Guest Post by Kevin of 20smoney.com
In the previous part of this series entitled, “An American Future,” we laid out the case that the economy is shrinking. Whether we label it a double-dip recession or an economic depression, it makes no difference. While business opportunity as a whole is shrinking on the macro-level, I firmly believe that there will always be opportunity for those looking for it, for those willing to work for it, and for those who are smart and can innovate and be creative.
These opportunities do not apply to the masses that are unwilling to get off their couch and look for them. These opportunities will not be easy for the average American who is conditioned to expect things to happen for him rather than make them happen himself.
To illustrate what I’m talking about, let’s look at an example that I feel is the exact opposite of what future opportunity will resemble. Let’s go back to the real estate bubble in the mid-2000’s. During this time, it seemed that every Average Joe out there was a “real estate expert.” Every so-called expert during this time had an opinion on real estate, was currently involved in a real estate deal and, in most cases, was actually making money – some were making lots of money! Of course we know how this ended. My point is that future opportunities will not be like the dot-com and real estate bubble where the means to wealth were apparent (at least temporarily) and the barriers to entry were nonexistent. Most of all, future opportunity and success will be limited to a few.
Future Employment For The Masses
Last year, I wrote an article called the 21st Century Worker in which I compared and contrasted the typical “worker” of the 21st century with the worker of previous generations. For comparison purposes, I discussed the typical employment for the average worker in the post-WW2 time. During such a time, most workers maintained secure employment with a single employer for the duration of their careers. They then went on to retire with well-funded pensions and retirement plans. The skills of these workers were pretty specific with many workers doing the same task or set of tasks for decades.
Many decades later, things are much different. For fresh college graduates today entering the work force, they expect to work for many employers probably by the time they hit 30. They will probably move from industry to industry, perform a wide range of tasks and develop a range of skills. Freelancing, independent contractors and temp workers are more and more common these days. Secure employment is becoming less common. Well-funded retirement plans are a laughable concept for most – unless you work for the government of course.
The reasons for this shift are many, but the two I’ll address briefly are globalization and increased regulation. Globalization and global communication has made outsourcing easy and necessary to maintain profitability. Unless you have a specific skill that is needed onsite here in America, your position can probably easily be outsourced to someone in Asia for pennies on the dollar. Increased government burdens including new health care mandates will exacerbate this trend by creating a situation where businesses don’t want full-time employees. By outsourcing the position, a business also outsources the health care costs and everything else that comes with having an employee on the books.
These trends are real and have been real for many years now. Only now are some waking up to them due to recent mass layoffs in the current economic climate.
Millions of jobs have been lost in the last couple years, and many are not coming back. Fulltime employment for many is very elusive and when it is found, it’s often at a lower pay. This is the new normal for many. Less work, less pay and less opportunity for advancement.
Frankly, for the individuals in their 40s, 50s and 60s who find themselves unemployed and needing work, the situation is pretty dire. They find themselves choosing between significantly lower paying jobs than what they’ve become accustomed to (and for which their lifestyles demand) and no work at all. For those who have an outdated skill set, the situation is even worse.
The Path To Success
As we move toward the opposite extreme from the height of stable employment in the post-WW2 era, we move toward a scenario where many will work multiple jobs to make ends meet. Many may work as contractors on a job-to-job basis. This means getting hired on a job-to-job basis and having to prove oneself over and over again. In order to prove oneself over and over again, it means constantly maintaining one’s skill set. It means staying on top of changes within an industry. It means constantly expanding one’s network of contacts.
The successful individuals in the new normal will be the ones who do not take employment for granted, but are always assuming unemployment is right around the corner. The successful individuals will constantly be seeking additional forms of income and additional opportunities to work.
To paint a picture of a successful individual in the new normal, consider an example of a sharp 20 or 30-something that works in the financial sector. He has a great job, but due to the shrinking economy, there isn’t much opportunity to increase his role and responsibilities (and pay) within his company and also within his industry. He’s fighting for the same pieces of the pie with seasoned veterans who are making much less than they used to. To make ends meet and to improve his personal financial situation, this person builds websites in his spare time. During nights and weekends, he provides contract web design work that pays by the job. By bringing in a few hundred bucks a month by doing this, he’s able to actually put money away toward retirement and toward other savings goals.
The example of the successful young person is something we will see more and more moving forward. His skills are diverse, ranging from finance to technology. He works for his regular employer and works as a contractor outside of his career.
Now, this type of work ethic is rare today especially amongst my generation. It requires working much more than the 40 hours a week and can really impact one’s television watching at night. Although this trend will continue to increase for some people, most individuals will reject it and continue to expect things to happen for them (from the government, from an employer, from family members, etc.).
For some it will be a forced, painful transition as reality sets in only when they collapse under a burned of debt which accumulates as they continue to live an “old normal” lifestyle funded with a “new normal” income. Then and only then will these individuals get off their butts, refresh their skill sets, and begin to pursue the opportunities that are available.
How To Prepare
For those of us who still face years and decades of work ahead of us, it’s important to prepare for these realities that we’re mentioning. Sure, there will be individuals who will be fine due to their above average skills, above average contacts and connections or above average luck; but the masses are for the most part find themselves below average in each these areas.
A few questions to ask yourself will get the ball rolling:
- What could I get paid to do if my job and industry shrink over time and even disappear?
- Are there other areas in which I could build an income and maybe eventually a thriving business?
- Is my skill set outdated? What new skills are marketable today that I could add to my skill set with relative ease?
- What contacts do I have that would be helpful in finding future employment or work?
Answering the above questions might make you sick to your stomach or offer some encouragement depending on your situation. Either way, it’s an important step as you plan for an increasingly weak economy with decreasing opportunity as a whole.
If it’s not clear already, the economy is not going to be fixed by the Federal Reserve magic and the political process. Sitting around and waiting for things to get better for you will not get you anywhere. The environment we find ourselves is one where it will be increasingly difficult to earn enough to sustain the standard of living for the average Joe. To make enough money to increase your standard of living in such an environment, you will have to work hard and be very strategic as you seek out opportunities. Focus on your skills and build your contacts in order to have more doors open to you in the future. Most of all, don’t assume your income and employment is safe.
In part 4, we will look at possible investment strategies and approaches in this new normal economy.
Written by Kevin of 20smoney.com
Further reading to consider:
- The 21st Century Worker from 20smoney.com
- Learn how to make some online income from 20smoney.com
- Are we moving towards a perma-temp workplace? From Wall St Cheat Sheet
Before identifying and expanding upon those “other significant factors” which shall greatly affect our future economy, I would be remiss in not indicating my agreement with much of Kevin’s post. I just assess it to be both more temporary than Kevin’s evident assessment and believe it to be a ‘transitional phase’ in a much larger and ongoing societal transformation.
Future prognostication is always problematic but certain trends and realities are sure to have a societal impact, it’s in the specifics of that impact wherein the uncertainty lies. In my view, a matter of exactly how and in what way, not a matter of if.
OK, first the context, then the specifics:
The societal transformation to which I refer were first brought to the public’s attention with the speculations of the sociologist and futurist Alvin Toffler, expressed in his theory of “Future Shock” in 1970. And then importantly expanded upon in 1980 in his follow-up book “The Third Wave” by introducing his theory that a transition is occurring in developed countries from an ‘Industrial Age’ society, which he calls the “Second Wave”, to an ‘Information Age’ “Third Wave” society.
Toffler argued that society has been undergoing an enormous structural change, a revolution from an industrial society to a “super-industrial or informational society”. He posited that this change would overwhelm many people, with the accelerated rate of technological and social change leaving them disconnected and suffering from “shattering stress and disorientation” – as he termed it, ‘future shocked’.
Toffler stated that the majority of social problems were symptoms of this ‘future shock’. (I believe he overstates the case at least somewhat but is essentially correct) In his discussion of the components of such shock, he also popularized the term “information overload”.
Toffler describes three types of societies, based on the concept of ‘waves’ – each wave pushes the older societies and cultures aside.
The First Wave is the settled agricultural society which prevailed in much of the world after the Neolithic Revolution, which replaced hunter-gatherer cultures.
The Second Wave is Industrial Age society. “The Second Wave began in Western Europe with the Industrial Revolution, and subsequently spread across the world. Key aspects of Second Wave society are the nuclear family, a factory-type education system and the corporation based on mass production, mass distribution, mass consumption, mass education, mass media, mass recreation, mass entertainment, and weapons of mass destruction. You combine those things with standardization, centralization, concentration, and synchronization, and you wind up with a style of organization we call bureaucracy.”
The Third Wave is the post-industrial or ‘information’ society. Toffler says that since the late 1950s most western countries have been transitioning from a Second Wave society into a Third Wave society.
Though the society foreseen is still emerging, with the dramatic transitions of the past two decades (e.g. Cell Phones, Internet, the rise of non-national and super-national powers, etc.), several distinguishing features were posed as characteristic of this new society. Among others, these included:
The rolling back of the Industrial-Era creed of “standardization”, as exemplified in the one-size-fits-all approach typical of institutions of this era, such as the education system, factories, governments, mass media, high volume mass production and distribution, etc.
The attack on the nation-state from both above and below and the progressive obsolescence of the nation-state itself.
The assault on the nation-state from below would include both the gradual loss of consensus, such as has characterized the politics of the United States in the 21st century, as well as political turmoil elsewhere.
The assault on the nation-state from above would include the rise of powerful non-national entities: IGO’s, multinational corporations, religions with global reach, and even terrorist organizations or cartels. It would include the progressive hemming-in of national economies and of nation-states under a growing network of super-national organizations and affiliations; e.g. the European Union, the North American Union, the newly formed African Union, as well as organizations such as the WTO, NAFTA or International Criminal Court.
The eclipsing of monetary wealth by knowledge and information as the primary determinant of power and its distribution.
A transformation of the very character of democracy, itself, from rule-by-periodic polling at the election booth, toward a more direct interaction between the government and its populace. To a large extent, this has already emerged with the rise of the Internet, the trend toward on-line voting in the United States, though it has not yet congealed in the form of a fundamental revision of the constitution of any state.
Toffler left open both the question of what the outcome of the transformation of the structure of democracy was to entail, as well as the question of what kind of world order would supersede the order of nation-states.
The eclipsing of manufacturing and manufacturing goods by knowledge-production and information-processing as the primary economic activity.
The emergence of various high technologies, such as cloning, global communications networks, nanotechnology, etc.
OK, now for some specifics;
The new technologies, now emerging in the laboratories are sure to be paradigm changing in nature.
To elucidate on three fundamental technologies and a reality that will transform our future economy:
The technologies:
Nanotechnology; will affect manufacturing on a paradigm changing level as profound as the advent of computers.
Nuclear Fusion; we know it exists and is doable, it’s the process that fuels the stars and when achieved will result in utterly clean, inexhaustible and vanishingly inexpensive energy production.
Artificial intelligence and robotics: we are already there; Robot Scientist Able to Conduct Research By Itself
The mostly unrecognized reality;
<a href="http://neo.jpl.nasa.gov/neo/resource.html".Asteriod mining; according to NASA, ” It has been estimated that the mineral wealth resident in the belt of asteroids between the orbits of Mars and Jupiter would be equivalent to about 100 billion dollars for every person on Earth today.”
What do we get when we posit an economy benefiting from inexhaustible, ‘cheaper-than-dirt’ energy production, near-inexhausible and ‘dirt’-cheap mineral resources and a logarithmically more productive work force of intelligent robots?
Productivity on a scale previously unimaginable and produced at a cost greatly lower than available today. Manufacturing costs orders of multitude lower, than those between ‘first-wave’ society’s ‘hand-made’ production and second-wave society’s mass manufactured products.
The societal repercussions of that predictably certain future scenario are ‘off the scale’ profound.
That level of productivity and low costs essentially subjects current economic thinking to a tsunami of paradigm changing assumptions.
Start with China’s and indeed all third world work forces no longer competitive.
Robots work 24/7, aside from purchase and maintenance costs and depreciation there are no labor costs in production. No insurance, no benefits, no sick days…China and all third-world labor will no more be able to compete with a robot work force… than American manufacturing workers can compete with China’s current .86 cents an hour labor costs.
Manufacturing will resume wherever the market exists, or when nuclear fusion makes space flight as cheap as current rail transportation, will be shipped down from the moon’s environmentally clean factories with its 24/7 robotic work force.
The level of societal wealth will literally be astronomical and will allow for something never before possible; a social safety net predicated on a society-wide PUBLIC trust fund.
Yes, Kevin (and Monty) there will be unimaginable changes in how we make our living and the structure of our economy. Yes, whatever the level of productivity and wealth, economic laws remain but “the changes they are a comin” and of exactly what they shall consist no man can say, beyond the most temporary and general of outlines.
Of only one thing may we be sure, we will not be in Kansas very much longer.
“The successful individuals in the new normal will be the ones who do not take employment for granted, but are always assuming unemployment is right around the corner. The successful individuals will constantly be seeking additional forms of income and additional opportunities to work.”
Assuming accuracy in his prognostications, what Kevin describes will have profound psychological and sociological ramifications for the US and Western civilization. A new, societal norm of “always assuming unemployment [to be] right around the corner” will engender a deeply profound anxiousness in individuals and greatly raise societal levels of neurosis.
Though to a lesser degree, an example of which is the generations raised during the depression of the 1930′s, whose motto was “waste not, want not’ and many of whom, for their entire lives, long after the end of the depression, exhibit(ed) irrational hoarding behavior and intuitively reject(ed) current ‘throw-away’ societal norms.
The ‘great depression’ essentially lasted only a decade and yet the generational repercussions were significant. Kevin presupposes a depression of much longer length. If so, how could the sociological repercussions not be even more severe?
My personal observation is that few individuals truly wish to learn past their 20-30′s, after that, most seek to establish and maintain their personal comfort zone. That is at least partially due to the natural “slowing down” that occurs with middle age and perhaps even more so because society’s most need stability from its middle aged members, as they are in a different “stage of life” than the 20 somethings. Those physical and societal characteristics of middle age are not going to change, they won’t ‘just go away’ regardless of how much our economy changes…
And while voluntarily maintaining an attitude of “constantly seeking additional forms of income and additional opportunities to work” by “working much more than the 40 hours a week” and “getting hired on a job-to-job basis” while “having to prove oneself over and over again” may seem doable to Kevin in his 20′s, I can promise him that it will seem much less doable in his 50′s… as to someone in their 40-50-60′s… “constantly maintaining one’s skill set”, “staying on top of changes within an industry” and “constantly expanding one’s network of contacts” will be increasingly exhausting and will, with perhaps individual exceptions, be societally unsustainable.
There are other emerging factors besides the economic which shall greatly affect our future economy and while I’ve only read part 3 of Kevin’s missive, the tenor of this post leads me to presume that Kevin either discounts these factors (in my view unwisely) or is unaware of them. I’ll elucidate those factors in my comment below.