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Prosperity doesn’t trickle down, it comes from the middle-out (2)

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That’s not all. During tourist season, Zoe will pick up a little spending money by renting out her apartment on Airbnb, living in her parents’ house for days or weeks at a time. And when her schedule at the hotel allows it, she’ll pick up a temporary job or two, usually doing light office work at a local hospital; but her work schedule changes from week to week, and temp work is unreliable, so she can’t often coordinate jobs. Zoe would like to go back to college to finish her degree, but can’t seem to piece together either the time or the money. Besides, she has friends and co-workers with college degrees, living similar lives, only with the added burden of tens of thousands of dollars in student-debt.

If you think all her hard work amounts to a stable life-style, you’re wrong. Zoe doesn’t have enough money in the bank to sustain a savings account, let alone to contribute to retirement. She’s never late with her rent, but the idea of owning a house is far out of reach. Sometimes, when she catches a bad cold, or inclement weather conspires against her part-time piecemeal work, she’s forced to put groceries, the electricity bill, or gas on her credit card. It can take months to pay that balance back down.

But the cost is more than just financial. Zoe can’t remember a time when she wasn’t tired. She’s never taken a vacation in her adult life. (The right and ability to take a vacation are integral parts of what it means to be middle-class, yet a Google Consumer Survey found that 42 per cent of all American adults failed to take a single day of vacation in 2014.) She can’t imagine ever being able to retire. She barely has time for dating, let alone settling down and starting a family of her own. She dreads the day when her car just stops running, because she knows that would destroy her financially. Zoe doesn’t have any idea what the process of bankruptcy is like, but that doesn’t keep her from having nightmares about it. Sometimes when she listens to the radio while driving between jobs, Zoe hears that America is finally pulling out of the ‘great recession’, that prosperity is on the rise again. She doesn’t know what to make of that, but she knows she’s not feeling particularly prosperous. In fact, she feels a little bit poorer with each passing year.

Zoe’s parents help her and her siblings out as best they can, but they must carefully marshal their own savings. Zoe’s father, Joe, worked most of his adult life at a local brewery, working his way up from the loading dock to delivery driver, to local sales rep, until a series of mergers and the ‘great recession’ forced him into early retirement. Zoe’s mother, Liz, works as office manager at a small law firm, but plans to join her husband in retirement in a few years. Thirty-plus years at the brewery earned Joe a modest pension, and once the kids were out of the house, he and Liz were able to squirrel away additional retirement savings. Social Security will supplement their nest egg, while Medicare will provide for their health-care. They paid off their mortgage years ago, so their housing expenses will remain minimal. They’ve budgeted their retirement years to the last penny. It won’t be lavish - a little travel, a lot of golf - but it will be secure.

The contrast between the experience of Zoe’s generation and that of her parents is stark. Zoe’s parents entered the workforce with the expectation that hard work would be rewarded with decent pay, improving prospects, and a comfortable retirement; it was an era in which the benefits that define a middle-class life-style were largely provided through one’s job, and an era in which employers generally accepted that they had a responsibility to safeguard the welfare of their workers. Of equal significance, it was an era in which most Americans could reasonably expect to work for only a handful of companies over the course of their career, and certainly no more than one employer at a time. This was the social contract of the 1950s, ’60s, and ’70s, and it was a contract that fostered the economic security and stability that enabled the middle-class to thrive, and the American economy and businesses to prosper.

But for Zoe’s generation, this contract no longer exists. The hotel that employs her views her paycheck as just another operating expense to manage and to trim, while the clients she services via Uber X and TaskRabbit and Airbnb do not view her as an employee, at all. Zoe works longer hours than her parents ever did, but she earns no time-and-a-half overtime pay; accrues no sick days or vacation days, and accumulates no pension or 401(k). And in the ‘sharing economy’ that is frequently proclaimed to be the future of work  - an economy of work, but not ‘jobs’ - Zoe and her cohorts are even denied the unemployment and workers’ compensation insurance that have composed the barest threads of our social safety net for the last 100 years.

The lesson we can take from Zoe’s experience is that our traditional job-based benefit system no longer makes sense in an economy in which fewer and fewer workers will hold traditional jobs. For while the sharing economy promises many exciting new opportunities, without a new labour-ownership framework, it simply cannot provide the economic benefits, stability, and security necessary for a robust and thriving middle-class.

Uncertainty and the middle-class

If sustained economic growth requires policies that sustain the middle-class - policies designed to include more and more people in the economy, as both innovators and consumers - then what exactly does it mean to be middle-class? For the purposes of our discussion, ‘middle-class’ is less of an income distinction and more of a social one. Typically, middle-class Americans purchase homes, they educate themselves and their children, they participate in their community, they spend money on leisure and other discretionary purchases, and they save for retirement. Over the course of their lives, middle-class Americans build personal wealth, however modestly, and sometimes they start businesses. And they can do all these things because they have the confidence and the wherewithal - the economic security - to plan for the future. Or, to use a word our nation’s business leaders would surely understand, a functional middle-class enjoys certainty.

Since the onset of the ‘great recession’, corporate leaders and their surrogates in Congress have demanded certainty from government  - usually, in the form of lower taxes, smaller deficits, and less regulation. Indeed, it is a talking-point that has been repeated so often that it has assumed the status of conventional wisdom. “All businesses are coming to Congress,” House Budget Chair, Paul Ryan, told NPR back in September 2011. “They want certainty . . . certainty on regulations, certainty on taxes, on energy costs. And so we need to go back and go at the fundamental foundations of economic growth, get those fundamentals right.” On his campaign website, 2012 Republican presidential nominee, Mitt Romney, blamed “uncertainty” for the nation’s then-anaemic post-recession job growth, arguing that government must “provide businesses with the certainty and stability they need to make those investments.” And more recently, Bank of America CEO, Brian Moynihan, called on President Obama to create a “certainty premium” to coax corporate profits back into the market. “If we can just allow people to keep their confidence up by getting some of these (tax reform) issues off the table,” Moynihan was quoted in a December 2012 Politico piece as saying: “You would see the economy grow and momentum continue to build, and unemployment continue to ease down, and housing starts going up and housing prices going up. All that will continue to build on itself.”

We would be continuing this discourse in the next article.

•Lawrence Chukwuemeka Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via nwaodu.lawrence@hotmail.co.uk (07066375847).

Source News Express

Posted 11/12/2017 8:48:11 PM

 

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