How will we be paid in the future?
For many, receiving a monthly paycheck is the norm. But there’s a growing number of people who earn their keep in other ways, either through the gig economy, freelancing, cryptocurrency, playing the stock market or numerous other passive income sources.
That’s only set to rise as alternative ways of working become more popular. The majority of the U.S. workforce is predicted to be freelance by 2027.
Then there’s the added pressure on jobs from artificial intelligence (AI) and automation. Some 800 million jobs could be lost through automation, although some of these are likely to be replaced with specific jobs created by the use of AI - an AI ethics officer, for example.
The future of work is still evolving, but it looks like it’s going to be very different from our current experience of work. It’ll likely change the way that we’re paid too. In other words, our monthly paycheck might soon be a relic.
The demise of the annual salary
New forms of work such as freelancing means that payment-by-task is becoming more common. Uber drivers are paid per journey, Deliveroo drivers per order and Task Rabbits are paid per activity. But the gig economy is expanding beyond deliveries and DIY. The white collar gig economy is increasing with lawyers, data scientists and even doctors available on-demand.
The gig economy offers a win-win for everyone. Gig workers gain the opportunity to work for many different clients, which gives them greater control over their working hours, who they work for, and a potential buffer if one client fails to pay. Organisations benefit from expertise on-demand, as-and-when they need it, without the commitment of an annual salary or dedicated desk space.
It’s the lack of annual salary that’s likely to spark the interest of most businesses. There’s less long-term risk involved. Almost 78% of business leaders already say that it’s easier to get sign-off for a contractor compared to a full time hire.
Bitcoin, smart contracts and the blockchain
I’ve already touched on the perks of the gig economy for workers, but there is a big downside: they aren’t always guaranteed payment for work. A client’s company could go bankrupt whilst owing money to a freelancer, they might dispute the work received, or they could simply ‘ghost’ the individual. When this occurs, a freelancer usually has the option of chasing payment and hoping for the best, or going through a legal process.
However, thanks to the blockchain there’s another option. Smart contracts powered through the Ethereum blockchain platform can help secure freelance work. A freelancer and client enters an agreement through the smart contract and because it’s on the blockchain it cannot be altered. Funds are held in escrow and once work is completed, its released to the freelancer. If the work is disputed then third parties on the blockchain can rule on whether the client or the freelancer is in the right. It offers more security, structure and accountability compared to the usual freelance/client contract which can sometimes be little more than a handshake agreement.
There’s a few different freelance platforms that have been set up on the blockchain. Blocklancer, Orbi, and Bitwage offer slightly different options, including payment options and job matching. As an added perk, because Ethereum and Bitcoin are decentralised, they can be transferred across borders with much lower transfer fees. That makes them a more attractive proposition for digital nomads and freelancers who are working in a different country to their clients.
Being paid for not working
The payment developments discussed so far all involve being paid for work completed. But automation is going to get rid of some jobs. So, what if none of us work?
It’s a scenario that’s been considered by academics and governments for some time now. As automation increases, the type of work we’ll do will change and the job losses from AI will likely hit some of the most in-need parts of society. Plus, the cost savings from automation might not be passed-on, which means some people will greatly benefit from automation and others will be left out in the cold. The Institute for Public Policy Research has suggested a citizens’ wealth fund to re-balance this issue. It’ll own a broad portfolio of assets that will invest in companies that are benefiting through automation and use this to fund a universal capital dividend. This could help top-up some of the financial losses that some people may experience because of automation.
Universal Basic Income
Which leads nicely onto the idea of Universal Basic Income. The idea of free money would be attractive to many, but it could be a reality in our AI-driven future. Indeed, Y Combinator in Silicon Valley is one of many currently experimenting with Universal Basic Income. It joins Finland, Macau and Stockton in California is trialling some form of basic payment for every citizen.
The idea is that this will mitigate some of the income losses from AI and allow for a greater work/life balance. It also encourages people to work, unlike a traditional welfare system where people can often lose payments and end up worse off because of an increase in hours or new job.
However, Universal Basic Income isn’t without its criticisms. Critics worry that having ‘free money’ for all will make people lazy and prone to spending on drugs or other vices. There’s also concerns that it’ll lead organisations to pay poverty wages to those who do work and that it will require extreme taxation.
Payment for personal data
One largely untapped income source could be personal data. By now, most businesses have realised the value of using customer data to improve marketing, sales, product development and many other daily operations. The public are becoming more aware of this and they are gaining more powers to withhold access to their personal data (thanks to legislation like the EU’s General Data Protection Regulation - GDPR).
In the future, it’ll be common to see people sell their data to the highest bidder, with different companies competing for the data that they need. Datacoup, a personal data marketplace, is one example of what this could look like.
A portfolio of payments
It’s likely that one payment solution won’t work for everyone. Relying on one form may not provide a complete income or financial security. Therefore, as we move away from traditional payment methods we may see the rise of payment portfolios, where people have multiple incomes. This is partly seen today with a quarter of Millennials working on a side hustle.
Apart from the physical change in what we’re being paid and from where, there will have to be a cultural change. Payments might be sporadic and spread out over a month or even a year. Which will change how we spend our money (no more post-pay-day spending sprees for example).
It’s clear that we’ll have to adapt quickly. Whether that’s learning to do business on the blockchain or topping up our Universal Basic Income with gig work. When it comes to payments, the future is there for the taking.