Tag Archives: economy

A bigger gig economy

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The gig economy is a system where people work as freelancers or take on side jobs for companies instead of having a regular full‑time position. Uber drivers are a great example of this. There are a few reasons why I think the gig economy is going to grow:

  1. High prices are making a side hustle of some sort essential if you want to enjoy things beyond what salaries allow.
  2. Companies like the structure because pay is based on performance rather than a set salary.
  3. Entertainment is shifting to live performances, gigs, as a primary form of earnings. Getting your music to stream is not enough to keep most musicians going without a concert tour.
  4. A trend now in social media, is to see a lot of affiliate marketing. Only the biggest of social media stars can make this a full-time living. For the vast majority affiliate marketing is nothing more than a gig economy.
  5. We are going to see a wave of AI trainers needed to train robots to do everyday skills. Work as a maid in a hotel? We’ll pay you to wear a GoPro for two weeks while you work. That video will train an AI that’s going to take your job less than a decade later.

Companies are afraid to hire full time staff. Money is better spent on technology than on training a human on a fixed salary. As a result, the gig economy is just going to get bigger and bigger.

UCI rather than UBI

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As AI and robotics continue to scale at unimaginable speeds, with AI getting exponentially smarter and robots increasingly more agile, we’ve got to realize how many jobs will disappear in a very short time period. This isn’t a gradual transition, it’s not a move from one field to another like farmers transitioning into factory workers during the industrial revolution. It’s a massive shift from human labour to machine labour that the world’s economies simply aren’t designed to absorb.

I’ve seen a growth in the number of people talking about the need for Universal Basic Income (UBI), but I fear this isn’t enough. I fear that the idea of giving millions if not billions of people a basic income, but no real means for most of them to supplement those incomes as an insufficient solution. We don’t need UBI, we need UCI – Universal Comfortable Income. It’s not going to be enough to give people a basic survival income. We are going to need to see governments, and maybe even companies, share their resources and wealth with people, or else who is going to have the resources to buy the products and services AI and robots will offer?

The potential for dissatisfaction and ultimately unrest seems scary to me. A world with a couple dozen trillion-dollar companies, and a handful of trillionaires running them, is also a world with vast populations of people eking out a subsistence lifestyle, unable to do more than meet their survival needs. A basic income, requiring additional sources of income to appreciate the offerings of a fully automated economy, will not survive without a revolt for too long.

Maybe I’m wrong. Maybe there are other solutions to this problem. Maybe I’m too bullish about to how far things will advance in a short time. That said, the potential for the scenario above to occur in the next decade is not zero. It might be a pessimistic bad-case or even worse-case scenario, but it’s possible… and scary. If things advance as fast as I think they will, we can’t continue to have UBI conversations, we need to move the goal posts and start really thinking of UCI.

Feeling the financial crunch

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I just spent $155 on groceries that probably would have cost about $100 between 2-3 years ago. I know that prices go up, and I understand there are global factors like the price of oil that will elevate prices significantly. I get it. What I don’t understand is how lower middle class families and poor families are making ends meet?

The thing about the price of necessities going up that is often missed is that as a percentage of income, it significantly affects poorer people more. Furthermore, wage increases are negatively affected too. A person working a full time minimum wage job in BC Canada will make less than $40,000 in a year. When wages go up 3% in a year, that minimum wage employee’s salary goes up to $41,200, whereas the same 3% increase for someone that was making $100,000 sees their salary increase to 103,000… that means the higher salary person is making $150 a month more than the lower salary person for that year.

Of course, both of those workers are in a deficit when inflation has sent prices skyrocketing above 3%, but it’s clear to see how this is disproportionately affecting the poorer working class. And so again I wonder, how are these families making ends meet? What sacrifices are they making? What support are they needing that they didn’t need 3 years ago? When the financial crunch is felt, it is felt most by those who have already been struggling.

Fiscal year end squeeze

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Globally, we’ve seen jumps in prices in the last year that are unsustainable. It seems like everything in the grocery store is more expensive, and prices seem to continue to creep up. The impact must be felt around the world, and cost rises like this unjustly affect people below and near the poverty line more than they affect anyone else.

Now throw on top of this the loss of a job for the main breadwinner in the family, and the results are devastating. Unfortunately a lot of people are about to lose their jobs.

We are reaching, in the next couple months, the fiscal year end for a lot of large corporations, and two related patterns we’ve seen a lot of recently are going to repeat.

  1. Profits over people
  2. Massive layoffs

Corporations care about pleasing shareholders and maintaining stock value over caring for the people who work for them. This is the ugly side of capitalism. Eliminate thousands of salaries and suddenly the balance sheet proves to be more profitable. Never mind that these are people’s careers and livelihood that are being cut short. And never mind about loyalty to the company.

Cut. Save. Profit. And in a year, repeat.

And we aren’t taking about a few dozen jobs, we are talking about tens and cumulatively hundreds of thousands of jobs worldwide. We are talking about people with mortgages, people losing health care, people who were already living paycheque to paycheque, suddenly jobless. People who thought they were going to be ok, suddenly seeking a job in a challenging market where thousands like them are in the same situation.

Beyond purely meeting shareholder targets, AI and robotics are also taking jobs away. Companies are choosing to use the former salaries of employees to buy chips and memory storage. Manufacturers are replacing employees with robots that don’t take breaks or sick leave, and which don’t need to end their shift after 8 hours. On top of shareholder pressures, there are pressures to eliminate jobs and have the AI Revolution transform the workplace more dramatically than the Industrial Revolution did.

I think this year we are going to see this happen at an alarming scale. The irony is, the large scale layoffs that I see about to happen, added to soaring prices, are going to drastically affect the spending of consumers who buy the products these large companies need purchased. However, many of these billion dollar companies are circumventing this too, by committing billions of dollars to purchase goods and services from each other, again inflating their perceived profits for shareholders.

All this to say that I see a lot of short term financial pain for a significant number of people in the coming months. I’m predicting the fiscal year end squeeze is going to be a hardship like none we’ve seen before, and a lot of people, a lot of families, are going to struggle as a result.

Margins over manpower

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Amazon just laid off over 14,000 people. According to Beth Galetti, Senior Vice President of People Experience and Technology at Amazon, who wrote that they are ‘Staying nimble and continuing to strengthen our organizations’, “The reductions we’re sharing today are a continuation of this work to get even stronger by further reducing bureaucracy, removing layers, and shifting resources to ensure we’re investing in our biggest bets and what matters most to our customers’ current and future needs.”

What are the ‘biggest bets’ they they are investing in? Chips. AI chips. Profits before people. Margins over manpower. The human equation in a company no longer matters. People are as expendable as office supplies. Need cost savings? Fired employees save a lot more money than reducing the cost of paper and staples.

The shareholder model of capitalism is slowly collapsing. It’s the middle and upper middle class that is getting laid off. Meanwhile, large companies like Nvidia invest billions of dollars in Open AI, and Open AI takes that money and buys Nvidia chips. Simultaneously, all these companies lay off staff to amplify margins, buy more chips and grow even larger.

Top executives who are already making millions hit their shareholder targets and get bonuses. Meanwhile regular employees face layoffs and have no job security. You think your $200,000 job is safe? Only until the next quarter’s earnings are going public, or until the merger is completed after your small company is swallowed up by one of the big guys.

If it was just Amazon, that would be one thing, but similar reports of layoffs have recently been announced at IBM (9,000 jobs in the US alone), UPS (34,000 jobs), Nestle (16,000 jobs), Intel (24,500 jobs)… the list goes on. What happens to the global economy when hundreds of thousands of people become jobless while large companies recycle their money, reinvesting in each other in circular deals where funding is promised back to the investors in product purchases?

What happens in a world where profits and margins matter more than people?

Price hikes

Everywhere I turn I’m surprised by the price of things. Groceries, restaurants, parking, shoes, alcohol, no matter what I’m looking to buy, prices seem significantly higher than just a couple years ago. It’s not subtle, it’s very noticeable.

I wonder if the percentage of people living below the poverty line has increased? How are lower-middle class families doing? How many houses have been sold due to interest rates being too high? How many people are commuting from farther away from work than they hoped because rentals in cities are too high?

How are people making minimum wage making ends meet? How many kids in their 20’s and even 30’s are living at home with their parents? How many are renting with no hope of coming up with a deposit to buy a house?

Prices don’t seem to go down either, even when the economy and interest rates lower, prices stay hiked up… they don’t increase as fast, but they also don’t lower. New lows are set and we are forced to settle with the new hikes as the new normal.

It doesn’t seem sustainable.

Empty Malls

We went to the mall nearest to my parent’s house and I was shocked to see about 60% of the stores closed. The grocery store and drug store were busy, but while my mom waited for a prescription I went looking for a coffee, and the rest of the mall was almost empty. The closest I got to finding coffee was a Subway and Booster Juice, both with no customers in the stores. Both had shuttered, empty sores next to them.

The strip mall and small malls that we’ve known for decades are dead. There won’t be a revival. Amazon, eBay, Etsy, and other online shopping sites are in direct competition with these malls and unless someone is pulled to these malls by the need for groceries or a prescription, none of the other few remaining stores will get a visit.

That said, all malls won’t die just the stand-alone ones. The newest form of densification in cities is to build a mall or commercial level shopping below high rises… stack the customers on top of the shopping spaces and make the mall convenient to visit. You don’t even need to put on a coat to visit the mall, it’s just a trip down the elevator, or a walk through an underground parking lot.

Goodbye strip mall. They will all be torn down and revived only when a few hundred condos are built above the mall space. You want customers in your mall? Make the mall an extension of their living space. Until that happens, you’ll see more and more empty, shut down, and abandoned stores… Malls that are mere shells of what they used to be.

Price hikes and profits

I saw an article recently that said inflation has dropped to 4.2%, the lowest since August 2021. Yet our grocery bills are up 9.7%. What’s disturbing about this is that many grocery stores (or their parent companies) are reporting record profits. So are oil and gas companies while I’m paying $1.93 per litre of gas.

Some people can no longer afford their mortgage, others are being priced out of the market due to increases in mortgage rates, and yet companies are giving their shareholders huge returns. These price hikes we are seeing at this time are proof that the capitalist market ruled by profits is broken.

Shareholder good exceeds public good. Profits, not people matter. And those who can afford to be shareholders grow richer and richer while those who can’t afford the extra cash to invest suffer as their dollar is worth less and less… whether it’s mortgages or the price of eggs, what a dollar used to get you doesn’t go as far today as it did last year.

Got a 5% raise? That sounds great except food will still cost you more to buy than you had to pay last year, before your raise. In other words, your income is not growing as fast as your living expenses. And unless you are a shareholder getting great returns, that won’t change any time soon.

I don’t know how this changes? I just see a larger and larger gap between the haves and the have-nots, and the gap is widening. Is this sustainable? No. But what’s the solution?

Food and fuel insecurity

Since the pandemic started we’ve seen shortages in both consumable items and merchandise, which we haven’t seen before in my lifetime. I recently paid over $2.40 per litre of gas, and can remember being upset at having to pay over $2 not that long ago. Early in the pandemic it was toilet paper that was scarce to find, but that was driven by fear of shortages. More recently I’ve seen the back of empty shelves where I have not seen them before, ranging from items in the butcher section, to baking items, to well known products that usually seem to have an endless supply.

And I think things will get worse before they get better.

Parts of Europe are being deforested by concerned citizens collecting firewood, by people uncertain if they will be able to afford heating fuel in the coming winter. Food banks are reporting record number of people needing their service. And certain items including basic food items will be both in short supply and more expensive than ever before.

This is not fear mongering, and it’s also not all doom and gloom, end-of-the-world-as-we-know-it, but life in general is going to get more expensive with less purchasing power and choice for a while.

How will this pan out over the next few years? It’s hard to guess because the issues of inflation, money devaluation, questions of war, and a shaky stock market are far beyond my understanding. What I suspect is that this global economic downturn is not something we will just have to deal with this winter, but something that we will deal with through all of 2023 and beyond.

We can live without our favourite brand of cereal in our grocery stores. We can wait longer than we hoped for an appliance or a new car to arrive after ordering it. What we can’t do is sustain gas and food prices that make it impossible for lower-middle class and poorer families to sustain themselves on their inflation-diminishing salaries for an extended period of time… while grocery stores and oil companies generate record quarters of profits. At what point do large corporations recognize that their record profits will fall when a significant part of the population has no buying power?

My fear is that it has to get a lot worse before significant system change will happen. In the mean time, prepare to watch your purchasing power fall over the next year and beyond.

Nationalism vs Globalism

I remember reading The World is Flat back in 2006 and thinking about how our world had changed.

I hired a patent lawyer in India shortly after that and paid less than 10% of what I would have paid in Canada (a story for another time). I recognized the value of outsourcing, and seeing the entire globe as a single supply chain. It was a time of breaking down walls and getting access to whatever you needed, wherever you needed it, faster and cheaper. We have benefited greatly from this as consumers of products, many of which are made of component parts that are manufactured in different countries around the world, then delivered to our local stores, or dropped off at our doorstep.

But the tides are changing and we could very well see a move away from the globalization we’ve been benefiting from. Shortages and supply chain issues have been issues across the globe. War, fuel costs, inflation (or stagflation), compounded with severe weather systems affecting crops, have all led to things we haven’t seen in decades: Jumps in prices, delays in delivery, and shortages in products leaving some shelves bare in our grocery store.

This is all leading to a shift from globalism to nationalism. Why would a country export a product desperately needed in their own country? Why rely on a component part being made slightly cheaper in another country when shipping and supply are causing delays in production of the final product? What is a country to do when neighbouring countries don’t trade enough food, because they are focussing on feeding themselves? And the food that is coming in is very expensive due to increased transportation costs.

All these changes lead to a more nationalistic approach. An approach counter to the globalization that brought us such prosperity, with an endless supply of cheap food and goods. Is this the end of globalization? Probably not, but it could be the start of a rebalancing where countries get more nationalistic, and things get tougher for a while.

High prices, shortages of products, and a focus on countries protecting themselves from dependencies on other countries…dependencies that we relied on to create a global economy that brought us better, and more affordable products faster than ever before. Things really might get worse before they get better. And while I believe that there will be a return to globalization, I’m not convinced it will happen any time soon.