Are Independent Contractors Good for Companies in the Sharing Economy?

image source: www.insperity.com

image source: www.insperity.com

During March this year, tens of thousands of Verizon workers have been on strike, demanding better job security and a new labor contract for employees across the Northeast.

Additionally, thousands of janitors working at Facebook, Google and other Silicon Valley companies have recently voted to authorize a strike unless their union and cleaning service contractors agree on a new labor contract.

Shared job dissatisfaction among contract workers is nothing out of the ordinary, and it’s certainly nothing state-of-the-art. Over the past 15 years, independent contractors have replaced millions of traditional employees. According to a November 2015 article from the Harvard Business Review (HBR) magazine, “In the U.S. alone, companies are engaging roughly 6.4 million independent contractors, freelancers, and other types of contingent workers.”

Furthermore, a Deloitte 2016 Global Human Capital Trends study reveals that, “51% of global executives surveyed said their organizations plan to increase or significantly increase the use of contingent workers in the next three to five years; only 16% expect a decrease.”

So, in what ways are contract workers more desirable than traditional employees?

The chart below, provided by TechCrunch, indicates that human capital is often the largest expense for any services business, particularly for higher-end verticals. Hiring independent workers on a contingent basis increases business flexibility and agility, provides access to hard-to-hire specialized talent, and potentially reduces costs.

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The article also points to the Sharing Economy landscape and says, “Skill level has a meaningful impact on personnel expense.” Independent workers allow businesses to quickly and efficiently scale staffing up and down to meet shifts in demand and changing business circumstances in an increasingly volatile and always-changing global economy. Businesses are also turning to highly skilled independent workers due to difficulties in attracting and retaining employees with hard-to-find specialized talents.  

In other words, these independent contractors are in demand, and they know it.  So what do these highly skilled independent workers want from their clients?  

Being paid well and on time is obviously important to independent workers. Having the flexibility to work whenever and wherever you want is an increasing benefit. But as HBR authors, Steve King and Gene Zaino note, “Attracting, retaining, and managing these highly skilled workers will require new ways of thinking about talent management and the role that external talent plays.” Companies will need to become “the client of choice” for these high-end contractors and become more flexible to cater to the growing workforce that prefer to be a contractor than being an employee.

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Is the Sharing Economy a Millennial-Driven Phenomenon?

Image Source: www.washingtonpost.com

Image Source: www.washingtonpost.com

According to the 2015 “1099 Economy Workforce Report,” commissioned by venture capitalists and Stanford University alumni, 39 percent of sharing-economy workers are ages 18-34. This is coupled with almost half (49%) of Sharing-Economy consumers, also ages 18-34, or commonly referred to as “Millennials”.

Yet, AC Nielsen also provides evidence that the majority of consumers in the sharing economy tend to own a house, have children and earn above-average wages, suggesting that sharing is much more than a millennial-driven phenomenon.

So what type of impact are Millennials having in the Sharing Economy? This blog post gathers key statistics and data to help answer that question.

Millennials resonate with the idea of the Sharing Economy since it perfectly fits their budgets.  For example, an article by Lexology says, Compared to previous generations, Millennials have less spending power, are less likely to form households in their 20s and early 30s and are choosing to forego suburban neighborhoods in favor of smaller urban apartments. In turn, “They’re taking a more asset-light stance toward consumption, putting off buying a home in favor of renting, forgoing a car payment and taking Uber, or skipping a hotel in favor of booking a room via Airbnb.”

Additionally, Millennials’ affinity for technology has provided a big boost to the sharing economy. A senior staff writer at The Daily Californian writes, Demographic changes, coupled with the rise of sharing economy options, seem to be paving a new path for the way that young people interact with businesses. For instance, “digital technologies like GPS-enabled smartphones allow millennials to quickly make and respond to requests for goods and services and complete the transactions through online payment systems like PayPal.”

And, finally, research indicates that Millennials are having an increasing impact on the retail industry.  According to an article in the April 2016 issue of Harvard Business Review magazine, the largest category of spending in the Sharing-Economy is online marketplaces (e.g. Ebay, Etsy), with 16.3 million consumers each month spending almost $36 billion annually.

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These reports estimate that the generation’s spending will soon account for approximately 30% of all retail sales.

And, HuffPost Business says, “Nowhere is this medium of exchange more timely than among college and university students worldwide.”  Lexology helps explain this claim by providing the following two examples:

  • Startup Rent The Runway urges customers to question why buy when you can borrow by offering short-term rental options for what might otherwise be prohibitively expensive pieces of formal attire.

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  • More traditional retailers such as The Home Depot offer customers the opportunity to rent expensive machinery such as a stump grinder or sod cutter, items that would otherwise often clutter a garage after they are used for a limited project.

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These offerings hit the same trends: why spend hundreds, if not thousands, when you can share and save valuable space in the process? The “digital natives”, also referred to as, “Millennials” are technology savvy and able to take advantage of these services to have their limited capital extend longer.

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What Can You Share to Save Money?

How to save money using Sharing Economy business models & services.

Ranan Lachman Sharing Economy

Excessive mass consumption among families and individuals started in the 1920s and exploded in the mid-1950s. The automobile industry provided an enormous stimulus for the national economy. By 1929, it produced 12.7 percent of all manufacturing output, and employed one out of every 12 workers. Automobiles, in turn, stimulated the growth of steel, glass, and rubber industries, along with the gasoline stations, motor lodges, campgrounds, and hot dog stands that dotted the nation’s roadways.

Rachel Botsman and Roo Rogers, authors of the Sharing Economy book, ‘What’s Mine is Yours’, refer to this endless mass acquisition of more stuff in even greater amounts as “hyper-consumption”, a force so strong that there are now more shopping malls than high schools in America. However, today, the Sharing Economy is revolutionizing how we acquire and use goods and services by opening up new opportunities for both consumers and workers, allowing people to work on their own terms.

According to a recent poll from TIME, Burson-Marsteller and the Aspen Institute Future of Work Initiative,  44% of U.S. adults say they have participated in the Sharing Economy, playing the roles of lenders and borrowers, drivers and riders, & hosts and guests.

What’s more, highly skilled jobs, like consulting and teaching, are now shifting to more sharing-economy-like models too.  For example, TeachersPayTeachers, founded in 2006 by a New York City public school teacher, allows teachers to earn money by selling their lesson plans as well as supplemental materials, to other teachers.  A recent PBS article said, “The overall concept of TeachersPayTeachers isn’t entirely new; teachers have always created extra materials or entire units for their classes and shared lessons with other teachers, but the advent of the Sharing Economy has changed things somewhat. The difference now is that teachers are earning money from their after-hours and weekend work and receiving a larger pool of feedback.”

Furthermore, PwC estimates that revenues from sharing in the travel, car, finance, staffing and music and video streaming sectors could rise from $15 billion to $335 billion by 2025.

With the unemployment rate still high, the Sharing Economy is enabling people to make money while they wait for job opportunities to open up. By reshaping traditional business and consumer models, these sharing services help create a healthier, more sustainable system with a more fulfilling goal than “more stuff.”

Here’s a short list of more sharing services that are saving people substantial money:

Hospitality and Dining:

  • CouchSurfing: connect with a global community of travelers to find a place to stay or share your home and hometown with travelers. Couchsurfers organize regular events in 200,000 cities around the world. There’s always something to do and new friends to meet.
  • Feastly: Passionate chefs (common people) who can give you access to hidden food gems you won’t find anywhere else. Feastly provides home kitchens to pop-up spaces, chefs cook in the most unique dining locations.
  • LeftoverSwap: a smartphone app to help you barter or give away your leftovers. The company’s website says, “Help save the world while enjoying food by fixing these pressing issues: -40% of the food goes to waste.”

Automotive and Transportation:

  • Uber: Like Airbnb, Uber is probably one of the most widely known sharing services in the industry. Uber connects riders to drivers through mobile apps, making cities more accessible and opening up more possibilities for riders and more business for drivers.
  • Lyft: Like many other transportation services in the sharing economy, the company’s mobile-phone application facilitates peer-to-peer ridesharing by connecting passengers who need a ride with drivers who have a car.
  • Getaround: Getaround is an online car sharing or peer-to-peer carsharing service that allows drivers to rent cars from private car owners, and owners to rent out their cars for payment.

Retail and Consumer Goods:

  • Neighborgoods: NeighborGoods.net is a social platform for peer-to-peer borrowing and lending. Need a ladder? Borrow it from your neighbor. Have a bike collecting dust in your closet? Lend it out and make a new friend. By sharing with your neighbors, you can save money while reducing waste and strengthen your local community in the process.  
  • Pley - Pley.com is the leading toy subscription service, helping parents save money, reduce clutter and conserve the environment. Members can choose from over 500 toys and never have their children be bored again. Once the kids finish playing, they simply swap out their toy for another one and enjoy endless fun.
  • Poshmark: Poshmark connects you to people whose style you adore, allowing you to shop their closets, anytime you’d like. Have items in your closet that you love, but just don’t wear anymore? List it for sale on Poshmark in less than 60 seconds. Sell what you have in your closet so you can shop for what you really love.

Media and Entertainment:

  • Amazon Family Library: With Family Library, you can share select content between two adults in your Amazon Household.
  • SoundCloud: a leading social sound platform where anyone can create sounds and share them everywhere. Recording and uploading sounds to SoundCloud lets people easily share them privately with their friends or publicly to blogs, sites and social networks.

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Sharing your housing? An old concept gets updated

2987911_origThe idea of co-living is hardly new. In Israel, for example, Moshavs and Kibbutzim, two kinds of cooperative communities based on residents sharing resources with each other, have been around since the early part of the 20th century, and small towns have been around since the dawn of mankind. With the onset of the Sharing Economy, though, a new form of co-living is taking root, and instead of being based on farms, this iteration of an old favorite is cropping up across the urban landscape.

These contemporary co-living initiatives all play off the concept that – much like tangible resources (common spaces, internet, silverware) – ‘community,’ too, is a commodity that can be traded and shared in exchange for money. And with the release of their pilot program for co-living, WeLive, in early January of this year, the coworking giant and tech unicorn WeWork in New York and The Commons in London has officially thrown its hat into the co-living ring.

Much like the office spaces that typify WeWork’s offices, the company’s new residential offering, WeLive, located at 110 Wall Street in New York City, is in keeping with the branding that has defined WeWork during its rise in the coworking industry. Although their new apartments do, irrefutably, fall into the category of “microapartments,” WeWork is hoping to make up for this lack of individualized space – to them, an advantage – by emphasizing community at home the way it already does in the workplace. With shared common spaces, including kitchens, movie theaters and game rooms, as well as planned community-oriented events and mixers organized by WeLive employees for their tenants. WeWork is aiming to bring the collegiate atmosphere of their office spaces to their WeLive apartments. In doing so, they are operating under the premise that their target demographic will find the experience of co-living to be transformative and enriching that the company will be able to continue to grow its residential arm,

With its $10 billion valuation, the company has demonstrated that “the We economy” carries great significance and weight to a new generation of young people who value community and collaboration in every facet of their lives. WeLive is merely an extension of this concept, as is every company that plays a role in the holistic Sharing Economy (like Pley for toys, or TaskRabbit for one-off assistance with odd jobs). While only time will tell if WeWork’s new residential initiative is a success, strong proponents of the sharing economy have faith that in opening WeLive, WeWork is simply moving us one step closer to a world of sharing.

Sources:

  1. http://www.fastcompany.com/3055325/from-wework-to-welive-company-moves-members-into-its-first-residential-building