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January 13, 2020 | The Gig

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Last week ended with news of 35,000 jobs created in December. Big relief after a disaster the month before. As it turns out, Canada churned out 320,000 jobs last year – one of the best performances since the lights went out back in 2008.

Who’s working?

Well, almost all new jobs last year came in the services sector. The number of people who actually make stuff (including oil & gas production) fell by 50,000. The ranks of those who serve stuff grew by 367,300. Wow. And a big chunk of those were in the FIRE sector – financing, insuring or selling real estate.

But wait. It seems about two million people are now a part of the gig economy. That accounted for more than 8% of the workforce in 2016 and is estimated at 10% now (no official stats are available). A gig job is just what it sounds like. Here’s the definition: “self-employed workers who enter into various contracts with firms or individuals to complete a specific task or to work for a specific period of time.”

The biggest gig is IT. Nobody seems to want a full-time tech guy hanging around earning vacation time, getting dental benefits or contributing to a crappy group RRSP. And yet without robust technology, most corps would be dead in the water. Weird.

The proportion of gigers has doubled in the last 15 years. Think Uber. It includes free-lancers and baristas, musicians and roofers. Corporations would much rather have some incorporated dude come in and fix machines than have another employee costing payroll taxes and being impossible to lay off without grief and money. As labour regs and minimum wages become more onerous, the gig economy grows. So do the ranks of workers who never get paid, get sick, take time off to have babies, go on vacation or come to work looped.

Walmart gets it.

The world’s biggest retailer has just announced robots will be added this year to 650 more stores, bringing the number of locations to over a thousand. These machines prowl the store aisles, scan shelves and take inventory. Information is sent immediately to human employees who then order stock. What once took actual people two weeks to accomplish is now done twice a day.

Consultants McKinsey & Co. estimate half of all retail jobs will be automated away. And look at the banks. My office is a perfect example – I’m writing this sitting in an historic stone palace that Bank of Montreal operated out of for more than 100 years before they replaced it with an ATM next door and gave the place to me. Bank tellers are going. So are travel agents. Canada Post delivery people. Printers. Then realtors. Almost all newspaper and magazine jobs. Cashiers. Even soldiers.

The nature of work is changing daily. Selling stuff is going online and major corporations strive to shed costly, unpredictable and needy humans with robotics, automation and apps. This is a big reason why the gig economy is growing, full-time employment is more precarious and 70% of people no longer have corporate pensions.

Says McKinsey: “Activities most susceptible to automation involve physical activities in highly structured and predictable environments, as well as the collection and processing of data. In the United States, these activities make up 51% of activities in the economy accounting for almost $2.7 trillion in wages. They are most prevalent in manufacturing, accommodation and food service, and retail trade, and include some middle-skill jobs.”

Think about that. Half the jobs likely to go. The bulk of them in the service sector – which created all the new employment in Canada last year, and accounts for 70% of the American economy. Stats Canada, in detailing the gig economy, hints at the huge social impact this brings. Those in the bottom 40% of the income ladder are twice as likely to be shut out of full-time employment, as robots and labour cost-cutting prevail.

Okay, what does this mean?

First, everyone gets a vote. So expect more political upheaval as it becomes more difficult to find employment which is (a) full-time, (b) has benefits and (c) a career path forward. Already happening, as you know, which helps explain why Mills have been forming families a lot later than those promiscuous, lucky Boomers did.

Second, politicians catering to this angst and proffering solutions will get elected. So the inevitable outcome will be (a) more taxes, especially on property owners, (b) the embracing of some form of modern monetary theory allowing for much greater deficit spending by governments that will offer (c) a guaranteed annual income.

Third, bad news for housing markets. Prices will inevitably trend lower over time regardless of the level of interest rates. Also bad news for rich people, since we’re likely to see a wealth tax plus an inheritance levy.

Finally, for those with assets they foolishly want to keep, think about reducing real estate exposure and pumping up financial wealth. Houses are just too easy to target, and symbolize social disparity. Fully utilize government tax shelters like RRSPs, TFSAs, RESPs, RDSPs and LIRAs. They’ll be the last to feel political heat. Hedge against the dollar by maintaining about a quarter of your portfolio in US$-denominated assets. Invest, don’t save. What’s coming will stoke inflation and chew through savings.

Above all, live quietly among the masses. Consider driving a Kia. Yes, that bad.

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January 13th, 2020

Posted In: The Greater Fool

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