We are coming FROM a generation where many (not all) had solid social security benefits, corporate provided pensions, and a home paid off by the time they retired. Hence, decent revenue combined with a lower expense load (a mortgage/rent is the #1 expense for most people)
We are going TO a generation(s) where many (not all) have much lower social security benefits (pushed out to older ages and not indexed accurately to 'real' inflation), self reliant 401ks (mostly funded by your savings, not the company), and a home levered and borrowed upon over and over to consume - hence little equity, and certainly not paid off by retirement. So a much lower monthly stipend to live off of, combined with a higher expense load. Combined with financial illiteracy for many, combined with the inability to have discipline to save for something 20, 30, 40 years out. And this assumes a consistent inflation environment for this generation (which I don't believe to be true in my "future world" where 9 Billion humans compete for the same resources 6 Billion compete for today). Therefore, as I've stated in the past this will be the "Walmart greeter" generation - working as greeters until they keel over. Many will never retire. They won't be able to afford to.
So what is Generation X doing today to prepare and prove me wrong? Don't ask.
But some of it is not there own fault; the median wage statistic is just downright depressing but it goes to my piece on the "long term" trends that are happening in America - changes so subtle that it is like erosion. Until 1 day, ten years later you wake up, and the water is lapping at your doorstep. [Do the Bottom 80% of Americans Stand a Chance?] This is the worst danger of this inflationary era we enter - unlike the 70s, workers simply cannot get wages to keep up with the cost of living - this has been a problem the past decade, as globalization begins to equalize wages across countries, but we lived in relatively low inflation times (and people got by, by borrowing - versus house, versus credit cards, versus everything). Now we are in a much higher inflation environment - and it could be far worse in the coming decade+.
- For years, experts have warned that too many of the USA's 79 million baby boomers aren't financially ready for their coming retirements. Yet, if the boomers have had it hard, it's nothing compared with those next in line: Generation X
- Generation X now 27 to 43 years old — have even less assurance than the boomers of receiving company pensions and projected Social Security benefits.
- In 1979, when the oldest Gen Xers were teenagers, the sole retirement plan for 62% of workers was a traditional pension, according to the Employee Benefit Research Institute (EBRI). By 2005, when most of the Gen Xers had joined the workforce, that number had flipped: 63% of employees found themselves covered only by voluntary 401(k) plans. So much for the corporate safety net.
- Yet, burdened by high housing costs, stifling college debt, stagnating wages and outsize health insurance and gas prices, Gen Xers are saving too little for retirement, just as workplace benefits have shrunk.
- More than one in three workers ages 35 to 44 aren't setting aside any money for retirement. Among those ages 25 to 34, 45% aren't saving.
- Nine out of 10 consumers in their 30s are in debt.
- Gen Xers also are the first generation to graduate from college with significant student loan debt. About 20% of adults in their 30s are still paying college loans, according to the Federal Reserve study; the median balance exceeds $13,000
- Gen Xers also face this harsh reality: The standard of living that most of them have so far managed to achieve falls short of their own parents' standard at the same age. The median income for men now in their 30s, when adjusted for inflation, is 12% lower than what their dads earned three decades earlier. (just a depressing fact and I believe this will ACCELERATE as the globe becomes even more flat, and we move closer to global wage arbitrage)
- From 1974, when many Gen Xers were children, until 2004, when most were in the workforce, family income rose only 9%. And most of that gain came from 1964 to 1994
- Gen Xers also had the unfortunate timing of becoming adults in a period when the share of income that Americans spend on what most people see as essential needs, such as a home, health insurance and cars, has soared.
- Schwab found that Gen Xers often don't understand investment basics. Many, for instance, don't realize that an investor can contribute to both a 401(k) plan and an IRA. This might help explain why 82% of Gen Xers have no IRA, according to a Schwab survey.
- Some specialists suggest that Gen Xers, faced with escalating financial obligations and shakier job situations, have developed a wary, skeptical stance toward the corporate world.
6 comments:
**Among those ages 25 to 34, 45% aren't saving.**
Implying that 55% ARE saving? I find that very hard to believe, with national savings rate below zero.
Remember, 401ks would be considered saving. Just be default probably 50% are "saving" that way. Maybe 1-2% of salary.
A lot of companies, seeing how few people contribute to 401k are now setting by default 3% of salary into 401ks. So you have to take action to opt out. Versus before, you had to take action to opt in. Which many chose not to do because it required over 10 minutes of thinking. ;)
I believe that global wage arbitrage is about to reverse, as the cost of 10000 mile supply chains increase with peak oil driven transportation fuel price increases.
Upgeya, I agree that outsourcing labour will make local labour more attractive again. BUT that depends on local labour continue to be willing or able to work for "old wages" as inflation drives North American cost of living through the roof. I live in a boom area of Canada and of my retail biz, I am paying wages about 40% higher than 3 yrs ago, otherwise, people cannot afford to work for me (ie paying 1000$ -1600$ of rent for a 2 bedroom, plus high gas, food, insurance increasing etc, I am looking at having to pay even more in the near future. Luckily I can afford to pay it because people still have $$$ as we are in a boom, so retail still rocks, but I will have to shut down if things should slow down if i cannot find "cheaper " workers.
I do think as energy costs rise you will have a return to more localized mfg and producing BUT some things (especially services) are borderless - i.e. you can have an architect design your house in Budapest just as easy as Atlanta. Further, in a slack economy with 11-14% unemployment (if truly measured) people will be happy to work for most any wage. In Michigan for example, as auto suppliers cut wages by 50% it still pay $14/hr instead of $28. Versus Walmart at $9-$12. So people "line up" for either job. The opposite is "nothing". But keep in mind $14/hour is about $30K a year - for people who used to make $55-$60K (before overtime)
So it is all relative. But I do agree a secondary effect of higher energy prices will be the transport issue - already in the fall we were reading that it was costing more to SHIP iron ore from Brazil to China, than the iron ore COST. But one could argue this would also rip away some of the last mfg here in the US as well - i.e. we still do make some cars for Brazil, China, India here - if fuel were extraordinary expensive, you move those last plants directly into those countries. Etc. As with all these economics - there are hundreds of moving parts. I could see a lot of this happening in the food chain as well - food is becoming very costly to move 1000s of miles - strawberries grown in South America versus somewhere in America - the costs start to add up. When one sits back and details how petrol is literally the lifeblood of modern society it really makes you think about all the potential ill effects it could have on prices.
nl thinker,
import some Americans. They will do the work that Canadians won't stoop to do. (Inside joke, we say that about Mexicans now in America - but maybe like us, you will import labor or as you say it labour? from "down south") ;)
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