About this episode
The number of U.S. workers with multiple income streams is increasing steadily, with earnings of $200 billion today poised to double by 2030. Generative AI could help these “multi-earners” hold down their many jobs. ----- Transcript ----- Ed Stanley: Welcome to Thoughts on the Market. I'm Ed Stanley, Morgan Stanley's Head of Thematic Research in Europe. Ellen Zentner: And I'm Ellen Zentner, Morgan Stanley's Chief U.S. Economist. Ed Stanley: And on this special episode of Thoughts on the Market, we'll discuss the impact of A.I. on the multi earning trend we've been observing over the last year. It's Friday, September 29th at 3 p.m. in London. Ellen Zentner: And 10 a.m. in New York. Ed Stanley: You'll remember that the pandemic created the conditions for many people to start pursuing multiple income streams, and post-COVID this need has shifted to an opportunity. And little over a year ago, we first wrote about the rise of multi earners, a large and growing class of workers who, we argued, whose marginal hour was better spent multi-earning than staying in a low paying traditional corporate role, for example. And not surprisingly, Gen Z, a group our economist team have studied in detail, is leading this paradigm shift, and that is clearly underway in our latest survey. Ellen, before we get into some of the current specifics on the fast moving multi-earner and A.I. Trends, can you set the stage for us by giving us a sense of where the US labor market is right now and how things have evolved since the great resignation that we heard so much about during COVID? Ellen Zentner: Sure Ed. Participation in the workforce dropped like a rock around COVID and government subsidies helped folks take time away, and particularly those that work in high risk areas of services where face to face contact is a necessary work requirement. Now, at the same time, the percentage of employees that shifted to some amount of work from home arrangements soared from about 15% to over 50%, and it's remained pretty sticky even as COVID has moved further into the rearview mirror. So while prime age labor force participation has fully recovered and continues to climb, the share of workers with some amount of work from home has remained elevated, as well as those that the Bureau of Labor Statistics here in the US has identified as holding multiple part time jobs. So it turns out it skews toward younger workers. In other words, Generation Z, as you noted, which is a growing share of the prime age workforce. And for many workers, COVID was a wake up call, a call to action, if you will, that multi-earning might better balance a sense of freedom and flexibility while still earning a living wage. Ed Stanley: To expand our lens even more in order to understand the economic backdrop of multi-earning, can you give us a quick overview of the rise of the so-called worker economy over the last two decades? Ellen Zentner: So here's a brief history lesson. Wage growth, when adjusted for inflation, has been falling for decades in the U.S. and is a reflection of factors such as waning presence of unions, the rise of mega companies and the like that reduced worker bargaining power over time. Wage growth should have kept up with gains in productivity, and it just didn't. And as a result, the labor share of corporate profits has been falling. COVID created the labor scarcity needed to reverse that secular decline in labor income by raising bargaining power. In a sense, it galvanized the demand for higher wages that we think is durable. Now Ed, as you mentioned, you first started publishing on the Multi-Earner Trend a year ago, and this trend has been developing by leaps and bounds, it seems, especially when you overlay the fast and furious development of generative A.I. So can you tell us what you're observing and how your thesis is evolving? Ed Stanley: Yeah. So there are three ways that we keep track of to triangulate how this thesis is evolving. The first is official data, and you touched on this. The BLS shows a modest 1 in 20 multi-earners as a portion of the US population, for example, and growing pro-cyclically. So that is one data set we look at. The second is Google Trends. So it's a less well-captured metric in official data, but we can see less about how many people are doing it and more about the growth rate, which we can see is about 18% compound and actually growing counter cyclically. When life gets more challenging from a macro unemployment perspective, people seem to turn to these earnings streams, which inherently make sense. And then the third is to look at our Alphawise survey, the second of which we have that just came out, which shows multi-earning growing 8% year on year and as much as over 15% for Gen Z, which we talked about. So in essence, we don't rely on one dataset to estimate the size or growth of the market. The real addition this year is around generative A.I., where we showed, for those people using A.I. to enhance their multi earning, they are earning as much as 21% more than those who are not using generative A.I. tools. Ellen Zentner: Okay. So let's get into some of the key debates. You've had some investor feedback to this thesis. So what do you think are some of the key debates on multi earning in the era of generative A.I. that investors should pay attention to? Ed Stanley: I think there are two that remain the most unanswered, so to speak. The first one, I think the biggest issue is it can't be proven or disproven in terms of what happens during a recession. And given that the gig-working multi-earning economy is a relatively new phenomenon, the only recession we have data for was, as you say, distorted by stimulus checks, furlough schemes and other things which forced or allowed people to take much more risk than they otherwise would have. So a proper hard landing recession would certainly challenge this multi-earning thesis, and that remains to be seen. On the second point, I think it's actually a more positive one, the goalposts keep changing as it relates to these models. The speed and capability of new generative A.I. models, and particularly multimodal ones where you can deal with text and images, for example, all in one place is moving at pace still. And that is going to make content creation, e-commerce, gaming, web hosting much easier to scale and monetize for the individual. So if anything, we think we're underestimating the impact of A.I. will have on the multi earning economy over the long run. But those are the two debates that have captivated most investors. Ellen Zentner: So clearly there are unknowns around these key debates, but you have an estimate of the current market size of the income generated by individuals through multi earning platforms. Can you give us an idea of that? And given the speed at which A.I. is developing, what's your outlook for the next 3 to 5 years? Ed Stanley: So our base case currently is about $200 billion and that increases to $400 billion in 2030, of which we expect a 20% uplift from generative A.I.'s productivity gains. So about $83 billion of that $400 billion number. And that figure came from our survey, which I've already mentioned in terms of earning uplift with those using it versus those that aren't. And just to put that figure in context, that is only 4% of the wider gig economy market values, so really quite modest, actually, in view of the uncertainties that we have. And we actually expect these figures to get beaten in time, but it's always better to be more conservative early on. Ellen Zentner: Okay so, you know, last one from me, we haven't talked about regionally what's happening. So do you think there are any notable regional differences when you look at the intersection of multi-earning and A.I.? Ed Stanley: Yes, there are certainly that come out of our Alphawise survey. The highest earnings in dollar terms are in the US, the highest growth is in Europe but from a lower base. And then the one that jumped out at us and several of the investors we've spoken to is the higher than expected level of multi earning in India, which is new to our survey and particularly in the invest-to-earn category. And this is skewed by the fact that it was largely a survey for urban India, but it's also mirrored by a survey we did earlier in the year for Saudi Arabia, which showed much higher multi-earning engagement than we had expected. So that emerging market element has certainly taken us and some of our investors by surprise. But Ellen, turning back to you and to the US, what portion of the total US workforce are multi-earners and how do you see that evolving over time? Ellen Zentner: Multiple job holders has always been a feature of the labor market, but it's also always skewed towards younger workers and we have an incredibly young workforce today. So Gens Y and Z are moving through their prime working years in their greatest numbers as we speak, and the official data show that about 5% of the population hold multiple jobs. But, you've mentioned our surveys, our survey suggests that's an undercount and point to something closer to 8 to 10% of the workforce that are multi-earning. Our surveys also capture the skew toward younger workers where the labor force is growing more rapidly. So overall we find that multi-earning is growing by about 8% per year and that jumps to 15% per year if you isolate it to low earners. And the bottom line for me is that the stars align for this secular trend. Our demographic work has shown that the U.S. is an increasingly younger demographic and it really sets the U.S. apart on the global stage. Ed Stanley: Well, Ellen, thanks for taking the time to talk. Ellen Zentner: Great speaking with you, Ed. Ed Stanley: And as a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.