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Goodbye gig economy — what’s next?

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Unread 02.09.17, 03:17 AM
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Goodbye gig economy — what’s next?

02.08.17 10:01 PM

When the financial bubble burst there was an enormous dislocation of labor. A major boulder was thrown into the employment pools, and while the tsunami hit the U.S. first and hardest, the residual waves left no economy spared.

But the upshot of this was that a lot of Americans lost their jobs, houses, retirements and businesses.

And now we’re seeing that there was an even deeper cost to this collapse. Big corporations saw that it was cheaper and easier to replace people with automation — whether that means software or robots.

The number of stories is growing… they talk about how, with costs of robots being driven down due to demand and cost of labor going up, advanced tech and mass production are allowing companies to buy a couple robots to replace a couple dozen workers, not only in factories, but in fast food restaurants like Hardees.

I pointed this out in a recent article about the U.S. oil sector in particular. But it is also why, if there is a renewed manufacturing renaissance in the U.S., manufacturing jobs may come back, but it won’t be humans doing the work.

The same can be said even in the high temple of capitalism, Wall Street. Until Trump actually starts cutting regulations for the banks, even Wall Street has been cutting workers and replacing them with artificial intelligence trading and investing platforms.

“Fintech” is the new thing. Instead of working with a broker, you interact with a computer that asks you about your goals, risk tolerance, assets, etc. It then suggests a portfolio to help you navigate your money to your goals.

Now, if any of you have had a bad broker, this would be a fine replacement. Even a bad computer program is likely better than a bad broker. And it won’t call you to pitch sketchy investment ideas.

But even good brokers and traders are losing their jobs.

Why? Because people are expensive and tech is cheap.

We are witnessing a massive economy disruption*— employment is being completely redefined.

In the last five years, the great corporate media/PR machine has been hailing the “Gig Economy” as the new labor force of the future.

The media*— owned by a few giant conglomerates in whose interests it is to convince you that you don’t need to cost any of them money by being employed*— has been trying to tell you how amazing the “new economy” is. They want you to think it’s great that you can work when and how much you choose for companies in the “sharing economy” (doesn’t that sound great?) or as a freelancer. Hey, whatever you want!

There are two things wrong with this.

The gig myth

First, basically these are part-time gigs that people can turn into full-time gigs (say driving for Lyft or Uber), but there is no salary, so working 60 hours a week won’t necessarily earn you any more than working 40. That makes it tough to pay bills. And it seriously limits consumer spending.

The same goes for “gigs” like renting out a room or your entire house on Airbnb. You can only rent it as long as someone is willing rent it. It’s not a business model.

But we have been told that we have to reorganize our thinking and not expect well-paying jobs from companies any longer*— pensions are only a quaint memory already.

Next, you can forget having an actual job, too.

Even small businesses have found it hard to make any money because Obamacare has been an undue burden on them. The banks aren’t lending to small business, but these businesses are expected to cover more costs. Most small businesses operate on tight margins to begin with and this hasn’t helped.

Take AQ restaurant in San Francisco. First, minimum wage hikes ate away 10 percent of profits. Then, a huge increase in Obamacare costs ate up another 30 percent of their best year’s profit. Next, they have to pay taxes on the profits… and pretty soon there’s no profit left. You can see why AQ restaurant is just one of 60 that have closed in San Francisco this past year.

I’m not sure why companies are even responsible for Americans’ healthcare. It started decades ago as a perk, and now it’s a burden for all. I’ve been a long-time supporter of finding a way to shift the costs of healthcare off of companies and make it affordable for individuals to pay their way. How that happens is a lot more difficult to define.

The gig reality

The second problem is that the gig economy is already fading.

According to a recent article in online news source Quartz, JPMorgan Chase just released a study that shows not only the high churn rate of gig workers, but the fact that at best these are low paying jobs that don’t offer the freedom and self-determination that we’re told they create.

The study says that 52 percent of “labor” workers (like Lyft or Uber) leave in the first 12 months. And 56 percent of the “capital” workers (like Airbnb) are gone in that first year.

The study also shows, that the “pay” (basically a commission on sales) that workers get is also trending lower as companies look to improve their margins and look more attractive to Wall Street as IPO candidates.

My advice: steer clear of any company that promotes itself as a core member in the gig economy.

Look to companies like Thermo Fisher (NYSE: TMO), InterDigital (NASDAQ: IDCC) and Coherent (NASDAQ: COHR) that are the parts and equipment suppliers for our new robotic world.

— GS Early

The post Goodbye gig economy — what’s next? appeared first on Personal Liberty®.

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