Grounded Takeover: The Empowered Economy

Reconciling Independence and Job Security

Hi fam ✨

Way back in Vol. 1 you might recall that we mentioned “we can't tell you what you should expect here, but we promise you'll always learn something.” It’s now time to learn.

A couple weeks ago, Jomayra started working on a deep dive into the history of labor markets in the US. She originally meant for it to be her next blurb, but shockingly (jk not shockingly at all) she ended up writing a 50 page dissertation on how the history of labor markets plays into today’s tech trends.

While the piece is fascinating, no one has time to read 50 pages on anything…SO we convinced her to shorten it by giving her the inaugural issue of GROUNDED TAKEOVER (it’s in all caps because she aggressively has taken over).

This week, she’ll be sharing Pt. I of her Empowered Economy series. Happy learnings!

xoxo,

Alex

PS: In case you’re wondering what Maria is up to, she’s made her debut angel commitment into a questionably-run sticker business started by Jomayra’s little sister (known as Lady Patata).


Part I: Empowered Economy

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.

- Franklin Delano Roosevelt

While FDR declared this in 1944, the history of labor in the U.S. has been a constant tension between the independence we desire and the security we need. 

As we go from the peak of the gig economy era and enter into a period where we celebrate the micro-entrepreneur (or passion economy), I hear a lot of nostalgia for the age when everyone had a “good job” - one that was defined by a living wage, worker protections, good benefits, and a reliable retirement. But, funnily enough, as you look throughout history, that time period only ever existed for those who were able to organize and get access to power (i.e. white, native-born men). 

I expect the most important labor question we will have to answer in the 21st century is whether we can truly reconcile independence and job security, especially in an increasingly decentralized economy. As an optimist, I believe it is possible and once we achieve it we will get closer to the idea of an Empowered Economy - one where workers have the resource and tools they need to thrive.

In that vision, there are two levers of change I think about:

  • In what ways does “how” we work evolve? In this article, I’ll talk about the ways I expect increased entrepreneurism will manifest in corporations, employee-owned businesses, and independent work (quick spoiler below and more details to follow)

  • How does the ecosystem of tools to support our careers evolve? In Part II, I’ll discuss a related new “career stack” that will supplement the desire for either more flexibility and/or more security in each of these categories.

Before I go into each of these categories - a little bit of history on how we got here 

Agrarian Economy to Wage Labor

The Jeffersonian vision of an ideal and healthy economy was one in which independent farmers owned their land and had control over their destiny. That said, with the rise of industrialization and manufacturing, this vision became much harder to uphold. Farmers that were formerly self-sufficient were now dependent on creditors, railroads, and merchants for their livelihoods and were increasingly operating in more competitive markets. What was formerly a vision of self-sufficiency and autonomy was now riddled with concerns around uncertainty and risk. Wage labor became more common and many gave up their own land and artisanal trades for opportunities that offered a promise of financial stability.  In 1870, more than half of the labor worked in agriculture - that number was less than 40 percent by the turn of the century

Post-War Era and Unions 

In the post-war era, Americans were desperate for security and stability. Employers, especially those in manufacturing, were similarly aligned in their interest for stability. Many had made large investments in expensive machinery, which required every worker to show up in order to ensure optimal productivity. 

Workers recognized employers were reliant on them to come to work to operate the machinery, so they had power in this equation. As a result, we saw a significant spike in organized labor. In fact, workers who were unionized increased from 12.7 percent before the war to about 22.2 percent after the war. They fought hard for worker protections that we now consider to be emblematic of a “good job”. The 1950 GM-United Auto Workers agreement (“Treaty of Detroit”) negotiated important worker benefits like cost-of-living adjustments, health insurance, and pension funds. In return, workers agreed to not strike and resolve issues via arbitration. 

Both employer and employee needs were aligned in this era, as knowing employees wouldn’t strike allowed GM and similar large corporations to continue to make long-term capital investments. This relationship however only lasted as long as the interests of both parties were aligned. 

Never-Never Girl: Rise of the Temp 

The late 1960s were a time of stagnating profits. Companies were increasingly looking for ways to cut costs, which made the concept of temp workers, where employers didn’t have to put them on payroll and offer benefits, really compelling. 

Temp agencies like Kelly Girl (now Kelly Services) and Manpower started to meet this new demand. They put together armies of women who were looking to generate some supplemental income and welcomed a more flexible schedule. As shown in the image below, they enticed employers by promising the “never-never girl” - a worker who would never take a vacation, never cost you benefits, and never fail to please. 

By 1960, Manpower had over 200 offices across the country over 100K temps. Women tried to organize to gain simple protections via organizations like 9to5. Unlike the workers in the post-war era, they were unsuccessful as they were not in the same location, not fighting against the same employer, and fighting for the very rights that made their temp positions attractive to employers. 

The reliance on temp workers continued well through the 1980’s as the concept of the “lean” organization was popularized and operationalized by top-tier consultants. Temporary employment increased from 400K in 1980 to over 1M in the 90s, ultimately reaching 3M by 2000. Even in the midst of the Great Recession, temporary services continued to be in the top 5 of the fastest growing industries

While workers had some degree of flexibility, most of them were paid less than if they had permanent employment, had little to no access to benefits, and lived in a state of uncertainty of whether work would be available. 

Welcome Gig Economy

While the exact numbers are debated and not well tracked, it’s estimated that as many as 50M Americans have participated in the gig/freelancing economy. A survey conducted by economists Lawrence Katz of Harvard and Alan Kreuger of Princeton found that 94 percent of American jobs created between 2005 and 2015 were for “alternative work”, such as working as an independent contractor or through a temp agency. This spike in participating in alternative work arrangements was largely driven by digital platforms like Upwork, Uber, Instacart, and many others that have reduced the friction to gain access to flexible work.  

The experience of the gig economy is fairly diverse, as noted in a 2019 BCG survey, which found that while many think of gig workers as someone working for Uber or Instacart, nearly ~40% fall into the category of “high-skill” work or personal services (e.g. wellness or teaching). And this work can be lucrative. In fact, there were 3.3M independent workers who earned more than $100K in 2018. 

Many freelancers love the flexibility independent work gives them. In fact, 46% of freelancers cite that freelancing gives them flexibility they need because they are unable to work for a traditional employer due to personal circumstances. But they are also less likely to have income predictability than non-freelancing peers. It’s even worse for those who rely on “lower-skill” gig work as their primary source of income, with many reporting they are less likely to be able to cover $400 of emergency expenses and have basic labor protections than those who didn’t. As an illustrative example, a study conducted by the New School and Berkeley found more than half for ride-hailing apps in New York City drive on a full-time-basis, and their earnings were so low that 40 percent of drivers qualified for Medicaid and 18 percent qualified for food stamps. 

We can celebrate the increased flexibility that many employees have but we cannot ignore the related security they have lost for it. 

Labor in the 21st Century: Empowered Economy 

As I mentioned earlier, I think the biggest question we will have to answer over the next decade is whether we can truly reconcile our desire for independence and need for security in order to create an economy that truly empowers the worker. I believe it’s possible and below I share a vision below of how I believe entrepreneurism will manifest in different areas of the economy, the current barriers, an illustrative set of tools to enable the transition, and current score for flexibility and security. In Part II, I will discuss how a new “career stack” will arise to supplement these transformations.

  • Corporate Entrepreneurism: We will see an increased focus on internal mobility and redeployment of talent within an organization. Relatedly, there may be a rise of internal “gig marketplaces” where employees can pick up projects that align well with their skills (or that they can take on easily with quick upskilling). Historically, the challenges around adopting this type of model have been behavioral, given existing commitment to the idea of a particular job or functional group. As the need for flexibility starts to quickly outpace the need for stability, better internal mobility becomes necessary. This also caters to the large group of employees who want to work in a corporate setting and have the stability of having an employer. 

  • Collaborative Entrepreneurism: Worker co-ops or companies that are owned by employees is not a new concept. In fact, during the Great Depression, farmers who were struggling to access energy resources because investor-owned utilities were not interested in serving rural areas, set up electrical cooperatives that they collectively owned. That said, despite demonstrated benefits like higher productivity levels, improved wages, increased profits (often by more than 14%), and lower turnover rates, there has been relatively little adoption of co-op models. Part of it has to do with an information gap - it’s a complicated process to navigate and most co-ops are created from owners selling their companies to their employees - and another challenge is access to financing that can help with the transition. As we enter a downturn that directly impacts small and medium-sized businesses, there will be a new generation of small-businesses that create an opportunity for putting power back in the hands of employees. 

  • Micro-Entrepreneurism: This is starting to be commonly known as the “passion economy”, in which people are able to monetize off of their talents and skills. Platforms like Substack, Patreon, OutSchool, and Teachable, have all made it much easier to effectively become a “business of one” and have agency over your career and income.  

Power precedes change 

Digital platforms have, in many ways, democratized access to generating income but we are far from being able to say that we have created an ecosystem that allows us to have this desired flexibility with the security we need. True independence cannot exist without a system of security.

As we fight for a more equitable economy, I believe we will need to develop an ecosystem where we put power back in the hands of employees while still enabling employers to be flexible in a fast-changing economy. Some of this will require tech. Some of it will require regulation. Some of it will require behavior change. But what we definitely know is that deliberate organizing and building of power precedes change. 

In Part II of this article, I’ll review the new career stack I believe needs to exist to enable a transformation, including a new credentialing ecosystem, next-generation unions, access to upskilling and reskilling, and portable benefits. 


🙏🏽Huge thank you to Minn Kim @ BloomBerg Beta, Maria, and Alex who helped take this from a 50 page history report to something at least one person is interested in reading