Can Startups Create Blue-Collar Jobs in America?
While walking through Grand Central Station in New York, you’ll see a dozen ticket booths. But you’ll only see one employee selling tickets — and about 20 different ticket-dispensing machines. Those machines don’t need a lunch hour. They don’t get paid for overtime. A few engineers created the machines, eliminating a number of ticket-selling jobs.
This story is the traditional view of technology’s impact on the workforce: It drives white-collar job growth at the expense of blue-collar jobs. A recent report suggested that 47 percent of jobs in the U.S. are at risk due to computerization.
I think the conventional wisdom is wrong. There’s a growing class of tech startups that foster job creation — and I’m not talking about engineering jobs. As software continues on “eating the world,” we’re starting to see a move away from apps. Startups are beginning to reimagine physical world problems (and the industries that solve them).
“Blue-collar startups” create sustainable jobs for a thriving middle class — the engine of America’s economy. Some of the companies that are creating jobs and growing the economy include Uber, Fresh Direct, Harry’s, Lolly Wolly Doodle, Homejoy, Thumbtack and my own MakeSpace.
Companies are revisiting antiquated industries with technology-driven solutions
Cab drivers and storage companies have been around for decades. By rethinking the (outdated) business model, startups like Uber have created thousands of new positions. In general, small and agile companies are refreshing outdated business models by leveraging the ubiquity and accessibility of software solutions. Put another way, technology is allowing more granularity in the delivery of goods and services. That makes space for more blue-collar jobs.
Let’s look at cab drivers: Many live below the poverty level, and spend $3,500 per month on average to lease a taxi. UberX lets cab drivers use their own cars by taking advantage of smartphone GPS. This reduces the drivers’ overhead cost and boosts their net income. The Uber platform creates 20,000 jobs per month. It contributes $2.8 billion to the U.S. economy per year. The technology to create that value simply did not exist (in a cost-effective way) 10 or 15 years ago.
The same goes for the self-storage industry. Let’s look at the old model: Companies like Public Storage require users to haul their belongings to and from their storage unit. Those units are often far from where users live. At MakeSpace, we tried a new model, with low-cost pick-ups and drop-offs of storage bins — users never set foot in a storage unit. Although we are a tech startup, we employ four times as many drivers as engineers, because we need a sizable operations staff to handle the logistics of picking up and delivering bins to customers. We predict that this number will continue to grow steadily as we scale our business.
By owning and running their entire supply chain, companies gain more control over their products, and also create many blue-collar job opportunities
Harry’s is a startup company that produces low-cost razors and blades. The company broke the traditional startup mold in a big way. At 10 months old, Harry’s used $100 million of its $122 million funding round (82 percent!) to purchase an entire factory across the pond in Nuremberg, Germany. It is currently employing more than 400 German engineers, designers, craftsmen and production workers to build and operate the machinery producing millions of blades per year. Within its first year, Harry’s employed almost 500 people. Many of those employees are blue-collar factory workers.
Fresh Direct, a New York-based grocery-delivery company, recently built a headquarters in the South Bronx, which has the highest unemployment rate of New York City’s five boroughs. Fresh Direct will bring 2,000 new jobs that pay $16 an hour or more to local residents. Over the next 10 years, the plan is to hire for 1,000 more jobs. This is a major boost to New York City, and specifically the Bronx. The governor of New York hailed Fresh Direct as “a home-grown success that will now continue to grow and create jobs in New York.” This is a hat trick for Fresh Direct: Injecting growth into the local economies; control of its own warehouse facilities, operations and logistics process; and bringing jobs to an economically underserved area.
Similarly, the North Carolina-based company Lolly Wolly Doodle operates out of a 19,000-square-foot factory that’s half-owned by the state of North Carolina and employs more than 250 people. The factory is based in Lexington, N.C. Previous manufacturing jobs moving abroad saddled Lexington with one of the highest unemployment rates in the country (10.7 percent). Lolly Wolly Doodle is dedicated to stimulating the local economy by localizing manufacturing and production of its textiles.
The Internet is digitizing mature sectors in non-tech industries, making traditional services readily accessible and opening up jobs for thousands of people
Housecleaning and other services used to be found exclusively in the Yellow Pages. Companies like Thumbtack, an Internet marketplace for local services, and Homejoy, an on-demand housecleaning service, have changed that. Thousands of people — who otherwise wouldn’t have been listed as repairmen, tutors or cleaning staff — have been able to make a substantial income from this type of blue-collar work.
Some of Thumbtack’s top sole proprietors are earning more than $10,000 per month. The majority of professionals on Thumbtack use it for their primary source of income. This is not just a handful of people or a few dollars: To date, $1.5 billion in transactions has passed through Thumbtack’s platform.
Homejoy currently employs more than 1,000 cleaners and is growing rapidly, having recently expanded into 31 markets in the U.S. and Canada; it will continue to add jobs as it scales. And while these businesses certainly do create new white-collar jobs — for engineers, customer-service managers, designers and others — they create a disproportionately larger number of blue-collar jobs.
What other types of blue-collar jobs can be created in the future, and how much growth will we see?
I predict that blue-collar startups will create upward of 500,000 new jobs by the end of 2015. That’s a conservative estimate, based on the number of jobs already created and the number of nascent companies. As these companies expand nationally and others continue to pop up, job creation will grow steadily. I believe that the majority of these jobs will be driven by “people marketplaces,” companies that provide the ability to connect people with services in a way that previously did not exist.
By taking advantage of technology’s ability to connect millions of people that would have never found each other previously, companies are giving people the power to generate additional income. Though we recently recovered almost all of the jobs lost from the recession, a significant driver of job creation will be maximizing underutilized time, specifically from the underemployed or unemployed.
While the “this is another tech bubble” sentiment continues to grow, companies are scaling their business in a real and revenue-generating way. They are creating jobs in blue-collar verticals. Thanks to advances in tech (hard and soft), these companies require significantly less capital and infrastructure than needed even a few years ago. The same advances also allow these companies to scale much faster when they’re doing something right — creating blue-collar jobs on a shorter timetable. The sooner people are re-employed, the sooner they’re back in the economy spending money.