Wednesday, August 14, 2013

The Future of Labor

Futurists have been predicting how technology would revolutionize labor for well over a hundred years. Ideas of robot servants, self driving taxis, and work from home interfaces have been harped on time and again but have, as of yet, been hard to find in reality. As recently as the twentieth century prognosticators believed that the American workweek would drop to thirty hours or less with an accompanying ten weeks of vacation annually. Unfortunately for most of us we haven't arrived at that particular utopia yet.

So what will the future of the labor markets look like? If I had to guess, I'd put my money on a model like HourlyNerd. HourlyNerd is a service which matches highly skilled business consultants with small businesses at an hourly rate.  Businesses submit their projects and individuals apply to complete them along with a requested hourly rate. The small business then selects their "nerd" who completes the project.  Services such as accounting, financial advice and business consulting are available at an average rate of $35-$50 per hour.

If a project is going to take approximately fifty hours, than the HourlyNerd service can complete it for approximately $2500. It's easy to see that's far cheaper than hiring a full time professional of the same skill level. A truly large firm might require a market penetration analyst full time, but realistically in most cases highly skilled, highly specialized people probably only apply their primary skill set thirty percent of the time or less at a full time job.  The remainder of their time is either spent idle (not accomplishing meaningful work) or performing tasks which a low skilled worker could easily accomplish.

Paying high costs for a highly skilled full time worker could be thought of as a retainer of sorts.  However, as the ability to connect with hourly professionals increases, the question of whether a retainer is necessary becomes very obvious.  It's a simple decision when the question amounts to, "Do I want to pay $100,000 a year plus benefits for the same information I could get for $30,000 from an outsourced worker."

The obvious disadvantage of such services is a decreased level of employee accountability. After all, there's very little dread at the prospect of termination when your position ends upon project completion regardless. Poor work of course diminishes the likelihood of being engaged for future assignments, but it seems unlikely that such a disincentive is as potent as termination from a full time position.

So here's the official prediction.  Services that match highly skilled workers with short term or hourly employment will continue to grow.  Small businesses will pick up and drop these workers as needed thus gaining many of the advantages available to larger firms while keeping their costs relatively low.

Information about HourlyNerd can be found at their website

More economics next week. Until then stay safe and rationale.

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