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Creative Destruction and the New World of Work

A version of this post originally appeared on Pacific Standard’s The Future of Work series, supported by The Rockefeller Foundation.
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Nearly 75 years ago, Joseph Schumpeter popularized the term “creative destruction” to describe how businesses evolve over time: Enterprises with new or improved products, cheaper processes, and modern practices displace companies using older technologies and means of production. With the rapid onset of 21st-century innovations in technology, we’ve seen this process play out as historical precedents would suggest. Creative destruction has transformed the landscape of businesses and jobs.

“Creative destruction has transformed the landscape of businesses and jobs.”

Over the past decade, entirely new job classes and lines of businesses have emerged offering workers new livelihood opportunities they may never have imagined. Not so long ago, no one had the option to earn their living as an app developer or to open a burgeoning business in mobile repair. In parallel, we’ve seen the deterioration of many jobs in the formal and informal sectors: manufacturing workers being replaced by machines or waste-pickers losing work to the increased use of incinerators.

Leveraging these transformations to promote opportunity, mobility, and sustainable development will continue to pose important challenges for the global community. Despite their imminence, we have the benefit of drawing on the lessons learned by previous generations to meet these challenges. Yet some of the more recent innovations fueled by the Internet and mobile technologies are introducing phenomena unique to our time. Twenty-first-century technologies are doing more than changing the landscape of jobs available to workers; they are fundamentally changing how people connect to jobs and to work.

Consider how technological advances have changed the world of work for cab drivers or artisans. The nature of these jobs remains unchanged, but the entry points and opportunities associated with them have shifted dramatically. Through Uber or Lyft, drivers can connect directly to clients without a formal business relationship with a taxicab company. Similarly, on Etsy, artisans can open a digital storefront in minutes, joining millions of vendors and shoppers from nearly every country.

This technology-fueled entrepreneurialism has empowered individuals to pursue work and compose their careers differently. Workers are now complementing traditional jobs with freelance work or combining freelance jobs to create a portfolio of work as a main source of income. In fact, a recent study commissioned by Freelancers Union and ElanceoDesk indicates that, in the United States, 53 million Americans—about 34 percent of the workforce—are doing some kind of freelance work.

Companies, too, are benefitting from the facility with which they can connect to workers. Consider Amazon’s Mechanical Turk. This business runs from an online platform, which connects workers to requesters, or businesses that populate their website with tasks that can be completed online. Another example is CloudFactory, a social enterprise that received an investment from The Rockefeller Foundation’s Digital Jobs Africa initiative. Its offices in Nepal and Kenya market to companies, often in the health-care industry, that need support converting paper files into electronic record systems. Similar to Amazon’s platform, the company disaggregates its client’s projects into micro-tasks that it outsources to workers virtually.

“How can we prepare the 21st-century workforce to develop the skills required to succeed in a freelance economy?”

As these examples illustrate, increased connectivity has led to new business models and modes of employment that are catalyzing significant shifts in how we characterize the relationships between employer and employee or vendor and client. With technology re-defining these relationships, the global community will face important questions regarding the policies and practices we’ll need to promote inclusive economies: How can we prepare the 21st-century workforce to develop the skills required to succeed in a freelance economy? What roles and responsibilities can new platforms or businesses assert to promote more equitable access to opportunity and mobility for workers? How can we harness greater connectivity to promote more opportunities for more people?

In the U.S., we’re seeing some of these questions bubble to the surface with great contention. In San Francisco, the labor commissioner’s office ruled that a Uber driver should be considered an employee, not a contractor, which elicited a firm debate among those vested in the freelance economy. In a separate but similar case related to Lyft, a judge asserted that the presiding jury would “be handed a square peg and asked to choose between two round holes,” further arguing that “the test the California courts have developed over the 20th century for classifying workers isn’t very helpful in addressing this 21st-century problem.”

With technology proliferating at an increasingly rapid pace, we face a pressing need for modernized labor laws, systems, and organizations that will promote greater resilience and inclusion. Creating these will require us to re-frame, re-imagine, and build upon Joseph Schumpeter’s notion of creative destruction. This is both a challenge and an opportunity for the 21st century.

For the Future of Work, a special project from the Center for Advanced Study in the Behavioral Sciences at Stanford University, business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace, and what anxieties and possibilities they might produce.

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