Tuesday, July 20, 2010

Action List for the Newly Unemployed

As employment continues declining, newly unemployed people will have to adapt to the unwanted change in circumstance.


I consider it highly likely that another leg down in employment is getting underway. As the Federal stimulus peters out and the Central State's ability to borrow $1.5 - 2 trillion a year to fund the status quo begins pushing up against the financial equivalent of the speed of light (as you approach c, it takes much more energy to increase velocity), then jobs which were only recently considered secure will be lost and the people who held them will be unemployed.


The $787 billion stimulus package, "cash for clunkers," the credit for new home buyers, the $1.2 trillion in mortgages the Federal Reserve purchased--all of these programs stabilized employment at around 131 million jobs. Now that these programs have ended or been reduced, employment is set to undergo a a new decline which could be characterized as a "phase shift."


Wealthy Reduce Buying in a Blow to the Recovery:

But the Top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers — defined as those earning $90,000 or more — surged to an average of $145 a day in May, up 33 percent from a year earlier.

Then in June, that daily average slid to $119. "I think a lot of that feeling that the worst was over has sort of abated," said Dennis J. Jacobe, Gallup’s chief economist.

The top 20% are starting to "get it": it's going to get worse from here on, not better. Many of these High Caste technocrats are the very people who were confident that their position in the world was secure, and the Great Recession was for the lower 80%. But that is not necessarily the case, and this same group of highly paid workers also tend to over-estimate their ability to get a job of equal pay, perks and security. That denial of "the new normal" will be the undoing of many.


Examples of jobs lost in this next wave of contraction include local government employees, employees of enterprises which fold or shrink in response to losses, and jobs lost to offshoring and attrition.


The vast majority of new jobs created in the past two years have been temporary or contract/free-lance positions without guaranteed hours or benefits. This is "the new normal."


As people who reckoned their job was relatively secure discover it isn't, a new cadre of shell-shocked unemployed will have to deal with unemployment and poor prospects for permanent employment. Here is a basic, common-sense list of actions to consider should your household income fall drastically for any reason. It is based on the concepts I laid out in Survival+.


1. Cut expenses immediately. Middle-class households seem especially prone to thinking they can weather a radical drop in income without any real change in lifestyle until a new job appears. Some even resort to pulling money out of IRAs and retirement accounts (and paying penalties to do so) to maintain the lifestyle to which they have grown accustomed.


The better strategy is to perform immediate triage on the household budget and eliminate all extraneous spending. Cut expenses in every way: unplug zombie appliances and chargers, stop buying snacks and convenience food, stop going to high-priced yuppie markets, borrow films from your library rather then rent them, etc.


Write the budget down and track your actual expenses monthly. Reward yourself with a small treat if you stay within the new budget.


2. Look at your biggest expenses and reduce them to your "new normal" income by whatever means are necessary. Typically, the biggest expenses are housing, healthcare and perhaps education.


There is abundant evidence that when it comes to unsustainable mortgages, The wealthy strategically default as a business decision. If a mortgage is completely out of line with the household's reduced income, then the wealthy may have the right idea: it's just business. Anyone considering defaulting on debt should of course do what the wealthy do and consult experienced, licensed real estate and tax attorneys before making any decisions.


Some people have found that renting out rooms in their house allows them to align their income with their mortgage costs. Either expenses must be cut or income increased, or both. Hoping to find a high-paying job in the near future is not a strategy, it is just a form of denial.


Many people we know who have seen their small business income suffer have already cancelled their health insurance--$1,000+ a month is a lot of money. There may be professional organizations which offer cheaper catastrophic-type insurance to members; those seeking to slash their health insurance costs will have to look around for creative ways to do so.


3. Keep productive. All work has dignity. Base your pride in being productive, not on your position or title. It is very easy to fall into feeling lousy about oneself when unemployed, and the best way to counteract that natural diminishment is to stay productive. Find an organization who needs your energy and skills; yes it is "working for free" but you get value for your efforts: you keep your skills sharp and maybe add new ones, you have self-worth by contributing to a worthy organization, and you network with others in ways which might lead to some paying work.


One value we have lost in the U.S. is the inherent value and dignity of all work. Too many people feel that all sorts of work is "beneath them." No wonder, perhaps, given that our popular culture worships at the altar of narcissism, self-glorification, indulgence and victimhood.


I personally consider picking up trash around my neighborhood a highly valuable form of unpaid labor. There is nothing lowly about work performed with care, attention and impeccability.


4. Work to establish multiple sources of household income. If there are potentially employable members of the household earning nothing, then get them out there making some sort of income, even if it is informal, sporadic and low-paying. Something is better than nothing.


5. Think like an employer. The attitude built up by 60 years of prosperity is generally "give me a job and I'll do good work." That was no hindrance in decades of rising employment but now there is a new reality: a thousand other people will also do good work when given a job.


The key word here is "given." If you think like an employer, then you realize that doing good work is the minimum baseline. You have to provide additional value that gives the employer/supervisor some hope that you will bring a much-needed spark to the enterprise. That could be a cheery, generous nature; it could be a can-do attitude of wanting to learn new things. It could be a willingess to be flexible in hours worked.


This is not a suggestion to work for free for an enterprise which pays others to do similar work. But even in this recessionary environment, all too many people expect to work according to their own requirements rather than the needs of the enterprise. This difference in baseline assumptions is most visible between native-born Americans and recent "green card" immigrants, who typically will do whatever it takes to get ahead.


6. Beware the illusion of incremental change. Sustained effort brings results, but within this common-sense approach is a pernicious trap I call The Seductive Illusion of Incremental Change (May 13, 2008). Picking the "low hanging fruit" produces significant improvements, and with that the illusion is formed: if we just keep doing what we've been doing, little by little the problem will be chipped away to zero.


For example, in the first round of household budget cuts, it's not too difficult to pare away a few hundred dollars (travel, eating out, unlimited texting phone plans, etc.). That initial success can lead to a false confidence that such cuts can be continued to the point that income and expenses are actually aligned.


But incremental change often starts yielding diminishing returns. Are the changes being made fundamental, or are they essentially tweaks to a system heading toward collapse?


Weight loss is an example many of us can relate to. A pound of human fat contains 3,500 calories. To lose a pound of fat you need to burn 3,500 calories in excess of what you eat. To lose five pounds, you must burn 17,500 calories more than you eat. If you ramp up your exercise program and burn 500 more calories a day, then in 35 days you will lose the five pounds. Alternatively, you can cut 250 calories from your intake and expend 250 calories in additional exercise.


This sort of sustained effort will produce fundamental results, but anything less will not. Just sending out 10 resumes a week may not produce any job offers, and cutting marginal expenses rather than making the deep cuts needed to re-align income and expenses will only set aside the day of reckoning.


7. Preserve capital. Pulling money out of savings, IRAs and 401Ks to maintain a giant mortgage or an unsustainable lifestyle is unwise; that savings might be needed down the road for a really important emergency such as getting a knee replacement (paid in cash).


Given the likelihood that the stock market will eventually reflect the weakness of the real economy, then keeping IRAs and 401K capital in cash rather than stock mutual funds is a form of capital preservation.


8. Become fluid and flexible. Someone to whom various kinds of work is "beneath them" is like the person who has no interest in learning new skills; their inflexibility dooms them by reducing their adaptability. The living branch bends in the wind, the dead branch snaps off.


9. Accept the new reality. If someone offers you four hours of work, take it. It might lead to something else, and if not, at least you made a few bucks. Clinging to past paradigms is a dead-end.


10. Get healthy, stay healthy. Losing status, income, security, etc. are wounds to self-worth and the soul. Increased stress and anxiety are not healthy. Exercise and productive work/learning are important ways to reduce stress and build a positive response to unwanted change. Walk a quarter mile; when that's easy, walk a half-mile. When that's easy, walk a mile, and so on. Seek respite and renewal in Nature.


Your body is a temple; don't feed it crap.


11. Think entrepreneurally. The basics of entrepreneurism are simple: seek out unfilled needs, or offer a service/product which offers customers faster, better, cheaper. Identify what you like doing even if it's unpaid (at first) and pursue that line.


If you don't want to slog your way into the ranks of Corporate America or work for somebody else (possibly a tyrant/sociopath), then create your own job by making customers/clients your boss.


12. Create value before asking for something in return. One of the key values in Survival+is reciprocity. If you want ten people to help you find some paying work, then you need to offer them something of value that is meaningful to them. The world does not owe any of us a living.


13. Add some beauty to your world. Our culture glorifies ugliness, aggressiveness, self-centeredness and psychoses of power. Planting some flowers that can be viewed by passerby, keeping your block trash-free, creating some art or craft, repainting a fence with bright colors--anything which adds vibrancy, color and creativity to a small corner of the world is a blow against degradation, aggressiveness, ugliness, squalor and surrender.


14. Become politically active. There are larger forces at work behind the media facades and facsimiles. Our society focuses on self-help rather than on the darker forces of Empire, Power Elites, etc. In other words, the Powers That Be support a politics of experience in which we each blame ourselves for our inability to find paying work, etc. rather than seek out the financial and political roots of our common crisis.


The Power Elites and its Mainstream Media work tirelessly to depoliticize our understanding of the world around us. They present us with a false political choice (Republican or Democrat, as if it really makes a difference to the running of the Global Empire or the concentrated power and wealth of cartels and Financial Elites), religious rabble-rousing and plentiful "entertainment" distractions-- anything to suppress or marginalize our understanding of just how distorted our economy and society have become.


Derangement is normalized though a relentless barrage of imagery, "news" and commentary which cements a depoliticized politics of experience: if you can't find work, it's your personal failings that are the "problem." It's all the Demopublicans or Republicrats fault, these reforms have "fixed" the system, etc.


Ask cui bono--to whose benefit?--of everything.


15. If there is no work in your area due to declining wealth, move to a place where wealth is still being created. Moving is both frightening and exciting; it's always been one path out of poverty into new opportunity.


16. Failure is how we learn; embrace it. One reason Silicon Valley continues to spin out innovation is that failure is not just grimly accepted but celebrated. You haven't really "earned your stripes" if you haven't had a start-up go under or equivalent (your company coming within an inch of going under qualifies). Natural selection is all about constant innovation and failure.


Bonus point:


17. Do more of what's working and less of what's not.



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