While traditional higher education will remain a valuable asset, we are witnessing the death of our post-World War II, post-Industrial Revolution economy, where workers earned a steady paycheck for 40 years with a corporate entity, then retired comfortably at 65 with few or no hiccups.
Major events like 9/11, the 2008 Great Recession and the COVID-19 pandemic have eroded confidence in that long-held economic model. The illusion of job security and of the "safe choice" has been stripped away. The birth of a new kind of economy was already emerging, spurred on by millennials, and has sped up exponentially from this pandemic. The way we do business and make money will never be the same.
With technology from video conferencing, document-scanning and business phone line apps, to cost-effective digital promotional channels and the explosion of gig economy freelancers, self-employment has become a more level playing field than ever before in our modern history. Adding to that, according to Small Business Trends, 69% of U.S. entrepreneurs start their businesses at home, and the costs associated with starting a business are very manageable.
A new 21st Century economy has taken shape, allowing people who were previously referred to as economic underdogs to emerge at the other end of the COVID-19 era. Previously marginalized populations, with shrewd business sense but lacking formal higher education, as well as more minorities and women, will be jumping into entrepreneurial waters in large numbers. In fact, they already are.
While you may need an MBA to get your foot in the door to earn a six-figure salary with a large corporation, a whopping 33% of entrepreneurs are scrappy self-learners who only possess a high school diploma or GED. Plainly put, what we are now witnessing is a seismic shift in who gets entry into the club.
A September, 2019 FastCompany.com article crowned minority women as the reigning queens of self-employment. It stated that "women of color account for 89% of the new businesses opened every day over the past year," and added that "this number has grown faster than the overall rate of new women-owned businesses in the past five years, at 21% versus 43%."
An Inc.com article seconded the sentiment, stating that "minority women now control nearly half of all women-run businesses." The article goes on to note that minority women are starting up businesses at a much faster rate than their white counterparts.
I feel strongly that this number will continue to increase in the days, months and years to come, because we are transmuting into a society of independent contractors. Employers are also realizing through the mass COVID-19-related layoffs that they need fewer full-time employees to be productive. Independent contractors, freelance and gig economy workers offer something invaluable to employers. They keep labor costs down by eliminating expenses associated with each full-time employee: workers compensation, medical insurance, retirement plans, payroll taxes and vacation time, all of which eat into the bottom line and which businesses might no longer want to bear. Without those expenses, budgets are freed up to pay more independent contractors to perform a variety of projects. As a result, companies will also downsize their office space, because they won't need large central offices to house employees any longer. When the dust settles, many will see significant increases in their profitability.
Don't count out women of all races. We’re likely going to see an avalanche of all-women teams starting businesses within the next year, to supplement household incomes or to capitalize on an idea that they’ve been nursing for years. As husbands and significant others lose their traditional nine-to-five jobs, more women across the board will be stepping up with home-based businesses that will allow them to care for their families at home while earning income. Another reason for the emergence of self-employed women will be the result of support personnel and administrative work being farmed out to independent contractors, turning them into small-business owners.
A lot of people are going to turn to multi-level marketing (MLM) companies, which experience greater participation during times of economic hardship. Not all MLMs are built the same; when you're required to purchase product inventory, it’s a significant risk that more often than not doesn't pay off. There are some MLMs that are service-based, where you don’t buy anything or pay fees to join. You’re simply tasked with promoting and selling a service-related product, and receive checks from the company based on your performance.
Though it seems counterintuitive to have new business on the brain during the biggest pandemic our world has seen in more than 100 years, if history is any indicator, entrepreneurship and innovation have always been hallmarks of tough economic times. With tens of millions of Americans out of work and collecting (or trying to collect) unemployment benefits, there’s an overriding sentiment about that steady paycheck not being so steady after all, and self-employment possibly being the better bet.
We’re also seeing a new kind of bartering system, where freelancers and independent contractors offering a wide variety of creative services are hiring each other to fill in gaps in their suite of client services. For example, if I do digital content marketing, but am in need of search engine optimization to service my clients, I can reach out to an independent SEO specialist and hire them on a per-project basis. They, in turn, can hire me to supplement the services they offer to their clients.
Another shift is the emergence of artificial intelligence and robots, handling work ranging from tech-related tasks to legal research and even medical procedures. This could eventually mean less need for candidates with post-graduate and doctoral degrees, and for more trade-related workers to service A.I. and robotics. There will be just as much work for laborers and trade workers; industry concentrations will just shift to accommodate technology-based trades.
This trend also gives companies the ability to gain financing. Banks will be eager to finance A.I. and robotics innovation. Post COVID, it will be a lot easier for a bank to give you money to invest in a robot than for hiring four or five more people. That robot can also depreciate over a period of five or so years, and you get to write that off on your taxes, much in the way you do with traditional office equipment. Robotics will also offer companies digital secretarial assistance in the form of typing letters and memos, keeping a calendar, answering phones, transferring calls and other secretarial tasks.
One of the most exciting trends we’re going to witness is the erosion of stigma related to working from home. Right now, nearly all high-end professionals are working from home in quarantine, and many people will continue to do so when all of this is over. Whereas it was previously unusual for large companies to hire a smaller company and solo practitioner working out of a garage or a home office, now it will be the norm. That is great news for the new economy as we shift to independent contractors and freelancers. It will be the new way of doing business and interacting.
Gig, freelance and independent contracted workers will need to adjust their radar and zero in on how they can best support companies who will now be working with a fraction of the in-house staff they once employed, pre-coronavirus. With so many cost-effective outsourced options in the U.S., companies may be less inclined to outsource their work overseas as they turn their attention toward millennial and gen-z freelancers who charge lower rates, relying on multiple clients and varied projects to make up their total income.
One downside to transitioning from nine-to-five employment to self-employed independence is the arduous and anxiety-provoking tasking of obtaining affordable comprehensive health insurance. But it doesn't have to be. It takes a little digging and asking the right questions of your accountant and your state's health insurance marketplace, but there are options for first-time business owners in need of affordable health insurance coverage. If you happen to live in a blue state, you’re in luck with all of the tax credits offered to subsidize your healthcare needs, as you gain your financial sea legs in the world of independent self-employment.
Changing times give birth to new industries and new economic models that are more sustainable to the climate we inhabit. The horse and buggy gave way to the automobile industry, and yes, horse-drawn carriage drivers and attendants lost their jobs, as automobile assembly workers and engineers gained theirs. It’s the nature of economic evolution.
The coronavirus has reset our economy and the way we do business. Many Americans have been experiencing the five stages of grief since the emergence of this pandemic, from initial denial to anger, depression, bargaining and eventual acceptance. Adjustments will be made; pain and discomfort will be felt, and we will eventually emerge with a more progressive and sustainable economy.
Solomon RC Ali is a private equity investor and host of the podcast MBA: Minority Business Access.
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