In The Headlines
The Gig Economy Keeps Growing
On-demand work helps Americans offset losses or boost pay according to a new study by the JPMorgan Chase Institute. An estimated 10.3 million Americans earned income through web-based platforms like Uber and Airbnb between 2012 and 2015, demonstrating that there is a job market revolution underway. That is more people than reside in the entire state of Georgia and amounts to 6.5% of the total U.S. workforce.
So-called gig jobs, in which a person performs a task for another individual often through web-based platforms, are generally easier to land and help generate additional income when regular earnings are not sufficient, according to a new study by the JPMorgan Chase Institute. Participants in this economy are typically younger, with the 25 to 34 age group accounting for the largest part of the gig workforce. They are more likely to be male, live in the West, and have an average median income of about $2,800 per month, according to the study.
The number of people earning income in the online economy during the three-year period of JPMorgan’s study increased 47-fold. Labor platforms (including ride-hailing service Uber) that connect customers with freelancers have grown more rapidly than capital platforms which rent homes and assets or sell goods, an example being Airbnb. Demand is also driving the growth as online service use becomes more common.
“Now, most people would know they can get their groceries picked up, they can get a ride from three or four different companies–things that only a year ago, only earlier adopters learned,” Diana Farrell, the Institute’s founding President and Chief Executive Officer, said in an interview, adding “It’s becoming more mainstream.”
While the platform economy is getting bigger, there is no evidence that people are quitting their primary jobs for this type of work. Monthly earnings from online platforms were as much as $530 or 33% of people’s total monthly income on average, according to the report.
A deeper drill-down shows that labor platform earnings helped Americans offset dips in their overall income, while earnings from capital platforms only supplemented their existing pay. More than 60% participated in capital platforms in any given month. Those providing task-related services were more likely to have lower incomes than average and live in the West. The same demographic experienced the highest income volatility on a monthly basis, the study shows. The JPMorgan Chase Institute used a sample of almost 1 million Chase customers to analyze income patterns across age groups and the income spectrum. It found that the vast majority of 18 to 34 year olds saw a more than 30% change in their monthly income over the three years of the study.
It is not clear whether part-time gigs like driving for Uber or renting out vacation homes to strangers is discouraging people from finding better jobs. Others have also raised concerns about the lack of workplace protections or employee benefits. But policy makers should take notice of these new dynamics as they are trying to understand how the shifting nature of work affects jobs and incomes, CEO Farrell reported. “There’s no question that the ability to participate in these platforms has lower transaction costs than in the traditional’ workforce,” she said, adding, “People are finding it easier to get in and out faster and that’s got to be good.”
IBM Bets that Big Data can Deliver Better Healthcare
IBM recently announced its acquisition of Truven Health Analytics for $2.6 billion. It is the fourth major purchase for the company’s Watson Health Unit since it was established in 2014. Watson Health was formed when IBM purchased Phytel and Explorys in April, 2014. Both companies had the common denominator of being data-driven health companies. The unit added Merge Healthcare for another billion dollars last August to give the company access to a huge store of imaging data. Upon completion of the Truven acquisition, IBM’s Watson Health Unit will have one of the world’s largest and most diverse collections of health-related data, representing an aggregate of approximately 300 million patient records.
With the purchase of Truven, IBM gets access to Truven’s cloud-based data repository, in addition to 2,500 employees and 8,500 clients, including U.S. federal and state government agencies, employers, health plans, hospitals, clinicians, and life sciences companies. While Truven gives IBM a treasure trove of data on hundreds of types of cost, claims, quality, and outcomes information, it is not just about the data for data’s sake, says Anil Jain, VP of Watson Health who came to the unit through the Explorys acquisition. “We’re getting the data and all the resources to make sense of it and help us scale and provide data driven-insights and knowledge-driven insights,” Jain said. He added that the data requires human experts to make sense of it, and the 2,500 employees coming over in the deal include data scientists, researchers, and a host of other experts who will be added to Watson Health.
It is one thing to buy all of these pieces; it is another to put it together into a coherent unit. While Jain acknowledges that taking all of the data, people, and various client bases from the previous purchases and putting them together into a coherent platform of services will be challenging, he points out that IBM has a great deal of experience doing that with acquisitions.
IBM is focused on helping providers deliver on the promise of value-based care. Value-based care is an emerging healthcare model that aims to improve the quality of care while controlling costs and driving better near- and long-term health outcomes for individuals. While traditional health systems have paid for volume based on a fee-for-service model, value-based care models use payment incentives that aim to advance quality outcomes at lower cost. This payment model requires that providers, payers, and other stakeholders have evidence—data and insight—to document how specific elements of care contribute to achieving a target health outcome for a given cost.
Some people have expressed concern about the privacy implications of IBM having access to all of this health information. Jain says they get this question often. First of all, they comply with HIPAA in terms of patient confidentiality, he said. They also use a system that does not identify the individual patient in order to give a big-picture view of a particular diagnosis or outcome. The idea is to give the provider as much information as possible without having to identify the patient behind the data.
As Jain explains it, if a patient has a complex set of symptoms, Watson can help bring together data about other patients with a similar look, detecting the pattern without identifying the specific patient associated with the data. If a doctor can look at the various procedures, outcomes, and medical journal data, he or she can understand the patient’s condition in the context of all this information and come up with better diagnoses and treatments.
“There are right ways and wrong ways of sharing information for everyone in the stakeholder ecosystem to get the benefit. At the end of the day the consumer or patient is at center of what we are trying to achieve,” he said.
The Good News Is . . .
• The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labor market strength that could keep Federal Reserve interest rate hikes on the table this year. Initial claims for state unemployment benefits decreased 7,000 to a seasonally adjusted 262,000 for the week ended February 13, the lowest reading since November, the Labor Department said. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 8,000 to 273,250 last week.
• The Walt Disney Co., a leading diversified international family entertainment and media enterprise, reported earnings of $1.63 per share, an increase of 28.3% over year-earlier earnings of $1.27 per share. The firm’s earnings topped the consensus estimate of analysts by $0.18. The company reported revenues of $15.2 billion, an increase of 13.8%. Management attributed the company’s results to the strong earnings contributed by the new Star Wars film to its studio / entertainment segment.
• Tianjin Tianhai, a Chinese shipping group, will buy the technology distributor Ingram Micro for $6 billion. Tianjin Tianhai will pay $38.90 a share in the deal, which Ingram, based in Irvine, CA, said would help it increase investment and expand its geographical reach. Ingram will become a subsidiary of HNA Group, an air transport and logistics company based in Hainan, China, which is the parent company of Tianjin Tianhai. Following the acquisition, Ingram would become the biggest revenue generator for HNA Group and would help it reach business opportunities in emerging markets, which have higher growth rates and better profitability.
Guidelines for Taking Required Minimum Distributions (RMDs)
When you reach the age of 70½, you will have to start taking required minimum distributions (RMDs) from all of your traditional IRAs and qualified plans, per Internal Revenue Service (IRS) regulations regardless of whether you want or need this money. Here are some guidelines regarding these distributions that can help you to effectively integrate them into your budget. Be sure to consult with your tax advisor to determine the best way to handle required minimum distributions.
Determining which account(s) to use for RMDs – You do not have to take RMDs from every single IRA and qualified plan balance that you own. You can do this if you like, but it may be simpler to aggregate all of your plan distributions and take them from a single account. This can be especially beneficial if you have holdings in other accounts that are trading at depressed prices, and you do not want to start selling them in order to take distributions. You cannot aggregate distributions from 401(k) plans. If you have more than one traditional qualified plan from which you must take RMDs, you will have to calculate and take them individually. But you can still aggregate your IRA distributions and take them from one account. If you do not want to take separate distributions from your plans going forward, then you can simply roll them into an IRA to avoid this inconvenience.
Find out how this income will impact your tax situation – All distributions from traditional IRAs and retirement plans are taxed as ordinary income, which means that on this money you will pay at your top marginal tax rate. RMDs may also make your Social Security benefits taxable depending upon how much you must withdraw. However, just because this income is taxable does not automatically mean that you will pay tax on it. If you are currently eligible to claim deductions and/or credits that go unused because you don’t have income to credit them against, then you can use them to pay for some or all of the tax on your distributions.
Do not forget to factor in your nondeductible contributions – If you have ever made nondeductible contributions to your traditional IRA, then you will have to compute the total amount that was not deducted and then add them to the total amount of deductible contributions; then divide the total by the amount of nondeductible contributions to get an exclusion ratio. This percentage of each of your distributions will then be considered a nontaxable return of principal. For example, if you did not deduct $10,000 of your contributions and did deduct $90,000, then 10% of each distribution will be tax-free. You should have this information at hand if you kept track of nondeductible contributions by completing IRS Form 8606 in each year that you made them.
Consider converting to a Roth IRA – You can completely and legitimately avoid having to take RMDs by rolling over or converting all of your traditional plans to a Roth IRA. Although it may be best to spread the conversion out over two or more years in order to prevent yourself from going into a higher tax bracket, you will never have to take any further distributions from any of your retirement funds again. Roth IRAs are unconditionally exempt from the RMD provision. Even Roth qualified plans do not have this exemption. If you have any balances in these and wish to escape RMDs for them, then you will also have to roll them into Roth IRAs.
Make your RMDs charitable donations – If you are inclined to make charitable donations, you can arrange to have your RMDs funneled directly to a qualified 501c(3) organization. This will effectively make your distributions tax free, as you never received the money yourself. This strategy essentially allows you to deduct this income without having to itemize.
1. http://bit.ly/15tblPT – US News & World Report
2. http://bit.ly/1Qr0WnS – Consumer Reports
3. http://bit.ly/1SXhPgV – Investopedia
4. http://bit.ly/1TvuRBJ – Kiplinger
5. http://bit.ly/21eVDQj – Investing Daily