« JLP’s Weekly Roundup (Week of September 10, 2007) | Main | Too Busy to Blog! »
Are You Better Off?
By JLP | September 17, 2007
Here’s an interesting piece from Money: Are You Better Off?
This pretty much sums it up:
…in one sense, the answer to the question “Are you better off?” is clear. Most families are materially richer. And the big economic shocks that made the 1970s so scary seem to have disappeared.
…On the other hand, it sure seems harder to plan for the future when your job or even your career could move to some other (cheaper) part of your industry’s smooth-running global network.
I agree with most of that. However, I don’t think it is harder to plan. You just have to plan differently. In other words, you may not be able to plan on a pension from your company when you retire so you have to plan to provide your own pension when you retire. I think it also emphasizes the importance of fine-tuning your plan on an annual basis. Are you getting closer or farther from you goal?
Finally, although it may not be fun, I think we have to weigh the impact of our spending on our future goals. How much will that flat screen TV impact your retirement plan? Afterall, that money has to come from somewhere.
Anyway, it’s an interesting article.
Topics: Miscellaneous | 5 Comments »
September 17th, 2007 at 1:27 pm
JLP,
That was a long, but interesting article. The concluding recommendations were reasonable as well.
However, the author’s subtitle asks: “So why do you feel so much less secure?” I suspect people feel less secure almost entirely thanks to the media’s fear mongering. (John Stossel did a special on fear earlier this year and he found that the media was largely responsible for the people’s fears.)
For example, the author mentions the difficulty of planning when one’s job might get off-shored. However, this has always been the case. Businesses always seek to maximize returns, just as employees do. People often leave employers for a better paying job and companies have long built factories or expanded in locations with lower wages.
In fact, restricting businesses and individuals from conducting free trade actually impoverishes everyone. Adam Smith eloquently made this point in 1776, “It is maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy…What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage.”
Professor Mankiw elaborates on this idea, “Adam Smith on Outsourcing” [http://gregmankiw.blogspot.com/2006/05/outsourcing-redux.html]
Also, Professor Boudreaux has an interesting quiz on “The State of Manufacturing in the U.S.” I think you’ll be surprised at the answers, again thanks to the fear mongering in the media. [http://cafehayek.typepad.com/hayek/2007/09/the-state-of-ma.html]
September 17th, 2007 at 4:54 pm
How is this any different that before? Jobs have left the US throughout its entire history yet most people still have jobs. Must be magic.
Or what about this:
“Take college. Prior to the 1970s, a degree may have seemed optional. Now it’s key to whether you keep up in the earnings race, says Harvard’s Goldin. But the cost of college relative to family income has shot up in recent decades.”
Do they know what the word “but” means? If more people want degrees they SHOULD get more expensive.
September 17th, 2007 at 9:59 pm
That jobs have left the United States throughout history is doubtless. But the important question is whether the rate of “churn,” or people losing jobs and having to find new ones, has increased. The general sense is that it has. That’s what makes people feel uneasy.
September 18th, 2007 at 12:31 am
You can both be doing well _and_ be uneasy. Nowadays, most people’s working history will outlive most companies, so the traditional “park yourself in a company and climb the corporate ladder for 40 years” strategy won’t work. Also, far more people than before will experience an involuntary layoff or company implosion at least once in their careers.
OTOH, people who are entrepreneurial and more self-directed do far better nowadays; they can either start their own businesses or build “standalone” careers that they can move from company to company. I’ve done a little of both.
In the past ten years, I’ve been laid off once, and seen another company melt down and quit just before it imploded. But I’m now working in a moderately successful startup. I’m far richer than my parents were at my age, even accounting for inflation and the lack of a pension. But they never experienced layoffs.
September 19th, 2007 at 9:32 pm
I think perhaps people’s perceptions are biased by the period starting in the 50′s to mid-80s where lifetime employment with a strong, major company and a pension afterwards was common. But when viewed in the context of US History, that period was the anomaly and we’ve simply returned to “normal” conditions of rapid change and lack of job security.