Traditional work is dying.
By 2040, the American economy will be "scarcely recognizable," according to a new report published by the Roosevelt Institute and the Kauffman Foundation.
We’ve seen glimpses of the looming changes already: freelancers now make up 34%—that's 53 million people—of the U.S. workforce, according to a 2014 survey by Edelman Berland. In the next 25 years, this shift will accelerate in a major way towards entrepreneurship, independent contracting, and "peer-to-peer" work on platforms like TaskRabbit. Additionally, there will be major diversification of entrepreneurship as new platforms like crowdfunding and relocalized production become increasingly popular.
As traditional jobs wane, there will be some growing pains. "It’s going to put major strains on our public fiscal system," says Dane Stangler, vice president of research and policy at the Kauffman Foundation. "We’ve built all of our massive entitlement programs—whether it's social security for retirement or health care systems or unemployment insurance or whatever—around this notion of a fixed job."
As we veer from this traditional work model, Stangler says the government will end up losing major payroll taxes, and that's going to create challenges for our fiscal system unless some "very significant policy adaptations" are made.
He warns: "There’s a whole ripple effect if this is going to be an actual and growing part of the economy."
The report, which includes insights from 30 economists, technologists, policy makers, and entrepreneurs, focuses on four main topics: the future of work, the future of technology, the future of entrepreneurship, and the future of inequality. Below are five changes to expect from America's next economy:
It used to be that having a job meant security and success for Americans. Since the recession, the idea that a good job is the centerpiece of the "good economy" was proven wrong, as people realized having a good job doesn't equate to job security.
By 2040, the job market will consist of part-time assignments, portfolio careers, and entrepreneurialism. Instead of day-in, day-out work consisting of much of the same responsibilities, a "career, then, will be composed of thousands of [short-term] assignments spread out over a lifetime," says the report.
In other words, workers will work on short-term assignments ranging from several days to multiple years, and will become employees for their own firms. As this becomes the norm, the vast majority of job growth in 2040 will come from small businesses.
As traditional jobs—with their health insurance, retirement planning, and tax withholdings—disappear, we will see more platforms and institutions develop to help workers and their families manage exigencies and mitigate risks. These platforms will meet needs in three distinct categories, according to the report:
1. Offer new means of marketing and selling goods and services, like Etsy does with handmade crafts.
2. Provide ways for workers to learn about new assignments, to qualify for and schedule assignments, to collect payments, and to meet such needs as health care, insurance, pensions, child care, and elderly care, like Task Rabbit.
3. Offer training and education programs for workers to connect with the larger market.
In the past, talent agencies were reserved for performing artists and athletes, but in the next economy, talent agencies and headhunting firms will start to play a bigger role in the lives of the everyday professionals looking to further their career. The report says:
There is not a single model or clear linear path along which the platforms of the new economy will evolve, but it is evident that the profoundly different nature of jobs and work in the emerging new economy will require profoundly different platforms for organizing work and careers.
The rise in self-employment will inevitably increase wages (think: you're no longer suffering under an underpaying employer). Additionally, as the aging population retires and with a birthrate below replacement, the labor supply will decrease, which will also play a role in boosting wages.
While immigration can help meet new labor demands, it's unlikely to stall wage growth, according to the report.
Sure, you'll be free from an underpaying employer, but this also means your career success relies solely on you.
The report says:
In particular, workers will be forced to think constantly about their next assignment, the skills required for that assignment, and the education and credentials required to gain those skills.
There will no longer be specific guidelines or career ladders to guarantee a career trajectory. Instead, workers will have to be savvier than their predecessors, because life has gotten much more complicated.
To be successful, individuals will have to be more entrepreneurial in thinking and planning their lives, meaning constantly selling themselves, defining one’s own work, and educating themselves for future assignments. In the next economy, work may be more lucrative and fulfilling, but the idea that you'll be professionally rewarded because you've been loyal to a company will be a thing of the past.