How Will CPOTUS Trump Deal with the Gig Economy?

White House James Steidl/Adobe Stock

President-elect Trump has wasted no time intrepidly wading into numerous policy areas. One notable area of action has been federal spending, where his frequent pledges to cut costs from federal programs has made him seem more like the chief procurement officer of the United States (CPOTUS).

Beyond federal spending, however, we as analysts of the contingent workforce and services procurement space have a far more specific question we’d like to address: How will Trump deal with the gig economy? None of us can be sure what may happen, but we can look at his public statements, cabinet nominees and past actions to try to determine where his attention might go and how.

The gig economy means many things to many people today. Possible constituents include the entire contingent workforce (including temps and workers in consulting and outsourcing firms), Uber and GrubHub drivers, global online freelancers and even shift-workers. There are also various narratives that define the gig economy: utopian, dystopian or a bit of both. In today’s media world of fake news and false equivalencies, which one would seem to be eye of the beholder. So we try to imagine how a President Trump might see it.

The gig economy should represent a complex policy matter to tackle. On the one hand, it’s a celebration of free markets and deregulation and jobs (or at least work) for all. On the other hand, it’s unclear what the gig economy really means for the fortunes of American workers, foreign workers and the businesses that rely upon them. After all, Trump’s most ardent supporters represent a large part of the population that was economically left behind even as other Americans prospered. Restoring the American Dream for those people should be a top priority.

But can the gig economy restore that dream?

Manufacturing Jobs vs. Gig Work

Growing manufacturing jobs in the US is major Trump policy goal. But boosting employment and wages for the majority of the workforce — in Trump’s parlance, making America great again — is likely unrealistic.

As the Washington Post explains, “Trump is selling a vision of manufacturing as it was in the 1950s, where workers with modest skills went to work in factories that employed huge numbers of people in good-paying, secure jobs with excellent benefits.” Those kinds of jobs are simply something Trump cannot force American companies to create without dramatically increasing the prices of the goods we buy.

But even beyond cost inputs, the reason manufacturing jobs will never return to their former state is because of automation. Contrary to Trump’s campaign rhetoric that “we don’t make stuff anymore,” U.S. manufacturing is actually producing more goods than ever before — just with fewer people. A late-night tweetstorm may be able to save a few hundred or thousand jobs here and there, but no social media platform in existence can intimidate a company into reverting a factory that only requires 200 workers to the glory days of one that required 2,000.

So if manufacturers can’t create enough jobs in the U.S. to absorb the population of unemployed factory workers, how much better off will they be stitching together a career driving for Uber, creating goods to sell on Etsy, renting out their homes on Airbnb or working shifts at Carl Jrs or Wal-Mart?

Again, the economic prospects aren’t so rosy. Data compiled by the JPMorgan Chase Institute indicate that monthly earning on “labor” platforms like Uber actually peaked in June 2014, and that the share of U.S. adults participating in “capital” platforms like Airbnb have declined from the previous year. And on both types of online platforms, both overall wages and participation have essentially stalled.

“It doesn’t look like [gig work] is becoming more lucrative for people,” said Fiona Greig, co-author of the JPMorgan Chase Institute report. “As the labor force strengthens, more and more people have better options.”

So if Trump’s manufacturing agenda falls through, pivoting to the gig economy may be a hard sell.

Globalization and the Contingent Workforce

One factor that the incoming administration will need to consider is that American and foreign corporations have developed a taste and increasing appetite for the contingent workforce, outsourcing and offshoring. For organizations that compete on a global playing field, these are critical labor strategies — and not just for cost minimization, the darling of the CPO.

For example, sometimes manufacturing in a foreign market optimizes selling into that region. Companies like BMW and Toyota have plants in the U.S., which theoretically helps boost sales here (and employment!). Similarly, NAFTA provides GM and Ford not only access to cheap labor in Mexico but also an opportunity to sell cars to our neighbors in the south.

And while labor costs are undeniably lower in several foreign markets, cost is far from the only concern. Call center labor turnover rates in the U.S., for instance, are almost unbelievable; in the Philippines they’re much lower.

Finally, countries like India and China are making large investments in STEM education. The statistics are clear about the growing skills trade-imbalance between such countries and the U.S. Many US companies outsource IT to India, partly because the labor supply in the U.S. is not sufficient (nor are H1B visas).

So there are many different variables to be able to optimize the prosperity of U.S. companies and the American workers whose jobs depend on them (not to mention that there is the kink that many Americans are employed by foreign companies in the US). How does all of this get sorted out?

The Digital Economy

New technologies will present policy challenges, as well. Plenty of U.S. companies now use remote employees, contractors and freelancers, and technology has exploded the potential for such work arrangements — not just Skype and Slack but also online freelancer platforms like Upwork, freelancer.com, and many others. There are millions of skilled workers across the world that can do contingent work for U.S. companies, often at lower pay rates. Should the labor of these online, offshore gig workers be taxed?

No matter how you define the gig economy, the question of how Trump will deal with it is a big one. It’s actually bigger than the gig economy, and it goes way beyond U.S. manufacturing jobs.

It’s one thing to impose tariffs on U.S.-incorporated businesses (like Apple) that produce goods offshore for the U.S. market. But what about a U.S. airline that provides services to its U.S. customers from an internet protocol-based call center in APAC? The services sector, which we’ve heard nothing about through the debates and the election, represents two-thirds of the U.S. economy. There are lots of jobs there, and many of them have been sent offshore, even skilled ones.

So if you’re the (C)POTUS, how do you do your best for your organization (the country) and for your internal stakeholders (American businesses and workers)? It’s a sensitive question the incoming (procurement) administration will need to have an answer to.

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