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Economy

No, It's Not The End Of The Wage System

Are new technologies making the wage system obsolete, turning employees into independents? No, workers aren't so much freelancing as moonlighting.

The office lives in Japan
The office lives in Japan
*Augustin Landier and David Thesmar

-OpEd-

PARIS — Over the course of just a few years, a bold new assertion has become conventional wisdom: that new technologies are rapidly making the wage system obsolete. The worker of the future will be a freelancer, the argument goes, accumulating jobs at the whim of possible clients and his desire to work. New technologies clearly favor this type of organization, because it puts the tasks that need to be handled in the hands of workers who can tackle them immediately.

This "financialization" of work — the idea that workers can, at any time, rent themselves to the highest bidder — was the dream of trade union centers expressed by political economist Gustave de Molinari during the 19th century. It's a utopia that dates from before the emergence of exchange platforms and that became a reality with the Internet and Big Data. It's a reality that will become generalized, the sharing economy experts predict.

Contradictory images

Looking at the creation of companies, the data confirms the impression that we're seeing an entrepreneurial revolution. In the U.S., the total number of companies rose by 30% between 2002 and 2012. In France, the number more than doubled over the same period. As Jean-Noël Barrot notes, this boom in the number of young companies is the result of two opposite forces. On one side, companies being founded with at least one employee have been in continuous decline for 20 years. On the other, there is a real boom of companies with no employees, both in France and in the U.S.

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Source: Wikimedia

But looking at employment statistics, the so-called end of the wage system that has been forecast so many times sure is taking a long time to become apparent. In the U.S., the number of independent workers has been decreasing slightly since the early 2000s, from 11% to 10% of the total work force. In France, the share of independent workers has risen from 9.5% to just 10% since the mid-1990s, according to the French National Institute of Statistics and Economic Studies. We simply aren't seeing the end of the wage system.

Secondary income

How do we reconcile the contradictory notions that the statistics suggest? The answer is simple. The new paradigm is diversification, entrepreneurship as a complement to the wage system. Examples are easy to find: journalists who host round-table discussions, university teachers who work as advisers, deliverymen who work as taxi drivers on weekends. And, of course, there are also those who make their cars and homes profitable via collaborative platforms, without relying on them for their primary source of income.

It's not so much freelancing that is becoming widespread but moonlighting: earning a stable salary but supplementing it with a secondary income as an independent. We can expect many upsides to this evolution. The security of a salary allows workers to take risks with their independent activities. When millions of individuals explore new ideas, the probability of coming across new economic opportunities only grows.

*Augustin Landier is a finance professor at the Toulouse School of Economics. David Thesmar is a professor at HEC.

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