Small Business Labs

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. 

Scientific American's Top Emerging Technologies of 2019

Scientific American's describes their Top 10 Emerging Technologies Of 2019 as "World-changing technologies that are poised to rattle the status quo." 

Key article quote on the technologies:

One day soon an emerging technology highlighted in this report will allow you to virtually teleport to a distant site and actually feel the handshakes and hugs of fellow cyber travelers. Also close to becoming commonplace: humanoid (and animaloid) robots designed to socialize with people; a system for pinpointing the source of a food-poisoning outbreak in just seconds; minuscule lenses that will pave the way for diminutive cameras and other devices; strong, biodegradable plastics that can be fashioned from otherwise useless plant wastes; DNA-based data-storage systems that will reliably stow ginormous amounts of information; and more.

It's a great list and hard to argue these technologies won't have a big impact.

But you could easily argue about when "one day soon" will be.

By far the hardest part of technology forecasting is timing. 

Identifying trends is pretty easy.  For example, it's not hard to predict that AI will improve and have a big future impact.

What is hard is identifying when the impact will occur. 

Back in 2014, there were lots of forecasts that AI-based driverless cars would be common by 2020. There were also many forecasts that many professions - accounting, medicine, law, etc. - would be disrupted by AI by 2020.

These forecasts were obviously wrong.  

So while we agree that the technologies in this list will have a big impact, whether or not the impact is "soon" will depend on your definition of "soon". 

All of the technologies listed are under development.

And a few (social robots, for example) have reached the point where there are in-market examples. 

But don't expect widely commercialized versions of most of these technologies for at least another 10 years, and in some cases much longer.

The Online Platform Economy as a Safety Net

The JP Morgan Chase Institute recently released a new study, Bridging the Gap: How Families Use the Online Platform Economy to Manage their Cash Flow. 

The key finding of the study is "participation in the Online Platform Economy functions as a cash-flow management tool for many families."

In particular, JP Morgan found many use online platform work to supplement their income when they lost a job. Key quote from the study:

"Taken together, our findings indicate that the Online Platform Economy— and particularly its transportation sector—play an income-smoothing function for families between jobs."

Regular readers may remember this was one of the key findings in our On-Demand Workforce Workforce study conducted with Intuit and released in 2017. 

In that study, we found 21% of online platform workers reported they participated in this type of work to get through financial hardships or shocks, such as a job loss or major medical expenditures. 

We also found 41% of the workers surveyed had faced a financial shock over the prior year. See the Aspen Institute's write up of the study for more details. 

These findings are important because policymakers tend to focus on long term, full-time gig workers.  This means they could easily pass laws that limit the ability of people to use online work platforms in times of financial need and/or to supplement their income.

Key quote from the JP Morgan Chase Institute study:

... as policymakers weigh approaches to improve the pay, benefits, and protections of platform workers, they ought to take into consideration potential impacts those same approaches might have on the very characteristics of platform work—low barriers to entry and high flexibility—that allows families to use it to smooth their income.

We agree with and echo the importance of low barriers to entry and high flexibility. 

Income volatility is growing and more Americans are facing financial hardships and shocks than in the past. It’s also clear that our traditional safety nets are not working as well as they need to. 

Online platforms and gig work have become an alternative safety net for many.  We have to make sure in our zeal to protect workers, we don't take away this important income-generating alternative.  

California's New Gig Law, AB5, Ignores the Growing Role of Remote Work

Business Insider's California is attempting a massive labor experiment that could grow into a disaster for millions of workers outlines some of the many problems with California's new AB5 worker classification law.

It's written by a self-employed multimedia journalist based in Los Angeles. He describes a key issue as:

"I have an independent business, I don't get paid vacations, and I have to cover my own health insurance. I've made these trade-offs for career flexibility. But the state's new Independent Contractor Law, Assembly Bill 5 (AB5) assumes that I'm being exploited and should be an employee, whether I want to be or not."

The author goes on to say that while well-intentioned, AB5 was "haphazardly written and rushed through the legislature, and it doesn't account for the way tens of thousands of freelance professionals in the state work."

Because of this, a lot of self-employed Californian's are likely going to be hurt by the law. 

This is especially true because more and more work can be done remotely. 

This means California firms can get around AB5 simply by hiring contract workers who reside outside the state. 

As the article points out, this is already happening. Key quote:

"There are already examples of a California backlash. Patch Media has placed an ad looking for reporters to cover stories about California, so long as the reporters don't actually live in California ... Some employment listings ... come right out and say it: "Due to legislative restrictions, residents of California and Massachusetts are not eligible for this opportunity." Massachusetts has a similar though less restrictive law."

Echoing this, we recently met with a large California based corporation. They told us because of AB5, they had decided to stop hiring independent workers in California.

They also plan to increase their use of remote independent workers located outside of the state.

Also echoing this comes from the LA Times article Opinion: California is making the writing life even harder. Key quote:

"Facing ever narrower margins, media companies prefer to avoid the time and cost of parsing the law and any risk of running afoul of it. They can turn to the many good writers who live in the other 49 states."

We obviously have mixed feelings about AB5 but agree that its intent was well-intentioned.

Nor do we think AB5 should be repealed. There are a lot of misclassified workers in California who should be classified as employees.

Many of these workers would benefit from and prefer being a traditional employee. And AB5 could be a good starting point for fixing these problems.

But it needs to be reworked and amended because it ignores the reality of three key work-related trends:

1. remote work is growing and a state-level law, like AB5, is easy to bypass by using workers located outside of the state.
2. more workers want the autonomy, control, and flexibility that come with being self-employed. Forcing these workers to be traditional employees is bad policy.
3. companies want greater workforce flexibility. Limiting their flexibility will result in firms hiring fewer California workers.

There are lots of examples of legislation that attempt to stop or turn back change. They rarely work. 

Both the legislature and California Governor Newsom have indicated a willingness to amend AB5. We hope they're serious and quickly move forward on fixing the clear problems associated with his legislation. 

53 Million Americans are part of the Low Wage Workforce

Brookings' Meet the Low Wage Workforce reports that 53 million Americans, or about 44% of all workers aged 18-64, have low-wage jobs.

According to Brookings, the national average for a low-wage job is one that pays $16.03 per hour or less.  The low-wage level is adjusted using city-level cost of living data.  For example, a job paying $20.02 in high-cost San Jose, California is considered low wage while one paying $13 in low-cost areas of the country isn't.

Brookings found the median low-wage job pays $10.22 per hour with median annual earnings for $17,950.

This, BTW, means about 22 million Americans have jobs that pay $10.22 per hour or less. 

The report map below (click to enlarge) shows the distribution of low-wage jobs across the 373 metro areas. Brookings did not include rural areas or towns not in the top 373 metro areas in this study.

One of the reasons independent work (freelancing, self-employment, etc.) has increased over the past decade is traditional jobs have become less attractive.

Wages have been stagnant, benefits cut, middle-wage jobs have hollowed and job security reduced. As this data shows, there's also a lot of jobs that simply don't pay well.

These factors lead more people to choose independent work. And as long as this is the case, there will be continued growth in the independent workforce.

How Political Polling is Done

We get asked a lot about political polls. And while Small Business Labs is non-partisan, we're OK with talking about how political surveys are done.

There are two big issues to be aware of with political polls. 

The first is how the questions are asked. It's well known that a survey can easily be slanted one way or another by the way questions are asked.

A good example is a recent poll released by President Trump's pollster. The questions asked are so slanted that's we laughed when we saw them (we could have easily found a similarly flawed democratic leaning poll. But the pro-Trump poll is recent and topical, so we went with it as our example).

The second big issue is who is polled. This is a more complicated issue.

But fortunately Pew's Why public opinion polls don’t include the same number of Republicans and Democrats nicely explains it.

As the Pew chart below shows, more Americans report either being Democrats or leaning Democrat than those reporting being or leaning Republican. 

But the tricky part is figuring out how many from each party will show up and vote.

Historically, wealthier and older people vote more than younger, less well-off do. And Republicans are, on average, older and wealthier than Democrats. 

So even though Democrats outnumber Republicans by quite a bit, it's almost even in terms of who turns up to vote.

The best political polls to watch, at least in our opinion, are the ones from non-partisan sources. These include Gallup, Harris and the major news organizations. 

We also watch FiveThirtyEight, which provides a presidential "poll of polls" based on their assessment of the validity of about a dozen polls.

RealClearPolitics also provides a wide variety of political poll results, including state-level data. 

Pew Internet: Experts Optimistic about Digital Life over the Next 50 Years

Pew internet's Experts Optimistic About the Next 50 Years of Digital Life project asked hundreds of technology experts how people's lives might be impacted by the evolution of the internet over the next 50 years.

72% of the respondents said there would be change for the better, 25% said there would be change for the worse and 3% believe there would be no significant change.

Key quote on why most are positive:

The optimists responding to the better-worse-no change question expressed hope that in the next 50 years digital advances will lead to longer lifespans, greater leisure, more equitable distributions of wealth and power and other possibilities to enhance human well-being.

But as Pew points out, even most of the optimists said there are potential downsides:

... nearly all of these experts’ written predictions included warnings about the possibilities of greater surveillance and data-abuse practices by corporations and governments, porous security for digitally connected systems and the prospect of greater economic inequality and digital divides unless policy solutions push societies in different directions.

What these experts recognize is technology can be used for both good and evil purposes. It's up to us to decide which.

The report is long, but the first page provides an excellent summary.

Corporations Starting to Embrace Digital Nomads

12 months living as a digital nomad, from LinkedIn, describes how a GE talent development executive spent a year as a digital nomad.

The key quote describes what she did when she finished her year as a digital nomad:

A point of culmination of this experiment is when I had the opportunity to pitch my experience to the CHRO of GE and so I have presented my learnings about this aspect of the future of HR, painting an image of digital nomads and flexible work at GE.

In the forecasting business, this is what's called a signal.

And in this case, the signal is corporations are starting to consider creating digital nomad programs.

There are 3 reasons we see this as a strong signal.

First, the author of this article is in talent development. This means she works with the people who decide the remote work policies at GE.

Having someone in her position supporting digital nomadism makes it much more likely GE will allow others to become digital nomads.

Related to this, she was able to pitch the chief human relations officer (CHRO) at GE on her experiences. This means the senior team at GE is now aware of digital nomads.

And 3rd, this didn't happen at Google or Facebook or some tech startup. It happened at GE, a traditional manufacturing firm. 

According to the findings of the 2019 MBO Partners digital nomad study, there are about 7.3 million American digital nomads. Of these, about 3.1 million report having traditional jobs.

Based on our digital nomad interviews, the vast majority of job holding digital nomads have been allowed to do this outside of any official corporate policy.  In most cases, their boss decided to allow them to travel. 

This is starting to change. As with GE, corporations are starting to explore, evaluate and consider - and in some cases, putting in place - digital nomad policies and programs. 

See the MBO Partners digital nomad research brief (we worked with MBO Partners on this study) for more on this topic.

Each Year a Lot of Americans Start and Stop Being Freelancers

One of the more interesting findings from the 9 years of data from the MBO Partners State of Independence study series is how many Americans enter and exit independent work.

As the study chart below shows (click to enlarge), the number of new full-time independent workers/freelancers entrants has stayed steady at around 1.5 million annually since 2011.

But the number of people exiting has varied widely. In 2012, only about 800,000 exited, but in 2016 2.4 million did. And since 2016 the number of exits has steadily declined.

The main reason the entrants' data is consistent is the aspirational nature of self-employment. Simply put, millions of Americans want to be self-employed.

Every year MBO Partners has done this survey between 12%-14% of Americans who aren't self-employed said they plan on becoming self-employed over the next couple of years. 

And while most won't, each year about 1.5 million take the plunge and become self-employed full-time.

The reasons people exit independent work is more complex and tied to cyclical economic forces and the state of the traditional job market.  

Early in the economic recovery, relatively few independent workers exited. This was because there were few alternatives since the traditional job market was relatively weak.

But as the job market gain strengthed, a growing number of independent workers returned to traditional employment.

This was especially true for the group we call "reluctant independents", which are independent workers who report preferring a traditional job. 

In fact, over the past five years, our research has found that four out of five independents who left the full-time independent workforce were reluctant independents. This resulted in the percentage of reluctants falling from 34% of full-time independent workers in 2012 to just 19% in 2019. 

The declining number of reluctants is also why the number of exits peaked in 2016 and has declined since. There are simply fewer reluctants left to exit. 

Going forward we anticipate the number of new full-time entrants to continue to run in the 1.5 million range. 

We also expect the number of exits to continue to decline and drop below 1 million per year by 2021. 

This forecast assumes the economy continues to slow (2020 GDP in the 1.5% range and 2021 in the 2% range), but doesn't all into a recession. 

We'll have our recession outlook in another article in the near future.

The Pros and Cons of Working Remotely

Recode's How remote work is quietly remaking our lives provides a deep dive on the growing impacts of the shift towards working remotely. Key quote:

"The changes remote work has introduced have happened so gradually you may not have noticed. But its growing popularity is remaking how we work, the tools we use to work, how we communicate at work, and even the hours we work ... What was once a rarity among a select set of workers is quickly becoming a defining feature of the future of work."

The pros and cons of remote work are well known, but the article chart below nicely summarizes them. The underlying data comes from a remote worker study done by the social media marketing firm Buffer.

The big pro is, of course, flexibility.

We cover the importance of flexibility a lot (if you do a Google search on "flexibility "Small Business Labs"" you will find 3400 citations).

But it still needs reinforcing -  it's a key driver of both the shift to remote work and the rise of independent work.  

We also certainly agree remote and distributed work is a defining feature of the future of work.

And to better understand this trend, we closely follow two remote work edge groups - digital nomads and fully remote organizations.

Digital nomads can be thought of as remote workers on steroids. Because they're both remote and nomadic, they tend to have advanced methods for work remotely - including how they use technology. 

Fully remote organizations are also on the leading edge of remote work because, well, all of their employees are remote. 

While reading the Recode article we were struck that remote work is a great example of Amara's Law, which is:

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Back during the first Internet boom in the 1990s one of the most common forecasts was that very soon everyone would work remotely. This, obviously, didn't happen. 

But 2 decades later, it's starting to happen.

Upwork Study: Freelancing Providing Opportunities to Those Unable to Work in Traditional Jobs

Upwork released their 2019 Freelancing in America study. It's the 6th year Upwork has conducted this study. 

The study found about 57 million Americans are freelancing. This equates to 35% of the workforce. 

One of the most interesting study findings is that almost half of all freelancers report they are freelancing because their personal circumstances don't allow them to hold down a traditional job.

As the study chart below shows (click to enlarge), health issues and family obligations are the two main reasons people report not being able to work in a traditional job.

These findings illustrate the importance of the "low friction, highly flexible" work options freelancing provides. 

Low friction means it's quick and easy to start earning money as a freelancer, especially with the advent of online marketplaces like Upwork, Airbnb, Etsy and Uber. 

Highly flexible means freelancers can work as little or as much as they want or need and when they want or need.  This means freelancers can fit work in around other activities, including schedule limitations due to health or caregiving responsibilities. 

We've long pointed out that many people need greater levels of schedule flexibility than is provided by traditional jobs. 

This is especially true for those needing to work part-time to supplement their income. 

More broadly, flexibility is almost always the top reason people become and like being a freelancer. And Upwork's study again found this, with over 3 out of 4 freelancers listing this as a major reason they are freelancing.

Many critics of freelancing say flexibility is overrated or doesn't really exist, especially for gig workers who get their work via online platforms and marketplaces.

We tend to believe freelancers and gig workers over these critics.  And they consistently tell us work flexibility is both important to them and real. 

Uber Enters the Staffing Business

Last week Uber announced Uber Works, a platform that connects workers with businesses that need to fill available shifts in hourly jobs such as cooks, warehouse workers, commercial cleaners and events staffing. 

Uber's chart below (click to enlarge) provides their quick description of the service.

Uber is partnering with staffing firms for this effort. The staffing firm partners will employ, pay and handle worker benefits.

This, of course, means Uber will not have to deal with the employee classification or other legal issues they faces in their ride hailing business.

Uber betting that their technology will provide value to workers, the companies that employ them and the staffing agencies that place them. 

They point out in their blog post announcing the service that temp workers currently struggle with rigid scheduling and a lack of information on what jobs are available and how much they pay. They claim Uber Works will fix these problems. 

For businesses, Uber says they can provide a broader pool of potential temp workers and simplify the hiring and payment of these workers. Staffing firms benefit from more placements and better information flow.

Uber's obviously not the only company offering this type of platform.

Wonolo, Snag and Moonlighting all have similar platforms in the sense that they offer businesses access to shift workers. 

Also, Shfitgig, which recently pivoted away from connecting workers to jobs, now offers staffing firms a technology platform that claims to provide many of the features Uber is offering. 

And, of course, several of the large staffing firms are trying to provide similar online staffing platforms.

This includes Uber's first staffing firm partner, True Blue. Their platform, Job Stack, seems to be quite similar to Uber Works. 

So there's a lot of competition for Uber Works.

But the market is also huge. According to the Staffing Industry Analysts, the global staffing industry generated $490 billion in revenue in 2018. 

This, coupled with Uber's brand recognition and technology skills, means they could easily be successful.

Uber Works is currently only available in the Chicago area. Uber says they will roll it out to more cities in the near future. 

MetLife Study: 45 Million U.S. Gig Workers and 85% of them interested in Continuing as Gig Workers

MetLife recently released The Gig Economy: Opportunities, Challenges, and Employer Strategies. Key quote from the study press release:

The report’s findings demonstrate the fundamental impact gig work is having on the American workforce in the changing work-life world, as employees are increasingly drawn to the allure of flexibility, autonomy and desire for purpose in their work.

The study is well done and found, like almost every other study of independent work, that the independent workforce (freelancers, self-employed, gig workers, etc.) is large and most independent workers want to continue as independent workers.

Key quote from the study report:

Today, almost 30 million Americans get their primary income from gig work, constituting nearly a fifth of the total workforce. An additional 15 million workers supplement “traditional” full-time work with “gigging/freelancing.” This number keeps growing, as many of the best and brightest workers turn to gig for their primary employment.

Another key quote is on why people like independent work:

“Our research shows that workers are turning to gig in the pursuit of creating the ultimate work-life blend where their careers meet income needs, provide a flexible schedule, and also give them a sense of purpose”

At this point, we think we've reported on well over 100 studies showing that the independent workforce is large and most independent workers are satisfied with being independent.

These studies have come from a wide variety of sources - government agencies, academics, think tanks, consulting firms, and companies. 

And despite the roughly 14 years we've been researching the independent workforce, we are not aware of a single, reputable study not showing that the independent workforce is large and most independent workers are satisfied with being independent.

So, you may ask, why are we bothering to repeat ourselves and report on these results?

The reason is we regularly read in the press and have people tell us the independent workforce is small and most independent workers would prefer a traditional job.

This despite the overwhelming evidence this isn't true. 

So we'll keep pointing to these studies until this changes.

The Economic Impact of Craft Brewing

The Brewers Association recently released their small and craft brewing economic impact report for 2018. 

The study found that the craft brewing industry contributed $79.1 Billion to the U.S. Economy in 2018 and provided directly and indirectly about 550,000 jobs. 

These numbers are based on what are called economic multipliers, which are used to measure both the direct and indirect impact of economic activity.

For example, the employment multiplier for auto factory workers is about 7. This means for every auto factory job gained or lost, 7 other jobs are gained or lost. These occur in suppliers to the plant as well as places where auto workers spend their money. 

As the chart below shows (click to enlarge), the number of actual jobs at breweries has grown quite rapidly, to 77,902 in 2018 from just 24,864 in 2010. 

This means brewing was one of the fastest-growing sources of employment during that time.

We've long used craft brewing as an example of the rise of niche businesses. We even featured the industry in a 2008 research report, The New Artisan Economy, which we did with Intuit.

And the three broad trends we laid out in the New Artisan Economy report as driving the growth of niche businesses continue to do so:

1. Growing numbers of customers are looking for unique, unusual, personalized or locally produced products.  

2. The Internet and online marketing have made it much easier to find or be found by people interested in buying niche products.  

3.  Technology is lowering the costs of serving niche markets and making artisans able to compete with even the largest of firms.  

7.3 million Americans Describe Themselves as Digital Nomads

MBO Partners this week released Digital Nomads: Leading the Shift to Remote and Distributed Work. The key finding of this study is 7.3 million Americans identify as digital nomads. 

Digital nomads are people who choose to embrace a location-independent, technology-enabled lifestyle that allows them to travel and work remotely, anywhere in the world.

There are many kinds of digital nomads. Some are nomadic for relatively short periods of time. Others travel for many years.

Some regularly move across countries and continents.

And yes, some really do sip Mai Tai's on the beach in Bali while banging away on their laptops.

But others never cross a border, choosing instead to live and work while exploring a single location or country (#VanLifers, for example).

What unites them is their passion for travel and new experiences and their commitment to working remotely. 

One of the more interesting study findings is 44% (3.1 million) of the digital nomads report having a traditional job. This is a clear signal that employers, at least in some cases, are willing to allow traditional employees to be digital nomads. 

Other findings include:

• Digital nomads tend to be younger and male, but all age groups are represented: 39 percent are female and 41 percent are 40 years old or older.
• Most digital nomads report being highly satisfied (79 percent) or satisfied (9 percent) with their work and lifestyle.
• Most also report either being very satisfied (35 percent) or satisfied (44 percent) with their income.
• Digital nomads work in a wide variety of fields, ranging from consulting, coaching, and research (13%) to sales, marketing, and PR (also 13%) to other remote-friendly fields like information technology (11%) and creative services (9%). 

As we've found in the past, a lot of Americans would like to be digital nomads. 16.1 million said they plan on becoming digital nomads over the next 2-3 years and 41 million said they may become one.

Of course, relatively few of these people will do so.

The vast majority will continue to be what we call "armchair digital nomads" - folks that follow the many blogs, Instagram accounts and related digital nomad media but don't become one themselves.

We're interested in digital nomads (we worked with MBO Partners on this study) because they are on the leading edge of remote work. This makes them an ideal group to study to better understand the future of distributed work and the technologies that support it.  

See the report for more details. 

See our digital nomad section for more coverage of digital nomads.

Is AB5 the End of the Gig Economy? The Quick Answer: No

California recently passed AB5, a law that changes how workers are classified.

AB5 establishes an “ABC” test to decide whether or not a worker is an employee or a contractor. The law starts with the assumption that everyone is an employee. To be considered an independent worker, a worker must:

1. Be free of the hirer’s control; and
2. Do work that is “outside the usual course of the hiring entity’s business”; and
3. Be established in a trade similar to the work being performed.

This is a more stringent set of rules than was in place prior to AB5 (for those interested in legal geekery, the prior rules are referred to as the Borello factors).

Many are suggesting that AB5 will result in the end of the gig economy and gig work.

This is not correct.

First, AB5 has a long list of professions that are exempt from the law (see the end of the article for the list). 

We’re still crunching the numbers, but based on the work we’ve done so far we think well over 50% of all independent workers in California fall under the exemptions.

Second, many gig economy companies (Uber is a good example) are claiming their independent contractors pass the ABC test. So until the courts say otherwise, independent workers associated with these firms will remain contractors.

Also, many industries and professions are still clamoring for exemptions. And since both the California legislature and Governor have said they’re open to making changes in the law, we expect the number of exemptions to increase.

And finally, the legislation is quite vague in places. This means the courts will be required to decide exactly who is and is not an independent worker. This will take time.

The bottom line is we won’t know the full impact of AB5 for some time – maybe even a couple of years.

But we do know it won’t kill independent work or the gig economy.

In case we haven't convinced you, we suggest you look at Massachusetts and New Jersy. They've had worker classification laws in place using the ABC test for years.

Despite that, the gig economy is doing just fine in those states.

We’ll have more on AB5 in the near future.

AB5 Exemptions

The fully exempted professions include:

A physician and surgeon, dentist, podiatrist, psychologist, or veterinarian licensed by the State of California.

A lawyer, architect, engineer, private investigator, or accountant.

A securities broker-dealer or investment adviser or their agents and representatives

A direct sales salesperson (includes those involved in multi-level marketing and social selling)

A commercial fisherman

Sub-contractors in the construction industry  

Subcontractors providing construction trucking services

Real estate agents

Additionally, many “professional services” providers are exempted if they meet certain requirements (see the actual bill if you’re interested in these details). These include:

Marketing services, broadly defined

Human resources services

Travel agent services

Graphic design services

Grant writers

Fine artists

Services provided by an enrolled agent

Payment processing agents

Services provided by a still photographer or photojournalist (does not include TV or motion picture industries or professions)

freelance writers, editors, or newspaper cartoonists

estheticians, licensed electrologists, licensed manicurists, licensed barbers, or licensed cosmetologists

Business service providers that contract to provide services to another such business are also exempt.  

The legislation is quite vague in its definition of “business service provider,” so the courts will have to sort out exactly who is exempt. But it seems likely most independent workers who provide a service to a business will be exempt from AB5.

What WeWork's Troubles Mean for the Coworking industry

WeWork's troubles seem to be going from bad to worse.

They lowered their target IPO valuation from their last private funding round value of $47 billion to under $20 billion - and maybe as low as $10 billion.

But after reading about WeWork's huge losses and highly questionable corporate governance practices in their S-!,  even that wasn't enough to attract investors. So they postponed their IPO. 

And this weekend various media outlets are reporting WeWork's board is considering replacing their flamboyant CEO, Adam Neumann. 

But despite WeWork's woes, the coworking industry is doing just fine.

As we pointed out a few months ago, the coworking industry continues to surge and WeWork's problems won't change this. 

Coworking rapid growth has been driven by 3 waves of customers. The first wave consisted of freelancers and independent workers who were coworking's first customer base. Quickly following them were startups and micro-businesses. More recently large corporations have embraced coworking.

In other words, firms of all sizes and shapes are increasingly using coworking spaces. And going forward we also see a fourth wave emerging. This wave will be driven by niche and vertical market growth and geographic expansion. 

And despite coworking's recent rapid growth, it still has a lot of room to expand.

According to a recently released CBRE study, there currently is 71 million square feet of flexible office space in the 40 U.S. markets it studied.

This is just 1.8% of the office space in these markets.

CBRE is forecasting that this will grow to roughly 600 million square feet, which is about 13% of total office space, by 2030. 

Having said all that, WeWork's problems will impact the coworking industry. 

In the short run, there will be a lot of negative press and coworking's naysayers (and there are quite a few) will suggest the industry is not sustainable.

This will result in potential customers becoming hesitant about committing to coworking. This will be especially true for large corporations. 

But this will pass and WeWork's current struggles mean it will likely have to focus on profitability, which will be good for the industry in the long run.

It's also important to point out that while WeWork is the industry's largest firm, it is only 1 of over 700 coworking and flexible office space companies operating the U.S. 

So even in the unlikely event that WeWork fails, there are plenty of coworking firms ready to pick up the pieces.

Liza On-Demand, a Gig Economy Comedy

Liza On-Demand is a TV show that, according to its description: 

... follows the chaotic misadventures of Liza, a young woman in Los Angeles who is trying to make a career out of juggling various gig economy jobs — for lack of a better idea of what to do with her life.

We've only watched a few episodes, but we've seen Liza drive for Lyft, get hired via TaskRabbit to bake cookies, help someone move and kill a cat (she didn't do it). 

The show is on YouTube Premium and is free. The 2nd season of the show starts at the end of September. The show's trailer is below.

Liza On-Demand stars Liza Koshy, who is a comedian, actress, and YouTube star who boasts more than 17 million subscribers on her main channel. 

Ths show is produced by Above Average Productions, a digital-first entertainment studio. Their tagline is "slightly better".

We find the show interesting on several levels.

First, of course, is it's about the gig economy. You know a trend has entered the mainstream when their starts to be movies and TV shows about it.

Second is the rise of digital-first entertainment. 

The world of entertainment has changed and the traditional channels (TV, big-screen movies, radio) no longer control the industry. Digital and online entertainment are now near-equal partners to traditional channels.

And the 3rd reason is the rise of Internet stars. Koshy is an excellent example, having turned her YouTube celebrity into broader entertainment success.

All interesting cultural shifts and trends.

BTW, despite being well outside of the target demographic we liked the show.

 

Gig Economy an Important Income Source for Military Service Members

According to a survey from the National Foundation for Credit Counseling, military service members and their spouses are turning turn to the gig economy to supplement their income. 

Key quote from the study site:

The findings of this year’s survey are a clear indication that military households are turning to the private sector for supplemental income ... About half of active service members and their spouses have turned to the gig economy for additional income.

The exact numbers are 54% of active service members and 48% of military spouses/partners said they had worked in the gig economy to supplement their income.

A key reason they are turning to the gig economy - as the study chart below (click to enlarge) shows - is it's hard for military members and their spouses to get and hold on to a traditional job. 

Military personal move often and have irregular schedules. These schedule issues make it hard to hold down a traditional job.

However, the gig economy provides low friction, highly flexible work options that work well for those looking to supplement their income. 

In addition to those serving in the military, there are many people who are effectively shut out of the traditional job market due to scheduling issues and flexibility needs. These include caregivers, parents, students, those with chronic illnesses or disabilities and many others. 

As is illustrated by this study, many of these folks are turning to the gig economy to supplement their income.

Freelancers and Financial Well-Being

One of the ongoing questions around independent/gig work is its impact on the financial well-being of independent workers (freelancers, gig workers, self-employed, etc.). 

To better understand this issue, a series of financial well-being questions were added to the MBO Partners State of Independence study survey this year (Emergent Research works with MBO Partners on this ongoing study).

The new questions included a set developed by the U.S. Consumer Financial Protection Bureau (CFPB), which the CFPB uses to create an individual’s financial well-being score.

This score provides a standard metric that allows comparisons of financial well-being across individuals or groups.

The chart below (click to enlarge) is from the study's research brief, The Financial Well-Being of Independent Workers.

It shows that, on average, independent workers and those with traditional jobs report similar levels of financial well-being. The CFPB's 2017 study also had similar findings. 

However, as the research brief points out, "average scores don't tell the whole story."

Although the averages are the same, the score distribution for independent workers is wider than the distribution for traditional jobholders. 

In other words, a greater percentage of independent workers have both relatively higher and relatively lower scores than traditional jobholders. Key quote on what this means:

One of the broader findings of the MBO Partners SOI study series is that independent workers with in-demand skills and a tolerance for the risks associated with independent work are thriving. The well-being scores from this study reinforce this.

But the scores also reinforce the study findings that independent workers without these attributes ... often struggle financially.

See the research brief for more details. 

FROGs, WFA and Remote Work

As we pointed out yesterday, working remotely is increasingly common for both independent workers and those with traditional jobs. 

Two recent articles also point this out and add several new buzzwords to our remote work vocabulary.

The Harvard Business Review's Is It Time to Let Employees Work from Anywhere? points out there is a new form of remote work emerging which they refer to as "WFA" (work from anywhere). Key quote:

Even as working from home (WFH) becomes relatively commonplace, a new form of remote work is emerging: working from anywhere (WFA), in which employees can live and work where they choose, typically within a specific country, but in some cases, anywhere in the world with a reliable internet connection. While many companies are just starting to consider allowing employees to work from anywhere, developed WFA programs can be found at firms such as Akami and SAP.

The article goes on to cover examples of productivity gains associated with remote work. 

The second article, Medium's Here Come the Frogs (Fully Remote Organizations), is from earlier this year. 

This article covers the growing number of organizations that don't have offices or co-located employees. Instead, everyone works remotely. 

Key quote on the advantages of being a FROG from the CEO of Invision, a fully distributed company with over 1,000 employees:

David Fraga, COO of InVision said, “Being a fully distributed company has been a powerful advantage for us at InVision. We’re able to find and work with the best talent in the world, no matter where they are, we have a higher than average retention rate across our team and our products reflect a diversity of perspective and experience that comes from having teammates from all across the country and around the world.”

While there are relatively few large companies that are FROGs, a lot of smaller firms and teams of independent workers are fully distributed. 

Both articles cover the drivers behind the growth of WFA and FROGs, which are pretty much the same as we covered yesterday: 

• improvements in remote work enabling technology
• organizations realizing remote workers are effective
• the desire by many to work remotely

We've just finished up a study on digital nomads. Because of their location independent lifestyle and high levels of mobility, they provide interesting insights into the future of remote work. 

We'll be reporting on the study's findings in the near future.

See our Digital Nomad section for more on this topic. 

Working Remotely the Norm for independent Workers

According to data from the 2019 MBO Partners State of Independence study, 83% of full-time independent workers report working remotely at least some of the time, and 31% report working remotely full-time.

As the study chart below shows (click to enlarge), this is substantially higher than what traditional full-time job holders report. 

That full-time independent workers are more likely to work remotely than full-time traditional job holders is no surprise.

But that almost 1 in 3 three work remotely full-time is a bit surprising and illustrates the growing nomadic nature of work.

This is in large part being driven by improvements in the technology that support remote work.

Online video and chat services make it easy to connect and communicate with customers and partners, online content creation tools and cloud storage enable work to be done and delivered from remote locations, and online marketplaces provide remote access to new customers.

Another driver is the growing acceptance by hiring organizations that remote workers can be highly valuable and productive contributors. 

A 3rd driver is, of course, more people want to work remotely.

What Control Means to the Self-Employed

Our article yesterday covered a study showing how work autonomy and control resulted in mental health benefits for the self-employed. 

As a follow-up, the chart below (click to enlarge) is from the Freshbooks 2019 Self-Employment in America Report. It illustrates how those who are self-employed define control.

It comes down to control over the when, where, what and how of their work. The self-employed often have a lot of control over these factors.

This is why many choose and stay self-employed.

Key quote from the Small Business Trends article on the study 96% of Self-Employed Professionals Don’t Want “Regular Jobs”:

"Why do people ditch the financial and social security of their jobs to be self-employed?

The main reason, as found out in the survey, was control over career. Being self-employed or running a small business allows people to have a better career control."

And more control often leads to better mental health.