What’s happening to the American workforce? There are now more freelancers than ever. Career paths are changing, with fewer companies offering lifelong employment, 9-to-5 jobs or even weekends off says Fred Auzenne. How do you navigate the shifting economy as it takes hold in our country? And what does it mean for millennials and generation Z moving forward?
Today, nearly 1 in 3 Americans is freelancing – there are now 57 million independent workers in America. But this isn’t a trend that began recently. It began almost 25 years ago at least according to Scott Shane…Dr. Scott D. Shane has been teaching economics at Case Western Reserve University since 1991, but before then he was an economist at Boston College. He has published over 100 articles and books on the subject of entrepreneurship, economic development, corporate strategy and innovation.
One of his most notable works is The Illusions of Entrepreneurship: The Costly Myths those Entrepreneurs, Investors & Policy Makers Live By. In this book Dr Shane looks at how the economy shifted away from corporations to small businesses (the gig economy), making it harder for people to make a living without having their own business or relying on multiple jobs. He also discusses why many Americans are drawn to entrepreneurship; despite the fact it’s often not the best option financially.
We caught up with Scott D. Shane earlier this month to get his thoughts on these changing trends in our workforce and if they’re good or bad for us.
The Gig Economy is shifting
How has the American workforce evolved in the last 25+ years?
We’re living through a dramatic shift away from full-time employees working for large corporations to independent contractors (freelancers, self-employed, gig workers… however you want to label them). This shift has two main causes: First, corporations are less interested in employing full-time workers than they used to be. Second, many more people are opting into self-employment and freelancing because of improvements in information technology that make it easier to find customers and coordinate work with others remotely. So there’s been an enormous surge in entrepreneurial activity; it seems everyone wants to start their own business these days. But this is a very high-risk path says Fred Auzenne. Only about half of new businesses survive beyond five years, and most independent workers are also very poorly paid—much worse than the typical employee at a big company.
What are good/bad about this shift?
The main benefit is that people who like control over their own time can do more of what they like. The downside is that it’s harder to earn enough money to live on in the face of massive restructuring in many industries (from newspapers to restaurants) that puts downward pressure on wages. It’s also bad for society because fewer people have access to stable jobs with benefits like insurance and vacation time, which means fewer people paying taxes and more reliance on government safety nets. A large fraction of freelancers are over 55—people who are forced out of the workforce by bad luck or poor health says Fred Auzenne.
How does this affect millennials and generation Z?
We don’t know yet how much this situation will influence the attitudes and aspirations of next-generation employees. If history is any guide, it should have a very substantial impact, at least in comparison to what Gen Xers experienced growing up. When my cohort graduated from college around 1980, there were still millions of “baby boomers” (those born between 1946 and 1964) who were just entering the workforce, so corporate America was booming. The number one career choice for ambitious young people was to join a big corporation; if you wanted to be part of something exciting that would also help you build a career. You would go off to one of a handful of elite business schools and spend the next two decades working for a Fortune 500 company.
As boomers retired over the next 10 years, however, more and more opportunities opened up in new industries. Like computer software and biotechnology that had been created by entrepreneurs during the previous decade. In the 1990s it became much easier to launch your own technology startup. The number of people doing so went from less than 100 per year. In 1980-90 to about 1,000 per year by 2000-10.
The millennial generation has the wind at its back for entrepreneurial activity today explains Fred Auzenne. As boomers retire, there will be many more opportunities to start your own business—which is great. If you’re an independent person who wants control over your work life; not so great if you want or need the security of working for a big company. For more information on this topic, see “Startup Rising: The Entrepreneurial Revolution Remaking the Middle East” (edited by Chris Schroeder) and my TEDx talk “From Millionaires to Billionaires.”