Is The Jobless Recovery Due to Small Business Outsourcing?

Interesting bit of background from a guy whose company is the fifth largest US processor of outsourced payroll. [Here]

Recently, the December employment report for the U.S. was a big disappointment: The U.S. economy managed to add only 1,000 nonfarm jobs. As outlined below, I believe our data might partly explain why this is a jobless recovery.

As you know, a trend that is starting to receive attention is small business outsourcing. Specifically, are we evolving into a free-agent nation in which fewer and fewer of us are engaged in traditional employer-employee relationships and more and more of us are available to organizations on a plug-and-play basis as freelancing independent contractors? Is our economy evolving into one in which traditional employment is going the way of the dinosaurs? Will many of us be used by employers on a plug-and-play basis? -- "I need you now, you're hired as a contractor; I don't need you now, bye. See you next time I need you."

Worth reading, as is this:

VCs Turn Their Gaze Offshore

Outsourcing isn't just for the big boys any more. Venture capital firms are getting in on the act with the small companies they back. One major American venture capital firm, for example, is understood to insist, as a condition of investment, that any company it invests in outsource its computer programming tasks to the greatest extent possible.

In another, even more vivid situation, several American and European investors recently put up several million dollars to back a Hungarian clinical research outfit whose main line is obtaining outsourcing business from American pharmaceutical companies.

[empahisis mine]

Venture capital preconditioned on job flight, not direct job creation. Just think, 10 years ago people thought the virtual corporation meant working from home on Fridays. Or more chances to play minesweeper. Many didn't give it any consideration: it just sounded like another goofy Biz School appellation and, besides, "that doesn't apply to me. I'm a knowledge-worker."

Welcome to the future, knowledge-worker-person.

Security or challenge? Comfort or risk? Ask most employees and they'll pick security and comfort. Ask any worthy leader or entrepreneur and they'll pick, within reason, the gains that challenge and risk bring. That's good, because the next 10-30-50 years are going to be the most callenging American business has ever seen. It's also bad, because Pareto's 80-20 rule hasn't been repealed: Most employees work for companies because it's safer, easier, and going it alone would give them ulcers, for social and financial reasons. And "living off the land", as the payroll company President puts it--I'd call it bricolage or resourcefulness--hasn't been taught in schools or encouraged in many businesses. This is more than problematic.

Business evolves, just like everything else. Outsourcing is a step just like IT was a step. Profits are soaring. Jobs are flat. What gives?

Excellent question. Employees and voters are looking to business and political leaders to provide context and alternative futures. But given the very narrow, finance-focused mindset currently raging in management, the other 80% are filling in the blanks for themselves. And to them, right now, those steps lead down, not up.