How Does Anybody Make a Living These Days?
by Bill Sardi
Recently by Bill Sardi: Mr. O's Fairness Taxes Could Backfire and End Up A Big Zero for America
With economist John Williams of ShadowStats.com pointing out the real US unemployment rate is above 20% and the economy is headed for some sort of future calamity before 2014 that may bring on unemployment rates of 50-60%, finding and keeping a job has to become "Job 1" in America.
The young who are entering the workforce for the first time are hit the hardest because they usually do not have the experience or financial backing to start their own business. Though one of my neighbor's sons is defying the odds and starting his own online business — a first-of-its-kind site that helps school sports teams raise money now that public and private schools don't have sufficient funds.
A major problem that I see is that it never dawns upon many people they need to increase their value. And there are "value traps" as I call them — getting a PhD is no guarantee you will be gainfully employed. For example, in Cuba and Argentina there are few jobs so people go back for more schooling. These countries have the best-educated cab drivers. Taxi driving is the only job that is widely available. A lesson here may be to use your education to create your own job rather than relying upon someone else to create opportunity for you.
Can higher education keep up with the speed of information?
The "higher education trap" in America today is that higher education has largely become unaffordable and going into lifetime debt to gain a degree that may not pan out into a career is potentially a dead-end proposition. Readers might want to view an incredible short online video entitled "Did You Know?" which points to the fact knowledge is increasing at such exponential speed that college textbooks are out of date by the time a freshman becomes a senior, that careers must change many times over a lifetime due to the speed of change, that the top ten in demand jobs in 2010 did not exist in 2004 and that we are preparing students for jobs that do not yet exist. This video cites a fact that according to the US Department of Labor "today's learner will have 10-14 jobs by the age of 38."
Taking advantage of the speed of change
About 15 years ago I took advantage of an explosion of information in the field of nutrition that was occurring. There were more published studies involving nutrition and health in just a short period of five years than there was in the prior 50 years. Whoever was educated and degreed in the field of nutrition was holding antiquated information in their head. I began to bone up on new information about vitamins, minerals, herbals, by visiting local university medical libraries and photocopying articles that I filed. Today this is much easier with online access to the entire National Library of Medicine. I became the "go-to" guy in the field of dietary supplements to answer perplexing questions from consumers. I turned my self-taught knowledge into a new career. I authored more than a dozen books and am heard on the radio as a pitchman for a dietary supplement company over a thousand times a month.
Because these radio interviews are taped, I earned passive income, another lesson on the road to financial freedom. Barbers, doctors and dentists reach a point where more they cannot be any more productive without burning out. If Barbara Streisand had to sing a song every time someone wanted to hear it, her income would be limited. But she sings it once and technology makes it possible for her to earn income every time her tapes are sold. Passive income should be a long-term goal for everyone.
I soon found myself being sought after for radio interviews and public presentations. I wasn't degreed in the field of nutrition. I was a perceived threat to some degreed nutritionists who wondered how I could speak out so boldly on health and nutrition issues without a degree (my degree was in journalism and public relations).
I have also had a number of wanna-be's contact me, wanting me to educate them. They want to do the same thing I do in life. I give them a list of books to read and other online sources I use. However, they usually don't want to do the necessary homework, they want me to spoon-feed them, educate them via e-mail or by telephone. They want personalized education served up on a platter. They want me to literally put words in their mouth. It doesn't come that easy. You can't lip sync knowledge.
Learn the language of a new field first
Medicine, law and information technology all create value by creation of an undecipherable language that requires translation for consumers. One of the stumbling blocks to learning a new field is that it is like learning a foreign language. You have to catch on to new terms. For example, a few of the buzzwords in the field of nutrition today are epigenetics, apoptosis, autophagy, hormesis. A new entrant will have difficulty understanding what biologists are talking about unless they can catch on to the terminology. The same is true for any new field you enter, and it appears this fast-paced world will require workers to learn whole new sets of terminology many times over a lifetime.
Make use of free educational opportunities
There is another lesson here too. Unprecedented access to online information should help people adapt their career paths, create new directions, learn new skills, but this doesn't appear to be the current American experience. Unfortunately, we see young people largely using the internet for self indulgence and social purposes. Music and social networks prevail among the young. Yet many of these same young people, particularly those in the Occupy Wall Street movement, lobby for equity in wages and wealth redistribution, as I will discuss below. The plundering of the American economy by the financial sector is appalling, but seeking transfer of wealth from rich to poor should not be a career move.
Are learning institutions really dedicated?
A killer for higher learning institutions is that you should be able to access online lectures from the most prominent professors of physics, biology, mathematics, and obtain their recommended textbooks, take proctored tests and skip the high cost of attending classes altogether. The list of schools offering courses and degrees online is growing. But online learning is the death knell for brick and mortar schooling.
Universities appear to be attracting young students at the time when they want to exert their independence from their parents and to frankly, find how to hook up with the opposite sex. Without the school health clinic providing the birth control pills and a wide selection of partners housed in co-ed dorms, one wonders how many students would remain serious about their "education." The real commitment of educational institutions towards learning should be called into question. I have often called American universities "welfare for teachers." Professors today are largely interested in maintaining their jobs, not in finding their students one.
I'm left with the thought of a young person with a college degree, with some acquired knowledge but few skills. Compare a college grad like that with a young person who has learned how to repair Mercedes Benz' or who can write a complicated computer program on a rush deadline, but has no degree. Which one has the greatest value in the marketplace? Skills are marketable. Skills cannot be taken away. If your boss fires you and thinks you are a bum, so what? If you have skills, you can travel.
Good old boy networks
An unmentioned aspect of a college degree is inclusion in a "good old boy" network where fraternity members and alumni identify themselves in visual ways, like school flags that fly in front of their homes, to identify themselves in a semi-secret society to gain favor for contracts and jobs. The University of Southern California alumni association is said to have set itself up in a similar manner to Masonry. In recent times I have observed that more friends and acquaintances have joined Masonry to enhance their earning power. The fact that educational institutions rely upon an informal network of favoritism based upon entrance into an elite alumni group rather than advancement by demonstrated skills and knowledge is a tacit admission these institutions have little to offer graduates in the form of true competitive advantage. This is a distasteful way of getting ahead in life as it doesn't build real personal value.
Your worth and the supply of labor
One of the problems is not seeing your worth in context of labor supply. This is why unions were fashioned. For example, there were too many bricklayers and hod carriers and many would work for less and less just to get the job. Unions were formed to negotiate minimum wages or livable wages.
Unions are not always necessary in producing adequate wages. It was Henry Ford who realized he couldn't sell his model-T cars without consumers having adequate incomes to afford to buy one, so he compensated his workers so they could buy the vehicles they built.
Examine the following chart. What it shows are the number of jobs available in the Cincinnati area compared with wages. It is clear that jobs which require greater education, skill and experience are much scarcer and much more rewarding financially. This may seem obvious to readers here, but not to the average Joe looking for a job. If you want a livable wage, you are going to have to become something more than a stock clerk. If you have knowledge and skills others don't and you can coax others to pay for that, you will earn more. Common knowledge pays common rates of pay.
Demands for livable wages
What we often read or hear today in the news are efforts by workers to obtain a "livable wage." You can click through here and read about bus drivers in New Mexico delivering their plight to a sympathetic news reporter who is attempting to help them gain better wages. But as you read the news story it is obvious that a contractor for the public school transportation contract under-bid to win the contract and now can't make a profit. The bus driver union says starting pay for these bus drivers is $9.87 per hour and $13.60 per hour for a veteran driver. The average annual salary ranges from $10,000 to $12,000 with no health benefits or retirement packages. The bus drivers complain they are victims of "paltry state funding." The drivers say they are “trying to get a living wage so that people here can get off of welfare and food stamps. It’s hard to raise kids on 10 dollars an hour.” Lesson: don't waste your time fighting for higher wages when your employer doesn't have the money.
Most people want to be paid what they need, not what they are worth
The problem here is that the news reporting is slanted. First, these are part-time jobs, obviously. There is no implied guarantee these are careers, no implied social contract their employer will provide for the total needs of their family. Second, there is a lesson here. I've found that most people want to be paid what they think they need, not what they are worth. Many confuse the cost of lifestyle with the cost of living. So, how much are you worth?
In the past, when I interviewed people for jobs, I would ask them, mid-interview, when we got to the subject of salary, "what do you think you are worth?"
It was a trick question. Some interviewees would look at me and say "I couldn't accept less than what I was making on my prior job." They thought I was trying to get them to accept a lower rate of pay.
I would ask the question again, only this time give them a clue that this question was a trick question. After I gave them time to think about this I would say: "I want all of our employees to think they are worth a million dollars. If they work and make contributions, they should think of themselves that way. All good workers are underpaid. If we had a million dollars to pay our best workers, we would. Obviously, we can only pay what we produce in profits." My answer obviously caught them by surprise. Being underpaid is the hallmark of any great worker. Yes, worker bees in the beehive are also underpaid.
Shop your resume
Most workers never really find out what they are worth in the open job market because they have never shopped their resume. The first rule is to keep a current resume handy. If you constantly shop your resume and you receive a firm offer from an employer at a significant higher rate of pay, you can go back to your boss and inform him/her you have a better offer on the table and you can't cheat your family and pass it up. Your boss will then have to mull over the cost of replacing you or increasing your rate of pay to retain your services. Don't play games with this. If you announce you are leaving your job for a better opportunity, your boss may have no choice but to find a replacement. Most employees are overly loyal to their employers.
Pay us or else
Of course there is the "pay us or else" syndrome. Union bosses might threaten to burn a business down if labor demands are not met. Maybe picketing will force a business to raise wages. Look at what is happening in Greece. What union bosses there are saying is, cut our wages and lay off workers and we will burn down Athens. A recent austerity measure in Greece (a 22-percent cut on the standard minimum monthly wage) resulted in just that. Burning buildings could be seen in news reports.
Implied social contracts
There are often implied social contracts when employers hire workers. There is no greater example than Benton Harbor, Michigan, where Whirlpool Corp, the world's largest maker of household appliances is headquartered. Whirlpool's sales slid 47% in 2011 and it no longer employs workers there. Benton Harbor is 92.5% African-American with a per capita income of $8965, Michigan's lowest. This small town has been placed under martial law. Benton Harbor's residents feel they have been betrayed, that they labored to make Whirlpool what it is today, and now they have been left out in the cold.
While a manufacturer may not have any obligation to provide lifetime jobs in its community, the story in Benton Harbor is a sad chapter indeed in the annals of corporate and government irresponsibility. Public funds that should have been directed towards ailing Benton Harbor went elsewhere. The rub is that in 2009 Whirlpool received a $19.3 million federal grant, in part to create jobs. A year later Whirlpool received $20 million from the State of Michigan to expand its facility.
But Whirlpool has abandoned Benton Harbor, outsourcing more and more jobs overseas or moving them to other locations in the US. This is all part of the crony capitalism that exists in America today, and the current administration in Washington DC is enmeshed in it, to the detriment of many. Such a strange irony that the nation's first minority chief executive embraces the crony capitalism seen here in Benton Harbor, and yet its people seem oblivious to the origins of what has happened there. The only out for these people appears to be relocation.
American expectations and over-sympathetic journalism.
Journalists often don't make much money so they frequently write tear-jerking pieces that side with disenfranchised Americans. A story in the Shreveport, Louisiana Times serves as an example.
A reporter in Shreveport writes of the plight of a 60-year old "paraprofessional" who works with the local school system, earns $17,444 a year with a take-home pay after taxes of $12,400, and who can, according to the news report, no longer afford to shop at Dillard's or TJ Maxx for designer clothes, or treat herself to weekly manicures or eat out at nice restaurants, and struggles to pay her home mortgage. The suffering must be tremendous.
The news report ends by saying “The cost of living is not the same as it was in the 1960s." That certainly is true, and needs to be addressed. The head of a food bank in Shreveport said: “It is definitely time for the government to redefine their percentage of what poverty is.”
Well, while we do see a steep slide in the quality of American life in this downturn in the economy, the example of the 60-year old woman in Shreveport is not a good one. How any employer can enter into a social contract to keep paying this school worker's home mortgage and ensure she gets timely manicures is beyond comprehension. America is in a state of decline. Don't avoid reality. Learn to live beneath your means.
As sad as it is to see Americans slide from independence to standing in line at food banks and applying for food stamps, I'm not sure this type of news article gets directed towards the real origin of this person's plight. The real problem is the high rate of inflation, a problem I discuss in more detail below.
Again, the pace of change in the world may seem cruel, but sympathetic news articles about the slide of the American middle class into the food-stamp class may not be what American workers really need to hear. Americans have to gain an understanding of the origins of this huge financial meltdown in America. Certainly the movement of manufacturing jobs offshore is a major earthquake-level event that has not been sufficiently answered by government or industry. Up to a point industry has to be competitive. If it doesn't lower manufacturing costs by shifting production overseas then competition will. At that point in time there should have been a major shift to retrain American workers towards higher technology jobs. Millions of jobs go wanting in America for the lack of skilled laborers. The McGraw-Hill Research Foundation predicts a shortfall of more than 35 million skilled and educated workers over the next 30 years
US manufacturing largely relies upon the assumption consumers have money to buy their goods. The consumer economy represents the greatest share of the Gross Domestic Product (GDP). If workers have lower or no incomes the consumer economy will flatten and there fewer goods will be sold. American business can lower its costs by shifting manufacturing offshore, but at the risk of killing consumer demand. Long term, America has shot itself in the foot.
Negotiated pay raises
Another strategy is to get a union or other agent to negotiate a pay raise for you. According to an article in the Huffington Post, recently union and management in the New York City hotel industry announced a new contract for 30,000 hotel workers in the city that calls for a 30% raise for senior housekeepers that would elevate their annual salaries from $46,000 to $60,000 over a 7-year period. Does this sound outrageously high? Before you weigh in on this issue, let me provide more information.
Writer Nathan Newman of the Huffington Post says: "Seeing rich business analysts on TV bemoaning workers making probably a fifth to a tenth of the income they take home each year is nauseating." Reporter Newman was referring to an accompanying Fox News report where TV reporters agonized over hotel housekeepers making that much money.
Newman steps out his reporter's role and adds: "Workers should be able to demand a living wage from their employers but under the law today." He goes on to say: "That’s the real problem of rising inequality in our nation."
It's true, that over the past few decades wages have not kept up with the cost of living. Wouldn't it be nice if hotel management could just step forward, increase hotel room rates and then increase all their employees' salaries? But it isn't that simple. At some point, hotel rooms become less affordable. Pay raises simply cannot be passed along to hotel guests without harming business. And who is going to get other competing hotels to follow along? If hotel room rates are unduly high in New York City, tourists and business guests might start booking rooms in New Jersey, across the Hudson River.
But again we are pinning the tail on the wrong donkey. It is the Federal Reserve that took the nation off the gold-backed money system and forced a debt-based paper money supply that is backed by nothing more than the full-faith and credit of an insolvent nation, that is responsible for the relatively low wages American workers earn today. The planned inflation by the Federal Reserve, which is higher than the Fed admits to, is what pressures wages to be increased. However, wages have not kept up with inflation.
A single mother making $36,000 a year with one child who was born in 1990 finds her child entering the job market for the first time at age 21 in 2011. How much does that youngster need to make as a starting salary to equal his mother's purchasing power in 1990? The answer is ~$60,000!
Thank you Mr. Bernanke! You are the correct donkey, not the employers! Organized labor keeps railing employers. Workers and their unions should be criticizing the inflationary policies of the Federal Reserve. How could unions have missed pinning the donkey tail on Mr. Bernanke?
When you go to your boss and ask for a pay raise, how much should you ask for? The answer is 7-10% more if you want to keep up with the real rate of inflation (see ShadowStats.com). That kind of pay raise would only help you tread water. Obviously, American businesses can't hand out 7-10% pay raises each year.
Waiting on wealth hoarders
An example of a common mind-set of the working class is provided by an online blogger who is an employee at a chain hotel. He describes a scene where he was picketing his hotel for livable wages and deriding a couple who chose to walk into the hotel restaurant, then suddenly realized he was almost late for his job and ran inside to don a waiter's apron and found he was waiting on the very people he was chastising outside. He said he served them kindly and was even rewarded with a $20 tip. Yet he titled his blog about this as "Waiting On Wealth Hoarders."
According to this fellow, union negotiations with his hotel chain had been stalled for nearly three years. He says "the hotel refuses to pay workers what they're worth. In my department alone, each employee works three or four jobs with no extra pay. In a single shift I am a waiter, a busser, a food runner, a host and sometimes a bartender. I'm afraid one day I'll discover that I'm the manager with no comprehension of how I got the title."
He goes on to say: "Frankly, I'm tired of being taken advantage of by the hotel. When its CEO makes more than $6 million a year and I see the rest of us struggling day by day just to pay the rent, it irks me."
Maybe his hotel's CEO is overpaid, I don't know, but he was also coveting the presumed wealth of the customers he was waiting on. I don't know of a restaurant that could survive without cross training its employees.
I've coached employees and advised them to take advantage of their employer by learning every task within reach regardless of whether they are working with the understanding they are being paid to do additional jobs. That way, when the time comes to let go of someone during a downturn in business, they will be the last one to receive a pink slip. Furthermore, should you leave your job at some time in the future your next employer will inquire what you did on your last job. If you say you "just waited on tables" you may not get a better job or better pay. You are cheating yourself if you are waiting on your employer to pay you for everything you do.
Waiting for things to change
So many friends and acquaintances, particularly those in the construction and housing industry, don't know where to look for a job. They are hoping the economy will turn around and housing will boom again. It won't. With American banks hiding 4 million foreclosed homes on their accounting books which will be released into the housing supply over the next four years, supply is going to overwhelm demand and the real estate and home construction industry will not return to any sense of normalcy over the next decade. We forget that housing and real estate essentially rely upon incomes, which are being eroded by inflation. Unless there is some major change in the nation's money policies and real incomes begin to rise, construction jobs will not return. For electricians, general contractors, roofers, fire sprinkler fitters, plumbers, carpenters, the future looks dim and you will need a kick in the butt to generate another source of income.
The lesson here is the economy is not going to change — you will have to change. My neighbor re-directed his career, from selling automobiles to becoming a licensed pest controller. More consumers in immediate need of rodent control now search online rather than refer to the Yellow Pages. My neighbor posted up an attractive website and began to receive calls the first day on the job. He then found many conventional ways of controlling gophers and moles to be inadequate and developed two inventions to combat the problem. A lesson here is to use your job as a base to pay the bills and as a learning lab to create passive income. Books, new products, online services, can generate passive income.
Government is about to destroy the underground economy
If you are mulling over the idea of setting up shop on E-bay, you may want to rethink that idea. So many of my disillusioned friends and acquaintances have gravitated to generating an income on E-bay. Certainly E-bay has been a saving grace for many. I know of a friend who resells clothing on E-bay to over-sized males who are embarrassed to go shopping in a store. I know of another friend who buys old motorcycles and sells off the parts on E-bay. A problem here is that E-bay income is about to come to a halt. This year (2012) the Internal Revenue Service is requiring E-bay to issue 1099k tax forms that declare gross revenues from online sales. Probably most E-bay sellers have not been paying taxes on this income. Now they will be forced to pay taxes. You can read the warning from E-bay on its website.
This means E-bay sellers will have to raise prices and they may not be able to offer more economical prices compared to brick and mortar stores. I see the whole E-bay economy melting down which is a counterproductive move on the part of government. This black market of sorts does generate incomes that become part of the consumer economy. (Wikipedia says a black market or underground economy is a market in goods or services, which operates outside the formal one(s) supported by established state power.) State and federal governments will predictably collect less taxes, not more, by burdening E-bay sellers with tax 1099k forms.
Even more discouraging is the fact that organizers of swap meets are now required to send estimates of income for each participant to the IRS and to demand each seller have a DBA (doing business as) fictitious business name. Again, I think this will be counterproductive. Prices will rise and fewer goods will be sold. The whole reason for swap meets and E-bay sales could vanish.
Let's recap what we have learned:
- The size of your paycheck will largely be determined by the number of people who can do your job. There can even be too many engineers or PhDs, which diminishes your value. If you are the only person in the world who has a certain skill or unique ability, you should then test to see if employers or consumers will part with their money for your services. You will only know your true value when you shop your resume.
- When working for someone else, learn everything you can on the job. Make it difficult for your boss to lay you off. Take acquired skills to your next job to increase your value.
- Diplomas do not equate with income. Diplomas are archaic as do not keep up with the fast pace of new information. Work on skills, not diplomas. Create a job and employ yourself. Don't wait to get hired. Take advantage of the exponential growth in information by gaining new marketable skills and knowledge.
- When entering a new field, the first challenge will be to understand new terminology. Learn it like you are learning a foreign language.
- Manage your own employee file. Ask satisfied customers for a written note that you can place in your file. Keep track of the skills you have added to your expertise.
- Don't expect your demands for higher wages to be met by an employer that is struggling to make a profit.
- Don't be confused over the cost of lifestyle versus the cost of living. Learn to live beneath your means.
- Go where opportunity exists. Apple Computer is booming. Oil fields in North Dakota can't find enough workers. Sales of guns and seed for crops are soaring. Don't get caught selling buggy whips when they went out of demand long ago.
- Wealth transfer is not a career move. Don't waste time participating in occupy street movements.
- You need to make 7-10% more per year to keep up with the true increases in the cost of living. Keep that in mind.
- Work to build passive income.
Regardless of your work habits, attitudes, attention to detail, willingness to do tasks you aren't paid to do and your loyalty to your employer, the business environment supersedes all of the efforts you bring to a job. Unless something is done at the top level of government, Americans will continue to suffer erosion in their quality of living. Incomes have not kept pace with inflation. Unless inflation is dealt with, American workers will continue to be impoverished.