Good jobs – threatened by the Internet

by Steven Hill*

What is the future of work, and the future of jobs? For the last several decades, the workers of Germany, the US and Europe have been the most productive and wealthiest in the world. But now that prosperity is in danger.

Where is this danger coming from? Is it from hordes of immigrants arriving from distant lands? Or foreign competitors stealing jobs? No, ironically the threat is self-inflicted.

The situation is most advanced in the United States, but it’s heading to Germany and Europe. The US workforce is undergoing an alarming transformation. Millions of workers are finding themselves on shaky ground, turned into freelancers, contractors and temps, with inadequate wages and a weaker safety net. Even many full-time and professional jobs are experiencing this shift. America is heading toward a “freelance society.”

During the weak economic recovery, nearly half of new jobs created pay only a bit more than minimum wage. Even as corporate profits are at an all-time high – with much profit parked in overseas tax havens – three-fourths of Americans now live paycheck to paycheck, with little emergency savings.

Now a mash-up of Silicon Valley technology and Wall Street greed is driving the latest economic trend: the so-called “sharing economy.” Companies like Uber, Upwork and TaskRabbit are allegedly “liberating workers” to become “independent entrepreneurs” and “their own CEOs.” In reality, workers are hiring themselves out for ever-smaller part-time jobs (called “gigs”), with no safety net or assurances of future work, while the companies profit handsomely.

What is equally alarming is that US corporations themselves are being redesigned. The vertical, industrial powerhouses of the post-cold war era, in which all operations were performed under a single company roof, yielded in the 1980s to companies like Nike and Apple, in which production was outsourced to low wage countries, while design and marketing remained in-house.

But now that business model is yielding yet again to companies like Uber and Upwork, and their precursor Amazon. These companies are little more than websites and an app, with a small core of executives and employees who oversee an army of freelancers, temps and contractors. In the vision of the libertarian CEOs of Silicon Valley, they want a “fractured” labor force they can turn off and on like a water spigot.

Upwork, for example, is a website where 10 million freelancers and contractors scrounge for work. Upwork draws globally, putting U.S. and German workers in direct competition with counterparts in India, Thailand and elsewhere. The result is predictable: cheap, Third World labor undercuts developed-world wages.

As “independent contractors” these workers also do not receive safety net benefits, and have no guarantees of future employment. They must constantly search for their next gig – the search itself is unpaid — in this “share the crumbs” economy. The “good jobs” of old are an endangered species. Welcome to the Freelance Society.

While these economic trends are most advanced in the US, Germany and Europe display similar tendencies. I am a visiting scholar in Germany at the American Academy in Berlins, here to research a few things. First, is it possible that this sharing economy could work better in a place where the welfare state, labor unions and the “visible hand” of government are more developed? Or might the current differences prove to be temporary, as the pressures of global competition tend to homogenize nations over time? Can we preserve transatlantic prosperity if our economies are based on fractured, unilateral employer-employee relationships? Or does prosperity require more co-determination between all the players?

These are the great questions before us. Fortunately there are solutions, but it will take a reimagining of the social contract, and careful regulation of these new ways of doing business.

*Steven Hill is a journalist and the Holtzbrinck Fellow at the American Academy in Berlin . His most recent book is Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism Are Screwing American Workers.

**First published at Euractiv.com