Desperate Economy Requires Different Solutions

What is causing all this upheaval in the economy? Most authorities think it is related to the withdrawal of all credit due to wholesale granting of mortgages to people who could never be expected to repay them. All this has happened since about 1995 when the government decided to provide housing to everyone who wanted a home. When the defaults began, lenders stopped lending, foreclosures were everywhere, no one could buy a house anymore, and home prices began a steep drop which is continuing right now. What will make the economy begin to revive? Nobody has any idea how to reverse the course of our economy. We are all going to have to live through this somehow. But what can we do? There’s no money!

The news continues to be frightening. Just today the Labor Department announced the loss of over 500,000 jobs in November alone. Since the recession started last December (2007) more than two million positions have gone away. This is a catastrophe for many households because one income is not enough to support the lifestyle of most families in the US today. Labor experts say more losses are likely in the next few months and their forecast is for slow hiring recovery even when the economy begins to turn up. This article is about doing something to remain positive and upbeat through the current time of trouble.

On this blog we promote a positive attitude. Negative thinking obscures the best ways to solve a problem. It’s like a dark curtain spread over the world where you can’t see any way to do anything. Here are some positive steps you can take to help get through the recession. If you try some of these ideas you may create a new and more rewarding career for yourself. Action is a major cure for negativism, so do something. If you fail at first, just keep on trying. If you don’t try you will never do anything.

The following ideas require some form of working for yourself, probably from your home in the beginning. But, you say, “A home based business will not work!” That’s true, so everyone says except successful entrepreneurs. What do your parents, your friends, your church, your school, and everyone else you know tell you about working in any way for yourself? Nobody can do it! That’s what they say. You have to work hard, get into a well-paying profession, stay with it for 40 years and retire with a large pension. It is no longer possible to work anywhere for 40 years; average time in one job is three to five years. Now, to have any kind of retirement, one must begin a systematic saving and investment program very early in life and stick with it until retirement.

What’s wrong with that picture? When people first begin to work retirement isn’t anywhere in the thinking universe. Many owe tremendous amounts for college loans plus credit card debt; in an article on the Bankrate.com website Lucy Lazarony says the average college student owes $2,200 on credit cards and graduate students owe even more, $5,800. Paying the minimum it would take over 12 years to pay off $1,000; go figure how long it will take to pay off larger balances. Add student loans and the average student owes a total of $20,402 so says Credit Card Research Program, quite a lot of money for a beginning employee to repay. The point is, new graduates aren’t thinking of saving. They want things like cars, boats, clothes, to get married, or to buy a home. And they still have those student loans and an ever-increasing credit card debt to repay. There’s no money to invest; not for many years, maybe not ever.

Now what happens with the few young beginners who have the self-control to begin a serious investment program? All investments carry risk; that’s why they pay you for making them. Many investment vehicles are available from real estate, mutual funds, stock market, all kinds of hedge funds, commodities, you name it. Most people have decided on 401k plans or mutual funds as being the safest way to go; but even these fairly safe plans have been hit with scandals like Enron and all the other accounting scams of the past few years. All these things have caused the value of retirement funds to plunge and sometimes to disappear entirely. You just can’t depend on any one source for continuing wealth if you aren’t working. Just look at what has happened to all investment plans since September of this year-they have lost 50% or more of their value. That’s a hit that can’t be recovered for many people, particularly those near retirement. They just won’t be able to retire at all.

“Well”, you say, “if I become a doctor or lawyer I’ll be self-employed and make a lot of money. I don’t have to worry about being an employee and be told what to do by others. I can keep the money I make and I’ll never have worries about money.” One of the top financial institutions in the US instructs all its agents and salesmen to not call on doctors, lawyers, or other professional people. Why? They all have nice homes, new cars, boats, and they are active in community life. They should be excellent prospects for investments. But they aren’t!

These professionals owe a lot of money for school and for those fine houses and cars and boats. Dartmouth Medical School says 35% of new doctors owe at least $150,000. They are expected to maintain a certain lifestyle and they will have children who need to go to college. Do the math and you will see most doctors will be approaching 60 when they begin to emerge from their mountain of debt. This is why the salesmen are advised not to call on professionals; they have absolutely no money!

This also means for most of their lives doctors and other professionals are not self-employed. They work for the host of lenders who have furnished money, they work for the community that expects a certain lifestyle, they work for the automobile and boat dealers who sold them their toys, and they work for the colleges educating their children. They are bound by their financial restraints so they aren’t self-employed at all. They work for all these other people. This is why people should be starting a home based business as early in life as they can, which is right now.

Even though people still have the same old mental obstacles to self-employment, there are new urgent reasons why everyone should be getting their home business started whether online or off. These operations need time to begin bringing in money; you can’t just kick-start them and expect an automatic fountain of money. You can do this on a part time basis which is a very good idea if you are unsure about your own business. Find out which ideas will work without risking very much.

What are these new and urgent problems facing us all? You really need to pay attention to this. There are ongoing issues in every business with respect to work and these problems will remain during any recovery and long after it goes away. First is the frightening move toward employers dictating everything an employee does at home or anywhere else. The latest development of this issue is the smoking ban initiated by the Michigan company Weyco. As a result of its firing of several workers a Michigan legislator has introduced “lifestyle legislation” banning an employer from firing people for legal activities away from the workplace. Only a few states have such laws and the federal law covers only race, religion, or gender. The lawmaker rightfully has addressed the possibility of extension of this concept to many other areas like drinking beer or clothing unacceptable to an employer. Other current high profile issues could include weight control, social behavior, and political correctness in speech or actions. Do you really believe anyone should be able to tell an employee how to act in a legal way off the job? Disgusting!

September 11, 2001, has given extreme emphasis on public illness fearing a terrorist act of some kind that can make millions sick. This Homeland Security issue is certainly well-taken. But when these concerns are added to the availability of flu vaccine many people have begun to place great emphasis on workplace germ issues. All the news media have addressed public concerns about communicating disease among those around you. On NBCs Today Show, February 16, 2005, Al Roker said employees coming to work sick has been estimated to cost employers $159 billion a year! I totally agree people should stay home if they are sick. BUT what about hourly workers? The NBC show says, for example, flu usually lasts five or six days but workers usually come back in less than two days. No work no pay, they starve to death. So what if employers start firing employees who come in sick despite warnings? These guys have to eat. So the employer gives paid sick leave even to hourly people; an employee uses it more often than the employer thinks is necessary and is fired. Who can work in constant fear of getting a bad cold and being forced into a pay cut or loss of a job?

Another serious issue for workers is offshoring of jobs to cheaper developing countries. This has the ability to affect any job that can be entirely done by telephone, like customer service, or on a computer like most programming and Information Technology (IT) jobs. Public Citizen reports there are no hard facts about the total number of US jobs lost or to be lost, but they do give these data:

Gartner Group says 10 percent of technology jobs will be offshore by 2005.
Gartner also says 25 percent of traditional IT jobs will go by 2010.
AT Kearney believes 500,000 (8%) jobs in banking, brokerage, and insurance will be offshored by May, 2008.

Can you afford not to hedge yourself against this happening to your Job? I don’t think so.

Now here come the robots and computer-operated machines. A few years ago I observed at first hand the effects of automation on the textile industry in the US. Hosiery knitting machines used to be operated by one operator for eight or ten machines and a mechanic who looked after maybe 20 machines. Then came high speed electronic machines where several hundred could be controlled by one person at a panel, and one mechanic could often repair problems from a remote computer console. Changing patterns, formerly an extremely labor-intensive process, could now be done in just a few minutes with a software program. The textile industry is nearly extinct in the US at this time.

The hosiery experience has formed an image in my mind of very large buildings with thousands of machines operated, at some point in the future, by maybe two or three people. So two or three people will replace thousands of workers who will have no jobs as we know them. In this factory computers connected to robots will receive orders and transmit them to the proper equipment for production; robots will then ship the products to wherever they are required, no human hands involved. Farfetched? Look at some of the unbelievable things already in the works. Doctors are being assisted by surgical robots in many medical environments, Japanese are developing robots to care for elderly people, and the Smithsonian Institution’s National Museum of American History has used a robotic tour guide. Development has begun on a desktop robot system capable of producing just about anything we use in our daily lives and others are developing a robot system that can build entire buildings. The list is limited only by the imagination of technicians.

Whatever happens, jobs are being eliminated worldwide, possibly including yours. The doctors and medical technicians are already at risk as are accountants and tax preparers; tax return and accounting software eliminates accounting jobs and medical robots will reduce demand for careers in medicine. Stock brokers, legal research, and programming jobs are all either going to developing countries or they will be replaced by web services or software that does their work; less demand for any of these people.

What these developing issues mean is work as we know it is likely to cease, or at least drastically change. In a few years (we don’t know how many or how few) there may be no office or manufacturing jobs for people to use for income. We have seen that even service and professional occupations are endangered; there is already a robot vacuum cleaner available for home use. So what are people to do? How will they pay for their needs?

There are some who say the US workforce will not be able to meet demand for workers in a few years; others say there are plenty of workers. The facts are the workforce probably isn’t declining, it is just growing at a very slow rate. Some say greater productivity will cover the shortfall of employees. If the worker replacement ideas we’ve discussed actually take place most jobs will be eliminated and there won’t be a need for ANY workers. If automation doesn’t do this and there is a greater demand for employees many say increased productivity will compensate for any shortfall. Either way employees will lose. If there are no jobs workers will have no income. If productivity is used to overcome a worker shortage, employees will become overworked and underpaid; they will burn out and be useless. Not a good scenario; there really is no upside.

Reality is- none of these extremes is likely to happen, at least not in the short run, but there probably will be increasing job loss pressure in the workplace. The government will figure some way to keep displaced workers from starving, perhaps by offering a subsistence payment of some kind. Would you like to just exist for most of your life without contributing anything to society? Probably not.

Here’s how to prepare for the worst case of being unemployed permanently:

Start a home based business either using the Internet or some other opportunity not likely to be impacted by automation or offshoring. You may have to try two or three things before finding the right one so it’s best to get into something requiring a small investment. When you begin to succeed you can put money into a more costly operation if your research indicates a winner.
Constantly educate yourself and obtain as many new skills as you can so you can participate in opportunities as they arise. Actively look for things to do in emerging fields. If you like one and think you are qualified, seize the chance immediately before it vanishes.

Remember, the first and best defense for you is the first option-become a home based entrepreneur with your own business. Even if you are successful at staying employed, your business new will provide extra income and a sense of financial security.

By taking these actions you will keep the dark curtain of negative thinking from covering up ways for you to successfully come through this recession. Good luck to you; keep your head high.

© Yank Elliott. You have unconditional permission to reprint or use this article in any way you see fit, wherever you wish to do so.