Are Portfolio Careers Now the Safest Form of Employment?

January 3, 2017

I recently facilitated a panel discussion about work in the twenty-first century, with particular focus on portfolio careers.  Something one of panelists said stopped me in my tracks, ever so momentarily.  It stopped me because while I spend a fair amount of my time thinking about the world of work and how it is changing, and while a lot of that thinking is about portfolio careers, freelancing and the diverse ways by which people make a living and relate to the “employer” (however that relationship is defined), the point that was made challenged the received wisdom that I have simply accepted throughout my years as a career coach.

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A portfolio career is about spreading the risk, not having all your eggs in one basket

The panellist, a person whose portfolio of activities comprises eight separate income streams, said that in his view a portfolio career is more secure than traditional employment.

And there am I trying to tell people that while it may not be secure, for many people the portfolio career is the best work pattern for reasons of lifestyle choice or pragmatic need.  I never really thought of portfolio careers as a smart move for the risk averse. When I work with people for whom a portfolio career seems sensible, it’s often because permanent (full or part time) employment prospect for people with their capabilities are rare. I don’t think I’ve ever suggested to someone that a portfolio career is the way to go for someone seeking financial security.

The reason is fairly obvious. When faced with starting out on your own or finding a job with a regular, known, salary from day one, the salary appears to be a safer proposition.

In the longer term, however, employment is precarious, and living in a world where redundancy can come with short notice, leaving a person without any income, is a reality of the twenty-first century.

So when my panellist pointed out that he no longer has any worry about finding himself without any income, because out of eight activities, even if some of them declined or went through a bad period, he’d still be earning from the others and would have time to fix or replace the failing ones, it made total sense.  Being self-employed is safer than employment.

Why does this notion turn our received wisdom on its head?  I suspect it’s about how society has viewed self-employment pretty much since the beginning of industrialisation. Working for a well-established, successful company was seen as secure employment.  Why has it been harder to get a mortgage or insurance as a self-employed person than as an employee? Because the actuaries have worked on the basis that a self-generated income is riskier than a pay cheque every month from a corporate entity.

That’s all changed now.  Employment is not a guarantee of security.  It’s just a guarantee of predictability for the duration of the employment. You know how much you’re going to earn, but you don’t know how long you’re going to earn it for.  On the other hand, self-employment means that you know you will always be working (as long as you choose to) you just don’t know exactly how much you will be earning.

Building a portfolio that manages the overall income stream is where the art of the portfolio careerist comes in.  My panellist could quite possibly develop one or more of his current activities into a successful business, taking up all of his time if he wanted it to, but he has decided that to put all his eggs in one basket in this way would diminish the security that his portfolio provides.

In other words, this portfolio career is specifically designed to offer a level of job security that he couldn’t achieve if he were employed by a large company.

 

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Are you part of the world’s second largest economy?

November 18, 2011

Do you know the name of the world’s second largest economy?

It’s called “Systeme D” and it’s what you might otherwise know as the black economy, but that would be to characterise it as individuals selling dodgy gear out of the back of a van, or pirate DVDs in pubs.  All that sort of thing is a part, but only a part of Systeme D, a global system worth an estimated $10 trillion each year.

The name “Systeme D” derives from the term débrouillard – a word that describes those people who are willing to take a risk and operate outside the stifling legitimate system.   These are the people that come up with clever ideas and work out how to implement them, they are adaptable to changing circumstances, finding ways around obstacles and, importantly, they don’t let official regulations hold them back.

It’s a particularly pertinent idea in French speaking Africa where so much happens under the radar, but it’s a worldwide phenomena and it accounts for, according to estimates from the OECD, almost 2 billion people – that’s half the world’s working population.

However Systeme D is not a mutually exclusive working environment.  Sure, there are those who are only working in this way, but there are many people who work in the legitimate economy, paying taxes as they should on some of their earnings while doing a little extra on the side that goes undeclared.  This isn’t new.  If it’s not the garage mechanic who will do the occasional job for cash, it’s your neighbour who runs a market stall at the weekends to pay for the second holiday.

Systeme D: thriving in the UK

What is significant is that this economy is set to expand as the way we work changes.  More and more people are building portfolio careers where they mix a full-time job with a tidy little sideline or do odd bits of private consultancy, and there are those who have a number of different jobs and are easily able to hide some of their income from the taxman.

The world is becoming a place where fewer and fewer people are declaring all of their income to the taxman.

My guess is that the tax game is changing much faster than HMRC is willing admit.  They may be claiming to be winning the battle against tax avoidance, and in their latest figures they say that uncollected taxes are at their lowest since 2004/5, but HMRC is fighting a losing battle.  The rules have changed.  Now governments tax us where they can, and they know that fewer and fewer people are declaring all their earnings and there’s nothing they can do about it.

According to 2009/10 figures from HMRC the amount of uncollected VAT, income, National Insurance and capital gains tax was around £26bn, of which £1.3bn was estimated to come from people who don’t declare any of their income and £1.8bn from those who moonlight and don’t declare income from second jobs.  This seems to me to be a fairly unsophisticated picture of the world of work.  Many people have multiple income sources and it’s going to be increasingly difficult to assess which are above the line and which below.  Estimates of uncollected taxes are going to become more and more inaccurate. I think the above combined total of £3.1bn is probably at the very low end of the estimated range.

The taxation culture is changing and my guess is that we will soon be living in a society, if we aren’t already, where it is considered perfectly acceptable to pay tax on some of our earnings but not all, and nobody will truly consider themselves to be doing anything terribly wrong.  It will be thought of as a way, in a world where real pay is in decline, to claw back some of what the individual is losing, because here in the west it’s becoming harder and harder to earn a decent living.

Perhaps this is why HMRC is now making efforts to go after unpaid taxes stuffed away in Swiss bank accounts.  It’s easier pickings than the cash your neighbour stuffs into his back pocket at the Sunday morning boot sale.  Until recently it hasn’t been worth the expense and hassle of going after that money.  It’s a bit like the way oil companies only go for difficult to extract oil when there isn’t enough of the easy stuff left to suck out of the ground.

Systeme D may have been born in the developing world, but it’s a system that is set to dictate the workings of the global economy of the future, and everyone’s relationship with the tax system.

My next workshop is Interview Preparation and it takes place on December 16th.  Details here.