Economic Development in the 1099 Economy

Temporary work is becoming the norm. Economic developers must change their focus if they want to create jobs in this new economy.
by | May 2011
 

My daughter's just about finished with college and has started the job search. It's both exhilarating and frightening at the same time, of course. Yet it's yielding a few surprises: First, there actually are jobs out there. Second, they're not exactly, well, jobs.

Most of the entry-level jobs she’s running across in her field are "1099 jobs." In other words, you don’t become a full-time employee with benefits. Rather, you simply enter into a contract with your employer to provide work. Maybe you have regular hours and maybe you don’t; maybe you have a workstation and maybe you don’t. In any event, you are a contractor, not an employee -- so at the end of the year you get a 1099 form from the IRS, not a W-2.

Having watched both her parents work in the 1099 economy throughout most of her childhood, my daughter isn’t particularly afraid of 1099 jobs. But she, like everybody else in the so-called Millennial generation, is a little uncertain about where this will lead. How stable is 1099 work? Will she ever have a full-time job? What will she do about medical insurance once she turns 26 and is no longer eligible to be on my policy?

These questions boil down to this: Is the 1099 simply a temporary situation because employers are skittish about the future? Or are we seeing a permanent change where most people freelance and only a few have full-time jobs?

This is a good question for economic development practitioners to ask because the answer will shape the future of the business. After all, economic development usually revolves around the whole idea of "jobs" -- growing them, stealing them, adding them to the local economy and making sure constituents have them. Oftentimes, economic development success is measured in terms of the number of jobs created or saved, and economic development deals between government agencies and private companies are based on jobs as a metric.

What happens when there really is no such thing as a "job" anymore? How do you practice the art of economic development?

The answer is that even though there may not be jobs in the conventional sense, there is still work. That's the whole idea of the 1099 economy. It's just a different way of organizing the economy. Businesses need economically valuable work to be done, but instead of employing people full-time and permanently, they contract with individuals to do the work temporarily. The work ebbs and flows, the businesses come and go, and the 1099 employees work for a while and then move on. It’s a lot more fluid -- and seemingly uncertain -- than the traditional economy.

What this means is that economic development efforts become much less about individual businesses and much more about the underlying infrastructure -- the dynamic flow of business growth entrepreneurs, financiers, public infrastructure) as well as the labor force (skill levels and the density of the labor supply). The "ecosystem" of economic growth becomes more important because a fluid economy requires this system to be operating at all times -- and most of it is in the community or the region, far beyond the factory gates.

Some of America’s most prosperous economic sectors operate this way. The entertainment industry functions this way not only in Los Angeles, but in New York and other cities as well. Everybody’s a "jobber," moving from project to project. Silicon Valley works in a similar manner, with highly skilled employees floating from startup to startup.

As a result, savvy economic developers who want to tap into the 1099 economy must recognize that they must focus on a different version of the basics. Visiting existing large businesses in the community remains important because your largest businesses are probably where your future entrepreneurs currently work. But you also have to know the subtle ebbs and flows of your local economy, especially where the clusters of small business activity are located. You have to stay in touch with your educational community, especially your community colleges, to understand what skills your labor force has and needs. And, of course, you have to read all those Craigslist ads that my daughter is reading.

It’s a much more ear-to-the-ground approach than traditional economic development because the 1099 economy is basically an ear-to-the-ground economy. Traditional statistics may tell you that no jobs are being created and unemployment is high, but somewhere in your community, somebody’s doing work.

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