Surviving the American Economic Makeover
No longer the Consumer Spending Habit
(c) Donna Grethen
How to stay afloat -- and get ahead -- when the old rules no longer apply
By 2007, the small company employed 15 people and
provided enough income for Cohen, his wife, Merced, and their two kids
to enjoy an affluent life in a tony
As the family income plummeted, the Cohens traded in their two cars for cheaper ones, cut all the expenses they could, and finally had no choice but to sell their home for a loss and become renters.
Many of Cohen's former colleagues took jobs at banks or retail outlets, went into teaching, or just dropped out of sight.
Cohen researched new fields and decided to start a financial-services firm for seniors needing help paying for assisted living. For 18 months, he built contacts at hospitals and nursing homes, took courses, studied regulations, and prospected for clients. Income was scarce. Clients often got cold feet after weeks of meetings. During one low moment, the 50-year-old businessman started looking for a conventional sales job -- and hit nothing but dead ends. Finally, his new firm, Senior Advisory Services, began to produce enough income to stabilize the family's finances.
"For a while, my optimism was challenged," Cohen says. "But I think it was good for us. It shook us up and helped us go in a different direction."
Many Americans feel they're going in a different direction these days -- but too often, it's reverse.
As the Great Recession of 2007-2009 finally winds down, millions of Americans face diminished lifestyles, with no obvious way to regain the wealth and prospects they enjoyed just a few years ago.
Many of the nearly 8
million jobs lost during the recession may be gone for good, with high
unemployment likely to persist for several years. Consumer spending may
decline permanently, depressing huge economic sectors like housing and
retail. Scarce credit and other problems, meanwhile, are stunting the
growth of new businesses and inhibiting the "creative" part of "creative
destruction." "This is not just a recession," says futurist
If so, Americans may need to reconsider the unwritten rules that have governed upward mobility since the end of World War II.
From 1945 to 2000, the American middle class was a kind of perpetual prosperity machine that created vast amounts of wealth. There were disruptions, like the recessions of the mid-1970s and early 1980s, but the wealth compounded and progress always resumed its upward trajectory.
Various assumptions formed the pillars of this phenomenal era:
A good education leads to a decent job and a satisfying lifestyle. Working hard means your income will keep going up. Devotion to your career will produce a comfortable retirement. And each generation will be better off than the one that came before.
Now, as Americans are ruefully discovering, a bachelor's or master's degree doesn't even guarantee a job. Hard work might bring a paycheck, but not necessarily job security or a reliable nest egg. Devotion to your company or career won't inoculate you from getting kicked to the curb. More
Americans are working harder just to stay even and asking themselves a troubling question:
If I did all the right things, why does it feel as if I'm falling behind?
The answer may be that "all the right things" no longer are.
As the economy recovers and jobs slowly return, some of the pain will surely diminish. But disturbing trends that were already underway before the recession are likely to continue and perhaps intensify. For about the past decade, for instance, median household income has been stagnant after four decades of nearly uninterrupted growth, and it actually fell during the recession. Many firms can now substitute technology or cheaper overseas labor for U.S. workers. The housing bust, meanwhile, has shrunk the biggest source of wealth for many Americans, limiting their financial freedom and their ability to move where the jobs are.
A Darwinian outlook.
Many other nations face the same problems, and
compared with most of them,
Forced cutbacks over the past few years may even
produce a lean, mean economic machine that comes roaring back stronger
than expected. But the Americans with the best shot at getting ahead
will approach their future the way
Unfortunately, however, many Americans are unprepared for a Darwinian economy.
A study by consulting firm
Manufacturing and agriculture, for example, are shrinking faster than the pool of workers, which drives down pay. Other fields like healthcare, government, and various types of services are growing, but many people deliberately choose fields such as these because the jobs can't be done easily overseas. So the quest for job security drives up the applicant pool, lowering incomes for those huddled in the pack. Even some fields that often require advanced degrees -- such as law, teaching, library science, and some medical-technology specialties -- have relatively low income growth, because lots of people choose them and once you have the credentials, the work is fairly standardized.
The real payoff goes to people with an ever expanding set of skills who work in growing and complex fields.
The highest earners are well educated, but they also have strong "tacit" and "cognitive" skills that are difficult to teach in a classroom: informed intuition, judgment under pressure, the ability to solve problems that don't have an obvious solution.
Those tend to come with experience, but top earners also go to
the trouble to keep up with the latest technology -- no matter how
exhausting -- and use it to solve bedeviling problems. "There's an
increasing demand for tasks that require human skills complemented by
technology," according to the
Flexibility and quick decision-making help, too.
After getting laid
off last June, for instance,
Sudden unemployment, forced downsizing, or an unplanned career restart may seem like forms of failure. But some resourceful Americans are already turning such adversity to their advantage.
Working parents or others with major financial obligations may dread
forced dislocation, but sporadic, unpredictable careers could end up
being the norm, predicts Weiner. She foresees more "inverted, nonlinear"
lives in which pay goes up and down instead of rising consistently, and
workers move between disciplines and try things they want to do at
younger ages instead of waiting for retirement. Consumers would have to
spend less, save more, and grow comfortable with uncertainty. Yet these
things are already happening, and some workers have adjusted to
Available at Amazon.com:
- Selling and Debunking Economic Recovery
- How to Solve the National Debt Crisis
- What Could Derail Economic Recovery
- Job Search Grows Cold, Creating Reluctant Retirees
- The Great Retail Revolution
- Surviving the American Economic Makeover
- What the Economic Bust Left Behind
- Tough Economic Times Molding Tough Consumers
- Careful Planning and Discipline Can Pull Consumers Out of Debt
- Green Jobs Can Spur Economic Recovery
- Green Jobs and Market Meddling Will Not Work
- Obama's Mixed Economic Signals Won't Create Jobs
Surviving the American Economic Makeover | Rick Newman
(c) 2010 Rick Newman