Some Investment Lessons and Advice for Professionals in the Age of the Gig Economy

The Paradox at the Heart of the Global Economy

There is an inherent paradox at the heart of the global economy and that is, despite the good economic growth and boom in some economies worldwide, the average person on the street feels as though he or she is missing out on the benefits.

For instance, take the case of the Indian Economy. It has been growing consistently for the last several years and yet, surveys by the RBI or the Reserve Bank of India and other institutions point to how consumer confidence in the economy has slipped from its heights in the last four and half years.

Indeed, the promised Acche Din have materialized as far as the economic growth figures are concerned, but have not made any difference to the person on the street.

This is not restricted to India alone and many experts in reputed financial and economic publications are writing and commenting on how while their economies in the West and elsewhere are growing; wage growth and disposable incomes have been either flat or declining over the last decade or so.

While some economists attribute this to the decrease in the productivity of workers which translates into lower earnings for the same number of hours worked, others point to how the gains are increasingly going to the top earners and the rich whereas the middle and lower income brackets are witnessing declining incomes measured in real terms and on relative growth figures. In short, the paradox of the global economy is that the rich are getting richer and the poor are getting poorer.

Reasons for Declining Productivity and Decreasing Wage Growth and Real Incomes

While this is not intended to be a Leftist polemic on the topic, the intention here is that there are solid and sound economic reasons for why this is happening. To start with, as mentioned earlier, productivity has slowed down due to the lack of the expected bump from new technologies.

In other words, despite the ongoing economic transformation brought about by automation, workers lose out since either their jobs are made redundant or they are paid less than before. In addition, with the rise in the Freelancing or the Gig Economy, there are important economic reasons why booming economies do not mean the same for all professionals.

To explain, while unemployment is low and workers are employed, one has to look at how they are employed or in other words, what are the kinds of jobs they are doing. For instance, employment statistics and job growth figures do not capture the fact that many professionals are now self employed and since they report themselves as being employed, statistics count them as such without capturing how gainfully they are employed.

Thus, a person can be employed for a few hours every day or a few days every week and earn far less than what he or she was earning in a full time job. This skews the growth figures since the gains here are all accruing to the owners and the firms employing them rather than the workers.

Booming Stock Markets and Professionals

While these are some reasons for growth not benefiting all, the other aspects such as the tendency to invest less and hoard more by the top gainers means that there is less capital available for gainful investments.

This explains why the stock market is booming since increasingly, almost all of those with excess savings tend to invest in the stock market rather than in new plants and new industries and companies.

In other words, we as an economic whole are relying on speculation instead of actual and real economic growth which means that while growth figures are impressive, the gains go to the speculators rather than the actual wealth creators.

This is a trend that has been evident since the 1970s and which picked up pace during the 1980s and the 1990s culminating in the Global Economic Crisis of 2008. It is indeed sad that despite the worldwide slump that followed, everyone including all income brackets have not altered their savings and consumption patterns and are instead, carrying on as before the crisis.

This has implications for the future since the recurring patterns of economic boom and bust cycles mean that at some point, we would be again subject to the same cyclical crises.

Preparing for the Next Crisis by Sound Investing and Saving

Thus, it is our advice to all the readers that they must learn the lessons from the previous crises and invest and make career choices accordingly. While we do not say, even for a moment, that stock market investments must be avoided, it makes sense for all of us to mix sound investing with equally sound employment so that there is a buffer when the next crisis strikes.

This means that both capitalists and professionals must choose to alter their investment patterns so that wage growth becomes the norm and stable and secure employment is supplemented by a “rainy day” approach to jobs.

Indeed, some trends in recent years suggest that this is already happening as can be seen from the way in which professionals are driving Uber cabs and leasing out their homes on AirBnB to supplement their regular incomes.

In addition, stock market investors have also become more knowledgeable and wise after the crises of the last decade and are putting their money on Blue Chips and other safe and reliable stocks instead of speculating endlessly.

Conclusion

To conclude, it is indeed the case that with the rise of part time jobs and the Age of the Gig Economy, it makes sense for professionals to follow sound investing and saving strategies so that even when they are unemployed, they have something to fall back on.

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