count on, as well as close relationships—can have a direct effect on health and buffers the effects of various psychosocial stresses, including workplace stress, that can compromise health.

This is where coworking comes in.

As we said in our article Coworking Is Not About Workspace — It’s About Feeling Less Lonely, coworking spaces provide social support. 

The McKinsey article nicely sums this topic up by saying:

Giving people more control over their work life and providing them with social support fosters higher levels of physical and mental health.

This is exactly what the combination of independent work and coworking provide.

Having said all that, we are well aware that not all independent workers have control over their work. We also are fully aware of the downsides and negatives that come with being self-employed. 

But for those who do have control, the combination of independent work and coworking can lead to a healthier life.

The Robot Business is Hard - Rethink Robotics Shuts Down

With all the noise around AI and robotics these days, you'd think this is a great time to be a company that makes robots.

And in many ways, it is.

According to the International Federation of Robotics, an industry body, worldwide sales of robots increased by 31% in 2017. 

But it turns out the robot business is tough and making money isn't easy. 

Because of this, robotics pioneer Rethink Robotics recently shut down. 

Rethink made two robots - Baxter and Sawyer - that were designed to be safe for humans to work around and easy to program. They were also relatively cheap by robot standards, starting at about $22,000. 

They raised $150 million and for awhile Rethink was considered a sure bet to be a winner. For example, we featured Baxter in our 2013 article The Rise of Robo Sapiens because we were so impressed by the company.

Their pitch was their robots were "cobots", meaning they could work along side and collaboratively with humans. It obviously helped their pitch that Baxter and Sawyer both looked cute - including facial expressions. 

But as the Boston Globe's Businesses want robots that are problem solvers stated:

"While robots may be a big part of the future, building and selling them in the present can be exceptionally difficult."

According to the article, Rethink's robots simply didn't solve business problems as well as robots from competitors. The article also pointed to some business missteps, especially around distribution channels.

That Rethink was forced to shut down instead of being acquired means demand for their robots was at best modest and the business not financially sound. 

Rethink's demise shows how hard it is to build and sell robots. But it also shows the robotics industry is maturing - Rethink failed in large part because their competitors were better. 

Despite its demise, Rethink played an important role in moving the robotics industry forward.

As the IEEE Spectrum article Rethink Robotics, Pioneer of Collaborative Robots, Shuts Down (which is where we got the sad Baxter picture above) points out, Rethink "developed a new class of factory robots that could safely work alongside people."

Expect to see more cobots in the future.

The Staffing Industry Analysts on the Gig Economy and Cloud Labor

The Staffing Industry Analysts (SIA) recently released their U.S. Gig Economy - 2018 Edition report. They found that about 48 million Americans are in the gig economy, which is 31% of the workforce.

They also found about 13.7 million Americans are human cloud workers. 

They define the human cloud as:

"... all manner of companies that facilitate direct, digitally-enabled work arrangements, from sourcing a worker through payment."

They've also identified and defined three key human cloud business models: online staffing, crowdsourcing and online work services. These are shown in their excellent chart below.

SIA's clients are staffing firms - including cloud labor firms - and companies that hire workers from staffing and cloud labor firms. This provides them with an insiders view of the gig economy and cloud labor. 

Much of their research, unfortunately, is behind their paywall.

But they do provide a lot of useful research summaries and information for free on their Staffing Stream blog. It's well worth reading.

In terms of subscribing to their full research service, as Ferris Bueller said "if you have the means ...". 

The Rise of the "Elite Expert Segment of the Gig Economy"

How To Be A Rock Star In The Elite Expert Segment Of The Gig Economy is an interesting white paper from The Luxury Institute, which claims to be "the world's most trusted luxury and premium goods and services consulting firm ...".

The Luxury Institute is an expert network firm. These firms provide clients access to industry experts, most of which are independent consultants. 

The Luxury Institute calls their expert network GLEN (Global Luxury Expert Network) and say they have hundreds of independent luxury goods and services experts who are part of it.

The white paper points out highly skilled expert talent is in demand. Key quote:

Whether an individual chooses to be a full-time employee, or an independent expert, it has never been easier to market and sell expert skills across the entire planet. With a tremendous skills brain drain occurring in business as baby boomers have started to retire, leaving in their wake an army of novice millennials to take over in the cockpit, literally, elite experts are in high demand.

And they point out if these people choose to go independent, they can do well. Again from the white paper:

... if someone is a rock star in the gig economy, they will see their market value magnified by going solo rather than being employed. This is simply because they have the ability to sell their expertise to the highest bidders. Similar to fields such as professional sports and entertainment, and now high technology and e-sports, the gig economy will ensure that elite business experts benefit from what economists call a “power law distribution,” where the top achievers earn a highly disproportionate amount of the revenue. 

This echos what we found in our research looking at highly skilled and compensated independent workers. 

As the chart below from the MBO Partners State of Independence study research brief Highly Skilled, High Earning Workers shows, the number of U.S. high earning independent workers (those making $100k or more) has increased by 70% since 2011.

There are many drivers behind the growth of high earning independents - see the research brief for details. 

But the main driver, as is pointed in The Luxury Institute's white paper, is the growing demand for highly skilled workers.

And since firms are increasing their use of highly skilled independent workers, we see no reason why the number of highly skilled independent workers won't continue to grow.

Can Traditional Employment Match the Flexibility of Independent Work?

We've long found in our research that having work flexibility, autonomy and control are key reasons people become and like being independent workers (freelancers, contractors, self-employed, etc.). 

But there's been much debate around whether or not companies - and particularly the online platform marketplaces like Uber and Lyft - could shift their workers to traditional employment and still provide the same levels of work flexibility.

Thanks to a recent California Supreme Court ruling and a new law for cannabis delivery companies, we're starting to see some companies shift their workers from independent contractors to traditional employees.

And we're starting to see how independent workers react to the shift. 

The Sacramento Bee's Bottle & Barlow barbers quit over state high court’s ruling on independent contractors covers a barber shop that switched its contract workers to traditional employees. 

All the contractors quit rather than become employees.

Key quote from the shop owner:

"Many hairstylists get into the trade for its flexible hours and opportunity for entrepreneurship, leaving the prospect of being an employee with set work times and withheld taxes unappealing, Giannotti said."

Another example comes from The Atlantic article What Happens When Gig-Economy Workers Become Employees. It covers the impact of a new California law requiring all cannabis deliver drivers be traditional employees. 

In the case of one company, about half their drivers quit over the shift. Key quote:

"Workers are split on whether they like the changes. Sky Siegel, the general manager for the Perennial Holistic Center in Los Angeles, said about half of his drivers preferred being independent contractors, and quit before the change went into effect so they could find other gig jobs."

Both articles highlight the decline in flexibility associated with traditional employment as a reason many of the gig workers quit rather than become traditional employees. 

So why don't firms offer traditional employees the same level of flexibility they can offer contractor workers?

The quick answer is labor laws, which provide protections to employees that gig workers don't get. But they also require monitoring and management of workers.

Examples of these include providing health benefits if a worker works more than 30 hours a week, overtime pay for more than 40 hours a week and minimum wage requirements. There are many, many more examples (with legal liability issues being a big one).

To insure companies are complying with all the laws and rules (and can do so profitably), companies schedule their workers. This, of course, greatly reduces worker flexibility.

In addition to legal compliance there's also a practical matter. Simply put, managers see their jobs as managing their employees. 

And as anyone who has had a boss knows, they reduce your work autonomy, control and flexibility. 

We spend a lot of time looking at the differences, advantages and disadvantages between traditional jobs and independent work - and how people decide which they want. 

For those seeking high levels of work autonomy, control and flexibility independent work is the clear winner.

But as we've pointed out many times, in exchange independent workers face income volatility, a lack of benefits and labor protections and greater overall risk.

We think companies can provide more flexibility than they currently do. But we also think they are unable both legally and culturally to provide the same level as independent work does.

Measuring the Gig Economy is Not Easy

The U.S. Bureau of Labor Statistics (BLS) released the results of their Electronically Mediated Work study.

They found about 1% of the U.S. workforce used an online labor platform during their reference week in May of 2017.

This works out to about 1.6 million people.

They also found their survey questions "did not work as intended" and resulted in a large number of false positives.

Because of this, they had to “recode” their data using a labor-intensive process. (See their study for the details.) They believe this process fixed many of the problems.

The false positive problem – meaning people say they do something in response to a survey question when they don’t – is a common problem with gig surveys for two broad reasons.

First, many people confuse working with online tools in a traditional job with working in the gig economy. This seems to be the main issue the BLS had.

The second driver of false positives comes from aspirational questions in surveys.  Whenever people are about things that are popular or considered cool (like working in the gig economy), many people say they are doing it even if they’re not.

A good example of the false positive problem is asking people whether they plan to start a business over the next 2-3 years. We ask this question in the MBO State of Independence study. Consistently over the past 8 years of this study, about 12% - 14% of Americas say they will. Yet in reality, only about 1%-2% actually start a business.

The best way to avoid these false positive problems is by asking a series of clarifying questions to screen out the false positives. But for a variety of reasons, which are explained in the BLS study results, the BLS was unable to do this and was limited to asking just 4 questions.

But even asking a series of questions -- which is how we do it -- doesn’t guarantee the false positive problem won’t happen.  It does, however, help mitigate problems that arise.

The bottom line is measuring the gig economy is not easy. Or as the Wall Street Journal put it in their article on the BLS study, “A government survey designed to measure the gig economy shows just how challenging that can be”.

JP Morgan Chase's 2018 Online Platform Study and Rideshare Driver Earnings

The JP Morgan Chase Institute released their 2018 Online Platform Economy in 2018 study this week.

It generated a lot of media attention, most of which focused on the data showing the average rideshare driver's earnings per month declined 53% between 2013 and 2017 (click on the chart to enlarge).

This, of course, led to a rash of headlines proclaiming earnings for gig workers have fallen substantially. These include:

Recode: Uber drivers and other gig economy workers are earning half what they did five years ago

Wall Street Journal: When the Supply of Uber and Lyft Drivers Rises, Their Earnings Fall

MarketWatch: Drivers for Uber, Lyft are earning less than half of what they did four years ago, study finds

The only problem is that's not exactly what the study found.

Yes, the study did find that the monthly earnings for the average gig worker driving people or goods decline by 53% between 2013 and 2017.

But as Uber nicely summarizes in their response to the study, the study does not include any data on how many hours per month the drivers worked. 

So if the average driver worked fewer hours in 2017 than in 2013 - which Uber says is true for their drivers - then their monthly total income from driving would of course go down. This is true even if their hourly wage stayed the same or increased.

Our research shows, like Uber claims, that on average those working via the online gig platforms are working fewer hours per month than in the past. 

A key reason is more people are taking advantage of the low friction, highly flexible work offered by these platforms to work when they have small amounts of spare time or gaps in their schedules. 

This includes students, care givers, those with illnesses, those with full-time jobs looking for supplemental income and others who need high levels of flexibility. 

Our research also shows only a slight decline in gig worker hourly earnings over the study's time frame. This data supports the thesis that the average platform worker is working fewer hours.

The study, BTW, is excellent and has a lot interesting data. It also has a "big data" methodology that knocks your socks off (or at least it knocked our socks off. And yes, we do need to get out more). 

See the report for details on the methodology.

What Highly Skilled Independent Workers Want

The global accounting and professional services firm EY has developed GigNow, an external online talent platform. 

Like PWC's Talent Exchange and Deloitte's Open Talent Community, the goal of GigNow is to help EY find and engage skilled independent workers - both for EY's internal use and for use on client projects.

They recently released a short video (below) that we think nicely captures 3 key things highly skilled independent workers are looking for in terms of assignments. These are:

1. Access to diverse and interesting gigs
2. To be welcomed by the client and treated as part of the team
3. The opportunity the learn and build skills

In a 2016 Harvard Business Review article on external talent platforms we said:

We expect to see many other large corporations deploying independent external talent platforms and exchanges over the next two to three years, as 21st-century social, economic, demographic, and technological trends change the way we all think about talent.

GigNow is another example of this growing trend.

Survey: Satisfaction Levels for Gig Workers and Traditional Workers Similar

Morning Consult's In a Robust Job Market, Gig Workers Satisfaction on a Par With Wider Workforce covers the results of their recent survey of employed Americans.

Key quote from the article:

 ... adults who identify as being a gig economy worker report being just as satisfied with their jobs, financial situations and family life as the average adult who has been employed in the past six months. Gig workers also report similar satisfaction rates on pay, benefits, required hours, work-life balance and other working conditions.

The study chart below nicely illustrates these results.

 

The study, like Gallup's and the Conference Board's recent gig worker studies, goes into detail comparing the motivations and attitudes of gig workers and those with traditional jobs.

All three of these studies found gig workers have satisfaction rates as high or higher than traditional job holders. So has pretty much every other study done on gig workers.  

Morning Consult also provides their questions and a detailed set of survey crosstab results. Kudos to Morning Consult for doing this.

U.S. Non-Profit Sector: Big, Growing and Mostly Comprised of Small Non-Profits

The Johns Hopkins Non-Profit Economic Data Project recently released new data on the the non-profit sector of the economy.

The data is for 2016 (the most recent available) and was developed in conjunction with the U.S. BLS (click here to go the BLS's non-profit data landing page). 

The quick summary is:

• The non-profit sector is big. It employs about 10% of America's private workforce, making it the 3rd largest industry sector in America.
• The non-profit sector is growing. Between 2007 and 2016, nonprofit employment grew by nearly 17% while for-profit employment grew by less than 5%.
• Most non-profits are small businesses. Over 80% of all non-profits spend less than $1 million per year in total expenditures.

As the Johns Hopkins chart below (click to enlarge) shows, the non-profit sector also has the 3rd largest payroll of the major employment sectors.

We've long forecast that the non-profit sector would out grow 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. 

Despite the size and growth of this sector, it's are often overlooked by companies serving small businesses.

It shouldn't be.

Silicon Republic on What is in Store for the Future of Work

The tech site Silicon Republic recently had a full week of stories on the future of work in the careers section - 15 stories in total.

Our favorite is These are 3 of the most pervasive future of work myths. 

The article's 3 myths, which we agree with, are:

1. AI will totally replace humans.
2. We're entering a work-free future
3. Only stem skills will be important

See the article for more on why these are myths.

And see the whole series. It's well worth a look.

Video: 7 Tips to Start Small Scale Manufacturing

7 Tips to Start Small Scale Manufacturing - Business Ideas for Product Makers is a fun and interesting video designed to help makers and other small manufacturers build their business.

The video, below, is from the YouTube maker video channel from the highly energetic Evan and Katelyn. Their series of videos is targeted at amateur and hobby makers, amateurs who want to be professional makers and micro and small manufacturing businesses.

As we pointed out in our article Are Makers the Future of Small Manufacturing?, small and solopreneur manufacturing firms are a rapidly growing small business segment. This video does a nice job of explaining why.

See our Small Manufacturing section for more on this topic.

 

Use of Contract Labor by Small Businesses Continues to Grow

The IRS released their 2016 tax data on sole proprietors. 

The data covers business receipts, deductions, and net income reported by taxpayers on Schedule C of tax Form 1040.

This includes the vast majority of small businesses, including small businesses that report on a pass-through basis (LLC's, etc.). 

 In 2016 about 25.5 million sole proprietors reported about $1.422 trillion dollars in gross receipts. 

As with prior years, sole proprietor spend on contract labor caught our eye. 

As the chart below shows, U.S. sole proprietors spent about $56.8 billion on contract labor (freelancers, temps, etc.) in 2016, up from $34.4 billion in 2010.

 

This is an increase of 65% between 2010 and 2016. 

Over the same period, spending on salaries and wages (meaning traditional employees) rose from $73.7 billion to $90.9 billion, an increase of 23%. 

Way back in 2003, contract labor was only about 20% of the labor costs of sole proprietors. By 2010 it has risen to 31%. And in 2016 it reached 39%. 

This is similar to the non-employee share of the workforce at large corporations, which has also increased substantially over the last two decades.

Expect to see the growing use of non-employee labor by firms big and small to continue.

Upwork Going Public; Shows Maturation of Online Talent Marketplace Industry

The online freelance talent marketplace Upwork filed last week to go public. 

According to the filing, Upwork has 375,000 registered freelancers and 475,000 client businesses located across 180 countries. 

The company reported sales of $164.4 million in 2016 and $202.6 million in 2017, an annual growth rate of 23%. For the first half of  2018, sales were $121.9 million, up 28% from the prior year.

Historically Upwork mostly served small businesses. As recently as several years ago, over 80% of their business came from SMBs.

But that's changed as enterprises have started to become major users of online talent platforms.

This is highlighted in Upwork's filing, which says 10 percent of its overall business came from a single, unnamed client in the six months that ended June 2018. It also says two clients each accounted for 10 percent of its revenues in 2016 and 2017.

Whoever those firms are, the obviously large enterprises. 

Upwork competitor Fiverr is also considering going public. 

That both Upwork and Fiverr have reached the size and scale to go public shows the maturation and growing importance of the online talent marketplace industry.

Data from the MBO Partners State of Independence study series (shown below) on the growth of independent workers reporting using online talent marketplaces nicely illustrates this. 

Also making it clear online talent marketplaces are mainstream is almost every study on talent management now mentions their use.

A good example is HR services firm Mercer's Global Talent Trends study, but you can pick up most any talent related study these days and you will find it covers the growing use of online talent marketplaces.

The FIRE Movement (Financial Independence, Retire Early) and Independent Work

The New York Times article How to Retire in Your 30s With $1 Million in the Bank nicely covers the "... growing movement of young professionals who are intently focused on quitting their jobs forever."

It's called the FIRE movement and the acronym stands for Financial Independence, Retire Early. Key article quote on the main drivers behind the movement:

"Millennials especially have embraced this so-called FIRE movement ... seeing it as a way out of soul-sucking, time-stealing work and an economy fueled by consumerism."

As with most movements, there are different forms. Again from the article:

"Some practice “lean FIRE” (extreme frugality), others “fat FIRE” (maintaining a more typical standard of living while saving and investing), and still others “barista FIRE” (working part-time at Starbucks after retiring, for the company’s health insurance). To be “firing” is to slash one’s expenses to maximize saving while amassing income-generating investments sufficient to support oneself. To have “fired” is to have achieved that goal."

One of the movement's bibles is the 1992 book Your Money or Your Life. 

It's a "how to" book on reducing consumption, increasing savings and focusing more on the non-material aspects of life. 

So what this got to do with independent work?

The answer is the trends driving the interest in the FIRE movement are similar, and in some cases the same, as the trends driving the growing interest in independent work. 

Key article quote from Vicki Robin, coauthor of Your Money or Your Life:

"It’s about having agency, Ms. Robin said: “The worker in this economy has very little sense of control over their existence. People are expendable. You’re a young person and you look ahead and you say, ‘What’s there for me?’”

A large body of research shows that agency is a key reason people become independent workers and like independent work. Agency, for most independent workers, means work flexibility, autonomy and control.

Research also shows a growing number of people are willing to trade income for agency. This, obviously, includes those in the FIRE movement and many independent workers. 

The overlaps between the FIRE movement and growth of independent work is an example of converging trends. And when trends converge, it's a strong signal the related driving trend is powerful and likely to become mainstream. 

In this case the convergence is around people seeking greater agency in both work and life. This is clearly a mainstream desire, but it's also becoming something a growing number of people are willing to change their work and lives to achieve.

As a side note, the founders of Emergent Research read and were influenced by Your Money or Your Life when it first came out. We ended up following what would now be called a fat FIRE lifestyle that led to us leaving traditional employment in our early 40's.

However, we didn't fully retire.

Instead we became high agency independent workers, focusing on work that interests us and we enjoy while making sure we also have plenty of time for our other interests.

We suspect many in the FIRE movement will become independent workers. The logic behind doing so - a continued source of income, engaging work and lots of time for passions and interests - is simply too powerful not to.

Digital Nomads Enter the Mainstream

MBO Partners last week released Digital Nomadism: A Rising Trend, a research brief on digital nomads. We worked with MBO Partners on this study.

Digital Nomads are wanderers who have a location-independent lifestyle that allows them to travel and work anywhere they can plug into the Internet. 

Some are short-term nomads who only travel and work for short periods of time.  Others do it for many years. And while globe trotting digital nomads get the most media attention, many never cross a border, choosing instead to live and work while exploring a single country. 

The three key study findings from our perspective are:

1. About 4.8 million Americans currently describe themselves as being digital nomads. While only about 2%-3% of U.S. adults, this is still a large number of people.

2. About 17 million Americans who aren't currently digital nomads say they will become one over the next 2-3 years. Also, 42 million say they might become one over the next 2-3 years.

The research brief points out that most of these people are unlikely to become digital nomads. Instead, they will likely continue to be "armchair digital nomads" following the exploits of digital nomads instead of becoming one themselves.

But these numbers clearly illustrate how popular the digital nomad trend has become. As the Forbes article on the study - Digital Nomadism Goes Mainstream - points out, digital nomadism has become a spectator sport followed by millions. 

3. The demographics of digital nomads are broader and more diverse than most think. While they skew male and younger, 31% are female and as the chart below shows, 54% are 39 or older. 

We closely follow the digital nomad trend for several reasons.

First, digital nomads are basically mobile workers on steroids. Because of this, they provide insights on the future of distributed work.

They've also chosen a non-traditional career path with a focus on work/life balance and integration. These themes ripple through our broader research on independent workers.

And most of them are independent workers, which, of course, is one of the main areas we study. 

We will continue to track and report on this topic. See the report for more details.

Independent Workers Have Higher Satisfaction Levels than Traditional Job Holders

The Conference Board recently released survey results that found "51 percent of U.S. employees feel overall satisfied with their job."

This is quite a bit lower than the level reported by independent workers in the 2018 MBO Partners State of Independence study. It found 72% of independent workers report being satisfied.

The two studies asked slightly different satisfaction questions. The Conference Board asked:

 “To what extent are you satisfied with your current job?”

The MBO Partners survey asked:

"Please rate your overall satisfaction with being an independent worker."

These questions are close enough, we think, for a directional comparison. And it's clear more independent workers are satisfied than those with traditional jobs.

These results are also consistent with our past studies where we've asked both independent workers and those with traditional jobs the same question about how satisfied they are.

In those studies independent workers have consistently reported higher levels of satisfaction than traditional job holders.

Based on our broader research, and the research of others, we think this is due to the work flexibility, autonomy and control most independent workers have.

This is reinforced in the Conference Board Study. They found traditional job holders making $75,000 a year or more have higher satisfaction levels than those earning less. They attribute this in part to higher earners having more control over their work.

Key quote from the Wall Street Journal article on the study, U.S. Workers Report Highest Job Satisfaction Since 2005 on the higher earning job holders:

“These are higher-skilled workers, managers, and they tend to have more control over their day-to-day work activities,” said Rebecca Ray, leader of The Conference Board’s human capital practice. “Having more control can drive a lot of how you feel about the job.”

As you can see from the Wall Street Journal chart below, the differences in satisfaction for traditional job holders is quite large.

      

In our work we've found only modest differences between the satisfaction levels of low and high income independent workers.

We think this is because many lower earning independents report having work flexibility, autonomy and control.  We've also found in our work having these tightly correlates with independent worker satisfaction - and is a much stronger indicator of satisfaction than income is.

But relatively few lower earning traditional jobholders have these. 

So it makes sense that satisfaction level differences are greater between higher earning and lower earning traditional workers than for higher and lower earning independent workers.

And it also makes sense that independent workers overall have higher levels of satisfaction. This is due to more of them having work flexibility, autonomy and control.

According to LinkedIn, Most SMBs Use Freelancers

A recent survey by LinkedIn found that 70% of U.S. small businesses have hired a freelancer in the past and about 50% currently are using freelancers.

LinkedIn also found most SMBs plan to hire more freelancers in the future. Key quote from their article on the study:

"... more than half (52%) of small business hiring managers say that the number of freelancers and contractors in their company will increase in the next 5 years while 38% say the number will stay the same."

Another interesting finding is solopreneurs and freelancers themselves also use freelancers. As the LinkedIn chart below shows (click to enlarge), half of solopreneurs currently are using one or more freelancers.

    

Most surveys show somewhere between 20% to 30% of independent workers use contract labor.

The likely reason the LinkedIn results are higher is the industries they targeted in their survey. Key quote from LinkedIn's study methodology:

"Specific industries were targeted including Art & Design, Accounting/Finance, Consulting, Consumer Goods, Education, Healthcare, HR, Marketing/Advertising, Retail, Sales and Tech."

Several of these industries - especially art & design, consulting, marketing/advertising and education - are heavy users of freelancers. So LinkedIn finding a higher overall SMB usage rate of freelancers makes sense.

The use of contract labor and freelancers by small businesses of all sizes is clearly increasing. The LinkedIn study results are yet another confirmation of this trend.