Simon South

It’s probably safe to say the main force right now driving the shift away from full-time, permanent employment towards virtual work is the employers themselves. Here are some of the reasons I see why we can expect companies to rely more on virtual workers in the future.

• It’ll cost them less. Like contract workers today, virtual workers aren’t paid benefits, so even when they demand a higher rate it can still be more cost-effective to use them for a project than an existing employee. And of course, a virtual worker doesn’t demand the overhead of office space, parking, or free coffee to do their job.

• They’ll have more flexibility. Since virtual workers aren’t employees, there’s no expectation they’ll be around past the end of a project or as a business enters its quiet season. This gives a company the flexibility to grow or shrink its labour force as it needs to in order to match market demand, without the risk of lawsuits or other kinds of retribution from laid-off employees.

• They’ll gain access to better talent. One of the effects of making full-time employment less desirable is that the most talented and in-demand workers will be less inclined to stick with it. Virtual work offers a better lifestyle for many and will, I believe, increasingly be the norm for those who are good enough at what they do to be able to choose it. How long will it be until those looking for regular employment are also those with the least-marketable skills?

• They won’t have a choice. Maybe. This isn’t true yet, but the incoming generation of workers, the so-called Generation Y, has seen the state of employment today and many are deciding they want nothing to do with it—they’re running their own businesses instead. Even those that aren’t are vowing to rewrite the rules of the workplace and have already started to win concessions from employers. Companies that want to stay relevant may soon have no option but to adapt to the more flexible, more independent work arrangements young workers are demanding.

Last September the Globe and Mail published an article about an interesting company, We Wash Cars, that provides car-detailing services in Vancouver and Toronto. The company is unusual in the way it operates: Instead of running a garage where people bring their cars, it maintains a roaming fleet of vans that travel to customers. All the company’s services are provided on-site. In fact, the company has no office at all: Customers schedule their own service and pre-pay through a website, and the rest of the business is run out of the vans themselves. It’s a great example of what I called at the time a virtual company, one that uses technology to remove the need for a physical presence, lowering capital costs and freeing work from being tied to a specific location.

Earlier this month I learned from NPR about a company that has taken this idea a step further. Fuentek is a multi-million dollar technology-management services company based in North Carolina with a staff of about 40 people, all of whom are required to telecommute. Fuentek not only is a virtual company, it is assembled entirely of virtual workers, too. The company’s success demonstrates how it’s now possible to build a thriving business with workers free to set their own location and schedule.

I think these stories illustrate a significant, lasting change that’s occurring in the way work is done. I see several trends converging to bring this about.

First of all, the traditional model of full-time employment is breaking down. Following the greatest economic crisis of a generation, companies everywhere are looking to lower their labour costs, which has led to widespread layoffs and to reductions in benefits for those left behind. With the previous recession still fresh in our minds, no one can really still believe there is security in a full-time job. Companies are purposefully moving away from permanent staff; The Globe and Mail has also reported (the article is now available only to subscribers) on new concessions built into job offers and how the market for contract workers is booming amidst a shift to more flexible, contingent labour. Last month, Business Week offered a bleak outlook for employees:

The forecast for the next five to 10 years: more of the same, with paltry pay gains, worsening working conditions, and little job security. Right on up to the C-suite, more jobs will be freelance and temporary, and even seemingly permanent positions will be at greater risk. “When I hear people talk about temp vs. permanent jobs, I laugh,” says Barry Asin, chief analyst at the Los Altos (Calif.) labor-analysis firm Staffing Industry Analysts. “The idea that any job is permanent has been well proven not to be true.” As Kelly Services (KELYA) CEO Carl Camden puts it: “We’re all temps now.”

At the same time the employment market is unravelling, technology is steadily lowering the barriers to self-employment and entrepreneurship—for knowledge workers particularly, but as the example of We Wash Cars helps demonstrate, for others as well. The Internet and applications built on it are freeing workers from traditional nine-to-five, office-bound roles as quickly as these roles are disappearing. New tools like netbooks and smartphones make productivity possible far away from an office building. Voice-over-IP and virtual-private-network technologies allow the self-employed to project an office presence wherever they go. Social-media sites like LinkedIn, Twitter and Facebook are increasingly the way new colleagues and customers are found. Most importantly, the capital costs of setting up a small, virtual business are plummeting: Hosted web, email and even telephony services are now astonishingly cheap, as are powerful computers and professional-quality software. As Fuentek demonstrates, in the new virtual workplace, traditional outlays like office space and a network infrastructure are no longer essential.

It used to be self-employment was risky because it offered neither benefits nor job security. Once these things are gone from full-time work as well, how many of the bright and talented will be afraid to make the jump?

I don’t plan on writing much about personal finance, even though it’s one of my favourite topics. That’s because most of what I really want to learn about are things a person considers after the lessons of personal finance have already been absorbed: Breaking ties to traditional employment, launching a small business, becoming financially independent. But these things are mostly about freedom, and you can’t speak meaningfully about freedom in our society without saying something about money. Besides, it makes little sense for me to toss around lofty ideas for the future of work without mentioning how a normal person might reach the point where these things are even possible.

The bottom line is this: The better able you are to manage your finances, the more opportunities you’ll have available to yourself. If you want to maximize your freedom to work, grow and prosper, you’re going to have to get yourself in the best financial shape you can. Conversely, the more you tie yourself down with debt, obligations and clutter, the fewer choices you’ll have and the less able you’ll be to take advantage of opportunities that present themselves.

What does this mean in practice? Far too much to be adequately covered in a single post, but to get started, here are four important steps a person can take towards building a strong financial foundation for themselves:

1. Learn to spend less. If there were a single secret to financial independence, this would be it. You have to reach the point where you’re spending less than you earn before anything else is possible. Identify all the things you pay for that aren’t adding value to your life—cable television, unused gym memberships and magazine subscriptions might top the list—and get rid of them. Realize that it’s easier to control what you spend than what you are paid. Be aware of how small expenses add up over time. Naturally, reducing your lifestyle requires sacrifice and self-discipline and I suspect it’s at this point most people fail.

2. Set up an emergency fund. Take the money you now have left over every month and stash it away in a savings account at the bank. (If you’ve been looking for a reason to open a tax-free savings account, this could be it.) Don’t spend from the account unless you absolutely have to! Keep saving until you have enough money to cover your living expenses in case you lose your job or suffer some other tragedy. That way, if these things happen, you’ll have some security and won’t be forced into a difficult position.

   How big should this fund be? Canadians spend an average of 15 weeks, or almost four months, between jobs. I always keep about six months’ worth of expenses handy to be safe.

3. Pay off your debt. Free yourself from the mindset that carrying debt is normal or that it’s impossible to live without it. It isn’t and you can. Debt is like financial cancer, constantly eating away at your resources while forcing you to work hard just to stay afloat. Some people make an exception for so-called “good debt”, like mortgages and student loans. I’m one of those who don’t: The money needs to be paid back anyway, and you’ll need to staunch the flow of interest payments out the door before the idea of turning a profit on investments becomes realistic.

   Once you’ve lowered your expenses and your debts are paid off, you’ll probably be surprised (as I was) at the way money builds up in your chequing account each month.

4. Invest the surplus wisely. Despite what everyone in the financial industry will tell you, this does not need to be difficult. You do not need to be a day-trader or an insider on Bay Street to build a manageable, profitable portfolio of investments. You will need to educate yourself, however, and you will need to develop some basic math skills if you don’t have them already. I won’t recommend a specific strategy here except to mention some important guidelines: Focus on controlling expenses; understand the importance of asset allocation and diversification before worrying about specific investments; be skeptical of stock pickers and actively managed funds; avoid so-called “financial advisors” as there is an irreconcilable conflict of interest between their bottom line and yours.

If you can do these things you’ll be well on your way towards the freedom to run your life however you see fit. For a more complete picture of personal finance, I highly recommend Personal Finance for Canadians for Dummies by Eric Tyson and Tony Martin. (Don’t let the title put you off; it’s an excellent book.) I also consistently hear good things about David Chilton’s The Wealthy Barber, which apparently conveys much the same information but in more of a story format. Finally, there are many excellent personal-finance blogs written by Canadians; Canadian Capitalist, Million Dollar Journey and Thicken My Wallet are three of my favourites, all of which publish plenty of good advice.