Sorry for going dark the past several weeks, but my batteries were out of juice. In addition to writing here from time to time, I also have a cranky one year old who doesn’t sleep; was overdue for a business trip to the states; was finalizing the purchase of our organic farm here in Panama; and training for this insane race called the Spartan that Trey and I did earlier this month.
So, with the bitching and whining out of the way…
What does job security mean in today’s economy, and does it even exist any longer?
No… and here’s why:
First, we are undergoing what is probably a once-in-a-century structural shift in our global economy. It’s as cataclysmic as the shift from the agrarian age to the industrial age. In the U.S., politicians from both parties claim that they have the secret recipe to get the economic gears moving again, but they don’t.
Take the manufacturing sector jobs that built middle-class America. Those jobs are gone, and they are gone forever – at least if we are envisioning a return to the massive industrial scale employment that dotted the industrial age landscape.
Those jobs aren’t coming back because 1) technology advances (software, robotics, automation) have increasingly rendered flesh and blood labor an anachronism, and 2) the outsourcing of jobs to cheap labor (or virtual slave labor state-owned enterprises) countries in places like China.
Bottom line: When politicians promise they will revive the manufacturing sector and those good blue-collar, middle class jobs, they are lying to you.
Second, from what I see, many white-collar, middle-management jobs will suffer the same fate because 1) The cost of outsourcing white-collar jobs is getting cheaper than the overhead costs of battalions of in-house cubicle drones and 2) those jobs are also being replaced with automation and cheaper labor.
Third, and probably most importantly, the industrial-age model of centralization is giving way to massive decentralization. That decentralization is occurring in the U.S. for a number of structural reasons and poor policy decisions, but significantly also because of the disintermediation caused by the Internet and technology. Why on earth do we need centralized big box stores like Best Buy (180,000 employees) or Walgreens (211,500 employees) when we can quickly get on line and cost-compare from dozens of online retailers for the lowest price and have the items conveniently delivered to our doorstep 24 hours later?
And those gargantuan technology giants like Google, Amazon and Apple that dominate the supposedly “new economy”? Not so gargantuan… At least from a workforce standpoint. Google and Amazon only employ about 30,000 employees each worldwide… Apple employs 43,000 in the U.S., but 30,000 of those jobs are employees working in Apple stores as part of the low-wage/low benefits service economy. The 50th largest U.S. employer in the U.S., Emerson Electric, employs four times as many Americans (114,000) as Google, and more than Google, Apple and Amazon combined.
What’s the common denominator in all of the above? The nature of work is changing and it’s changing very fast.
So, what to do?
Don’t fight the trend… Embrace it. If the trend is towards decentralization, then take steps now to lessen your dependence on centralized structures and institutions. Decentralization after all, is basically taking actions to immunize yourself from the inherent instability of large centralized institutions by increasing independence, redundancy and resiliency.
Decentralization puts a premium on individual imperative to provide the necessities of life, rather than relying on institutions to provide them for you. It requires independence from cozy and trusted centralized institutions, be they your employer, your bank, the media, or the government. The hard truth is that we are entering a tumultuous time where we won’t have the luxury of employment for life, cradle-to-grave government services and benefits, permanent economic growth, and always rising equity markets.
The upshot of this, I believe, is that the alternative may likely be a return to a highly decentralized entrepreneurial economy based on individual initiative and innovation. Humans do have an amazing capacity for rapid change and adaptation when there is no other choice. I believe the decentralization trend is baked in the cake, so we really do have no other choice but to adapt.
Become a free agent
Forget about job security and unfailing loyalty to an employer. Having worked in corporate America for the first half of my working life, I witnessed dozens of instances where fellow co-workers were let go in “downsizings” and “RIF’s (reduction in force), but were then immediately hired back as contract labor. This was the very front end of a trend that has only accelerated since.
As the world rapidly decentralizes, the security of a steady job and the assurance of company provided benefits are vanishing in a wisp of smoke. Standard & Poor’s in fact, estimates that the pension plans of the top 500 S&P companies are underfunded by $355 billion – the largest reported number ever. Of the 338 S&P companies with defined-benefit plans, only 18 are fully funded.
Unlike employees, consultants and contractors come with little overhead: no employee health care, pension or 401K contributions… No compliance with the volumes of government rules that regulate every aspect of the employer/employee relationship. Yes, it may seem like a cold-blooded calculation by corporate America, but it is what it is, so use it to your advantage.
You can get ahead of the curve now by exploring whether a consultant or contractor relationship rather than employer/employee relationship makes sense. This is especially important if your company is already laying off employees. Surprisingly, many employers are happy when high-overhead employees “outsource” themselves.
And there are advantages: Yes, you’re giving up what you may think of as a “steady” job, a pension, and maybe employee-paid health insurance, but in an age of decentralization these are increasingly illusions in any case. But you’re gaining a “bread-and-butter” client that is essentially providing you risk-free financing to start your own business. If you use that opportunity to go out and recruit additional clients, you will have built substantial redundancy and resiliency into your income situation.
You will also have substantially more freedom to save and invest for retirement the way YOU deem most beneficial. You’re no longer locked into a company-provided 401K plan with defined and often limited investment options, but can get very creative (look into self-directed IRAs to see just how creative) in making your own investment decisions.
Forget job security…Focus on income security.
If you rely on one centralized institution for all of your income (we’ll get to investment income later), you are placing yourself at substantial risk anytime there is an exogenous shock to the system: Poor earnings at your company? Supply chain breakdown for the widgets your company makes? A change in management? Every one of these potentially puts your one source of income at risk.
Decentralizing and diversifying your income streams gives you a higher degree of income security. Even starting small – writing and marketing an e*book about a specific area in which you have some expertise, starting a home based business, renting out a room in your house to a college student, the ideas are limitless.
Start off small. The idea isn’t necessarily to invest a big sum of money into a new venture or even to come close to matching the income from your current job. It’s simply getting comfortable with the idea of exploring and creating additional income streams and starting to think more like an entrepreneur.
The bottom line is that in the future we will all need to learn to be less reliant on the centralized institutions we’ve come to rely on. And that’s a good thing. Learning again to stand on our own two feet is what resilience is all about.