The trend toward replacing traditional employees with varying combinations of temps, contractors, outsourcing, and off-shoring is old news now. That gives us a bit of perspective to look at the situation and come up with some strategies for employees (and, increasingly, ex-employees) to deal with the situation.

I talked a bit about how these trends played out in the 1990s in part 1. Now let's look a bit at the underlying forces--and at what an employee needs to do.

I first became aware of these shifts in about 1990, when I read the book Powershift by Alvin Toffler. It talks about how changes in technology were empowering the individual, both as consumer and employee.

It's worth observing that these forces were (and are) having just as much impact on employers as they are on employees.

The company

Economies of scale were becoming less important, meaning that power was shifting away from big corporations and big banks; much smaller companies (with much smaller need for credit) could compete effectively. That meant that niche products could flourish, and it meant that entrepreneurs could set up small companies to make those products--and that workers could choose to work for one of those small companies, or even set up their own.

By the mid-1990s, everyone was talking about "virtual companies." The model of business was going to be like that of the film industry: A few people who brought money and management expertise (producers) would join forces with some creative types who had a vision (the director and screenwriter). They'd hire some "talent" (actors, cinematographers, composers, etc.) to create the product--perhaps outsourcing some of the work to specialty companies (special visual effects, perhaps), and definitely outsourcing things like shipping, receiving, catering, etc.

The virtual company of the future would simply be a handful of people with a vision for how to make some money. They'd come together, hire outside firms to do the mundane work, use their own unique talents and vision to create whatever it was they were creating, sell it (probably outsourcing the marketing, almost certainly outsourcing the sales), and then go their separate ways to their next venture.

The employee

Toffler presented a pretty balanced view that included the downsides of these shifts along with the upsides. Another book written about the same time, Megatrends 2000 by John Naisbitt, presented a much cheerier vision, at least for employees--a world where the tools that employers used to control employees would have simply melted away:

Considering the complex tasks of the information era and its elite labor force, the business leader’s job is quite a challenge.

He or she possesses no authority over people whatsoever. The military puts deserters in jail. In business, when you are deserted, you get two weeks’ notice. Maybe. Disobey a military order and you face a court-martial. In a seller’s market, if your ﬁrst lieutenant disagrees with your approach to the client, he or she can go out tomorrow and get another job that probably pays better anyhow.

(For an even more radical version of this vision, see The Sovereign Individual by James Dale Davidson and Lord William Rees-Mogg, a book which proposed that these same changes would empower the individual to the point that they would not only be out from under the thumb of companies and managers, but also largely free of the control of nations and states.)

An important cheerleader of this vision of future business was the magazine Fast Company. I first ran into the magazine in 1996, when I visited a relative who worked in human resources and had a copy on his coffee table.

I have an old piece of email where I described the magazine this way:

It's an odd, stressful magazine--targeted at employees and employers of the modern economy. The compositing of the articles is frenetic, with so many sidebars and related articles all mixed together that you just about can't read it linearly.

The whole focus of the magazine is on the employer/employee relationship and how the increasingly rapid change in the skills employers need renders employees obsolete in short order unless they constantly renew their training, education, and experience. It's a notion that I think is true, but not one that I'm really happy about.

The editorial stance of Fast Company seems to be that workers (the "better" workers) will come out way ahead as the economy shifts. That may turn out to be true, at least in periods when the economy is booming, but I'm not sure the advantages that top-notch talent will be able to wring out of the new economy during a boom will match their losses when the economy is slack. But, as the early 1990s showed, those losses are already being suffered, so it isn't like they have a choice.

I wrote that in August, 1998, ten years almost to the day before I lost my job in the winding down of a company that couldn't keep up with changes technology or changes in customer tastes.

For the cheerleaders, the key notion was that individuals (who used to be called employees) needed to take charge of their own careers. I read one good article that suggested the Condottieri (a kind of mercenary in Renaissance Italy) as the model that the people formerly called employees should follow. As individuals or small groups they should market themselves to companies, not as "labor" but as "solutions." Instead of just taking a "job," they should sign contracts that spelled out the work they'd do and what they'd get paid.

What happened?

For companies, things have gone rather according to the script. You don't hear about "virtual companies" any more, because the concept has gone mainstream. Just as Toffler observed, changes in technology have given small companies many advantages over big companies. If a couple of guys with a good idea want to produce a product or provide a service, it's not just possible to outsource whatever parts of the work the creators don't want to do, it's the ordinary thing to do.

For employees, the changes have been much more complex and uneven. We have certainly not come to the end of traditional employees. In fact, there are as many traditional employee-type jobs as there have ever been. (According to Civilian Employment data from the Bureau of Labor Statistics via the Federal Reserve Bank of St. Louis, there are currently 145.9 million jobs, down a statistically insignificant (except to the newly unemployed people and their families) smidgen from November's highest-ever level of 146.6 million.)

There was even a period (the peak of the dotcom boom) where demand for employees was so high that all sorts of people who had previously been considered unemployable entered the workforce.

Even at the peak, though, it was obvious that these forces worked against the traditional employee. For example, raises for existing employees were held down, in order to free up cash to pay signing bonuses for incoming workers.

The downside

As I said, though, the gains were unevenly distributed. Many employees, instead of finding themselves holding all the cards, have seen their jobs get steadily crappier.

Companies, squeezed between customers who demand the lowest possible price and investors who demand the highest possible return on their investment, have no choice but the grind out the most possible work for the lowest possible pay. They cut costs at every opportunity--wages, benefits, facilities, etc.

Well, at almost every opportunity--those top managers in a position to do so make sure that they are very well compensated indeed. In fact, for a modest number of elite performers--senior managers, key technical people, superstars in just about any area--the advantages that Naisbitt and others saw within the grasp of individuals have actually materialized. Many people out there can always find another job that pays better than the one they've got, giving them considerable control over their situation.

Although there are many individuals in that situation, as a fraction of the workforce they're insignificant. There are very few people that management doesn't view as easily replaceable--either locally, or at much lower cost in some low-wage country. With investors demanding it, managers are forced to behave this way, or else be driven out of business. (This is a principle theme of Robert Reich's latest book.)

So, where does this leave the employee? I'm afraid it leaves them just where Fast Company wanted to put them: in charge of their own fate, needing to take responsibility for maintaining their skills, constantly searching for the best opportunities, making whatever deals best advance their career.

The cheerleaders notwithstanding, for most people, it's a poorer situation than their parents had as employees of large corporations. Even so, it's worth listening to the cheerleaders, as a way to find the advantages--they're real, even if they don't overcome the downside.

The key insight is to realize that your career has almost nothing to do with your job. Whether you're an employee, a temp, a contractor, or an entrepreneur, you need to take charge of your career.

In the old days, careers and jobs were interlinked by the concepts of loyalty, job security, and seniority. Those concepts no longer apply to business situations. That's the downside--and you're stuck with it, whether you take advantage of the upside or not. So, how can you win some of the upside?

The upside

The big winners are those who can actually take full advantage of the new situation--the sort who have the temperament and the skills to create companies.

Even if you're not that entrepreneurial, you can be one of the people who works at them. That means having a useful skill, and it means having the contacts to find those positions.

You need to grab opportunities when they turn up.

In the old economy, it often paid to stick with your employer, even when other opportunities showed up. You might miss out on a signing bonus, your raise might not match what another company was offering, but there was some value in your pension, your seniority, a position that matched your skills, a boss who knew what you could do. In the days when a company would carry its employees through a recession, those things might well be worth more than the (possibly very short-term) gain of jumping ship.

Nowadays, there just about aren't any pensions any more, and younger folks don't even know what "seniority" used to mean.

Taking charge of your career isn't easy. It's not so simple as chasing the biggest salary--you need to find jobs that expand your skills, that expand your network of contacts, and that produce products that showcase your talents. But the days are long past when you can rely on your employer to manage those things.

You need to adjust your spending to account for the fact that no one else is going to carry you through a recession. (As a rough approximation, put aside any signing bonus, any raise you got for changing jobs, and any options that you get to carry you over periods when you're between jobs. If you don't change jobs, estimate what you could have made and put that amount aside--because you're stuck dealing with the downside, even if you aren't grabbing the upside.)

Managing your career might involve doing unpaid work (free software, volunteer for community organizations, etc.) when you're between jobs. Anything that helps you make contacts or that produces something you can point at as a good example of your work is worth doing when you're otherwise unemployed--it's probably worth doing some of that even when you are.

Right now (the beginning of a recession) is the hardest time to put these ideas into practice. It'll probably turn out to be a good time to see that the old model for employees is well and truly dead, though. For folks old enough to still imagine that there's such a thing as loyalty in business, that'll be worth quite a bit.

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It woke me up, even though I didn't realize it was an earthquake. (Felt and sounded more like the cat was scratching so vigerously as to shake the stuff nearby.)

I lived in Los Angeles briefly just before I moved to Champaign-Urbana. This is just the second earthquake that was strong enough for me to notice. Two quakes in 20 years is a big improvement over the six or so that I felt in the less-than-a-year that I lived in LA.

cool picture and cool post. Since I started working in the "new economy" I feel that companies really have no loyalty to their own employees so I don't have the need to be loyal when there is a better opportunity. It's true that my generation don't really care about seniority, either. Ultimately, I think that it's good that people are forced to change and learn throughout their careers.

Basically, I think you're right--it was always good sense to take charge of your own career. It just wasn't important from the 1940s through the 1980s.

When things were changing (all through the 1990s), it was pretty common for employees (especially older employees) to let employers talk them into making sacrifices in the name of a loyalty that no longer went both ways. I don't think there's much of that going on any more--and I think companies have given up a lot in exchange for a little cost flexibility.

I'm still hoping that companies will eventually come to regret that they've forced everyone to be a mercenary instead of an employee, but I'm not really expecting it any more.

Oh, and yeah--who in their right mind would pass up a chance to get Leonardo da Vinci to do the illustration for their post?

My current job outsourced half its work to India. This work used to pay $11-12 an hour, full benefits: medical, dental, 401K, vacation and sick time, national holidays and weekends off. Employees were recognized (at least verbally) for working weekends, learning new skills, or just shoveling out a large load of work in a quality manner.

The job is now on production plus a minimum 98% quality checks; both have to be met weekly to keep your job. (We get split personality emails throughout the day: Work faster! Slow down, pay more attention to quality! Work faster!) The production requirement was raised 3 times this year. Pay is 6-1/2 cents per line. We have to stay online when schedules, even when the work slows down, but are only paid for actual lines produced.

Our new medical is $300 a month, $3,000 deductible, covers 70%, with no pre-existing condition coverage for 1 year.
No vacation, sick time or holidays, just a "leave bank" based on hours worked. Get the flu, have surgery? No days off for you this year!. All schedules require 1 weekend day, same pay as weekdays. The only holidays they "recognize" are Christmas and Thanksgiving, which pay double per line. You don't take them off without approval (20 slots for 180 employees). Work on holidays is normally just a trickle, and you miss family time to sit there, only being paid for lines produced.

"You people should remember how easy you are to replace. There are a lot of people looking for work." My current boss said this in a staff meeting, when asked why earned leave time couldn't be approved when we needed it. Seems leave can only be taken based on workload, at the company's discretion, not because an employee needs it for something foolish like dental work or a sick relative.

To complete our frustration, we were asked to sign up for extra hours with incentive pay to cover "Vishnu." Seems this is a religious holiday in India. Brief investigation showed that 1) Our Indian counterparts have their life priorities straight, and 2) They have more cojones. The company attempted to "make" them work on Vishnu last year. Their team lead politely explained how nobody in their right mind was going to put a day at work ahead of this cherished time of spiritual and family celebration. She was ignored. Her team members listened to the requirement with respectful attention. Then they all stayed home, reappearing promptly when the holiday was over. Namaste, my friends, and thank you for the life lesson.

In the 70s I got laid off and out of desperation went to a temp firm. It supported me for 2 years, until I foolishly reentered the "stable" job market. I looked on a couple websites: the temps are offering medical, dental, 401K, vacation and holiday pay, flexible scheduling. But what if the work drops off and there's nothing for a while? Well, that would be like... like... where I am now, only with a better schedule and benefits! If I am going to be a wage slave, I must choose my masters more wisely :)

You'd be surprised how many companies still try the old loyalty routine.

I was an independent contractor for a company that treated us like employees (deadlines, mandatory meetings etc) with crappy pay and no benefits AND tried to get us to catch their vision for the empire they were planning to build. It really cracked me up. I stayed just a few months (gained a LOT of contacts for my rolodex) and a turn in the market wiped them out after a while. :)

Although managers as a group have suffered just the same circumstances as other employees, many individual managers have never lost a job, so they've been able to ignore the reality of the current situation--they may sincerely believe that loyalty and seniority still mean something.

Many others just have the sorts of personality that can take advantage of people by pretending that that loyalty is important.

Actually that's a little unfair. I'm sure in many cases the managers sincerely feel that loyalty is important. But the reality of business is that, when push comes to shove, they have to take whatever actions will maximize profits, despite their personal feelings on the matter.

Given that, employees need to have the same attitude: loyalty is all well and good, but in a business situation, employees need to act in furtherance of their own career. Anything else is to get stuck with the downside of the current situation without taking advantage of the upside.

Philip: your articles show that you are a software engineer, as your career choice has seen outsourcing and H1-B visas taking over your jobs. You chose to not be a victim - good for you. Your article is right on. Now if only I could purchase affordable healthcare and not worry about COBRA running out, or my husband's pre-existing condition not being covered. This would help it be easier to have more control over my career.

The best thing that has happened to my husband and I were experiencing two layoffs. We handle our finances very differently from those that have cushy jobs and don't fear that they are expendable. It is only a matter of time, we will be ready to move on, they will be selling of their boat and homes wondering why them.

Yeah, I was caught in layoffs twice early in my career. After that, though, I had a good 20-year run at my last job. I'm kind of glad it wasn't the other way around. Those early layoffs taught me a lot about what job security had become.

Health insurance is a big deal. I'm still riding on my former employer's insurance (part of the severance package for people with so many years in). In converts to COBRA in a few months. Then I have to try to get private insurance.

As a back-up, if you exhaust your COBRA, you're guaranteed coverage under HIPAA, even if you have preexisting conditions--but it's not guaranteed to be affordable, and it's not guaranteed to be good insurance.