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Life in the Post-Recession Era: The third-worldization of America

Ever think about what life will be like in America after the recession passes? If it passes? What if the economic collapse we’ve seen—and that’s just what it is, a collapse—does permanent damage to the U.S. economy, from which this country never fully recovers? Clearly the measures we’re taking to jump-start the faltering economy will have long-term repercussions, not the least of which may be some serious inflation. And many other forces are at work.

I have a creepy feeling that in the future—maybe not immediately, but over the next generation or so—we are going to see a steady third-worldization of America. Eventually, American wages will be driven down to the levels that workers in Third-World countries are forced to accept, the middle class will almost disappear, and our social structure will consist of a small, hyperwealthy upper class and masses of working poor. Really poor.

Ah, you say; she’s up on her pessimistic soapbox again! 

Well, let me tell you what makes me think this.

The Copyeditor’s Desk has lost its bread-and-butter client, a graphic design studio that packages books for print-on-demand publishers. “Book packaging” entails performing any or all of the various tasks that have to be done to create a book and take it to print. Our client has been copyediting, designing, laying out, proofreading, and producing camera-ready copy for its customers, and it has been hiring us to do the copyediting and proofreading. Suddenly, this nice little source of income  has dried up, despite raves of satisfaction from the client. 

Where has the wellspring gone? Well, I’ll tellya: There’s an Indian entrepreneur in town who lives here but owns a large operation in Delhi. This gentleman shows up at all the same trade meetings that we do…and at all the same trade meetings where our client goes. He told me that he can take a book from raw manuscript all the way through to camera-ready copy for $2.00 a page. That includes copy- and content-editing, fact-checking, negotiating with authors, book design, page layout, indexing, and generation of camera-ready PDFs.

Our lowest rate—for copyediting alone!—is $4.50 a page. Even when we’re reading pretty easy copy, that rate produces a just barely acceptable income. If we run into a problem that slows us down, it soon morphs into an hourly rate somewhere near minimum wage.

To compete with this guy, we would have to charge something like 30 cents a page, no matter how easy or difficult the copy. So editing a 300-page manuscript would earn us a grandiose 90 bucks. That’s a project that can take a week if the copy is clean, well written, and accurate, and upwards of a week depending how messy and poorly written the copy is (and self-published books can be very bad, indeed).

Ninety dollars a week. In a good week. Think of that.

You know, a print-on-demand publisher doesn’t care whether the book is literate, accurate, or correctly formatted in Chicago style. All he cares about is that the author gives the go-ahead to print it. Our client sees that most of her clients’ authors don’t know any better, and that a good 90 percent of them don’t care. So…why pay a living wage to an American editor when you can get someone in India to work for $90 a week?

This is the type of worker—competent enough and cheap—that Americans compete with in the global economy. With everyone and his little brother unemployed and not enough jobs to hire all the people who have been laid off, many Americans are going to have to accept wages on this order just to put bread (and only bread) on the table. As more workers agree to accept depressed pay because any income looks better than no income, pay in general will drop. Eventually, we’ll all be working for what people in India, Thailand, and Pakistan are paid.

Which ain’t much.

Remember, our country doesn’t have the safety nets required to provide lower-paid workers a decent lifestyle. We don’t have adequate access to affordable health care. We don’t have adequate provisions for retirement. We don’t have adequate child care. More civilized countries do: taxes and global competitive pressures push take-home pay down, but the taxes buy a social system that provides for citizens. Consider, for example, this interesting article by Russell Shorto. Recounting his experiences during a stay in the Low Countries, he reports that every parent receives an annual cash “child benefit,” cash underwriting for schoolbooks, and reimbursement for as much as 70 percent of the cost of child care. Employers are required to give workers four weeks of vacation time and a vacation payment of 8 percent of their annual salary; the unemployed also receive vacation pay from the government, “the reasoning being that if you can’t go on vacation you’ll get depressed and despondent and you’ll never get a job.” In addition, a third of dwellings in the Netherlands are part of a public housing system run by independent real estate cooperatives, which provide homes at below-market rates not as hovels of last resort but decent places even for people with respectable incomes. 

Well, say you, that’s fine if you don’t mind the government confiscating half your salary.

But folks. Half of our salaries is confiscated! My take-home pay is about 60 percent of gross, and that’s only because I have ridiculously cheap health insurance—when I paid $220 a month (for one person) my net was closer to 50 percent of gross. Shorto paid $390 a month, no copays, including dental coverage, for insurance that covered all his family of four’s medical care and also paid 90 percent of the cost of his daughter’s braces; in the U.S. he paid $1,400 a month for a policy that covered no dental care and was shot through with copays, deductibles, and exceptions.

Health insurance, required retirement savings, required parking charges, long-term care insurance, and disability insurance are, in fact, forms of taxation. You have to pay for it—you don’t have a choice. You’ve got to have health insurance; no one should have to choose not to be able to go to a doctor. If you have any assets, you’d bloody well better have long-term care insurance, especially as you get older. If you have a family to support and you think you’d like to continue eating after you get hurt or seriously ill, you’re a fool not to carry all the disability insurance you can afford. If you have kids to put in day care and health insurance full of copay holes, you’ll be needing that Flex plan. What is the difference whether you’re forking over a chunk of your pay to a private party or to the government? You’re still forking it over.

If you’re not earning enough to afford amenities like health insurance and halfway decent child care (if you can find it!), you’re out of luck. So…what is going to happen to Americans’ standard of living when large numbers of us are permanently out of work and when folks who can find jobs are looking at wages competitive with those in the Third World? It’s hard to conclude anything other than that we will have a Third-World standard of living.

We need to take another long look at social systems such as the one in the Netherlands, which, as Shorto points out, grew out of a private-enterprise tradition and a deep religious tradition, much as our own has done. If we’re to survive as a “developed” nation in the post-recession global era, we’re going to have to revise the ways we provide for our citizens.

Where’s “Is Frugality Un-American”?

A reader wrote in to ask what happened to a favorite Funny about Money post, “Is Frugality Un-American?” When I searched the blog archives, I couldn’t find it. Thought it must have dropped out during the transition from WordPress.com to Bluehost.com, and so went to the old site’s dashboard…where it still didn’t surface. But I finally found it on Google.

Turns out I’d spelled the title a little strangely, which probably complicated efforts to find it: “Is frugality unAmerican?” It’s still there, and it did come over to the new server. 🙂

Sick as a dawg

Wonder where that phrase came from? Why are dogs any sicker than any other critter? 

Whatever… Came down with the flu yesterday afternoon and by evening had a nasty cough, sore throat, headache, and fever of 100 degrees. That’s high for me, because (being a dinosaur) my normal temperature is lower than most…it’s a fever of about three degrees, the equivalent of about 101 for real people.

Grand way to spend your birthday and vacation!

Community Colleges: Baby-boomer nirvana

Next fall, I want to take 125 credits at Paradise Valley Community College. Think they’ll let me audit those? For those of us boomers who are into lifelong learning, this place is some sort of heaven. The English Department chair gave me a college catalogue, which I’ve been perusing with growing amazement and joy.

Some of these courses sound too wonderful for words.  Eight different courses on computer graphic art and design, starting with introductory and intermediate digital phtography and going thorugh computer animation, web-site design, and computer-aided graphic arts. Five courses in ceramic-making. Fifteen classes in drawing, painting, and watercolor. Wanna dance? There’s ballroom, swing, Latin, hip-hop, Middle-Eastern, West African, and Brazilian dancing! You can learn to speak Japanese and Chinese (why go or here?). Music in World Cultures….Rock Music and Culture. Private instruction in voice, jazz and classical piano, guitar, trumpet, French horn, trombone, tuba, flute, oboe, clarinet, bassoon, saxophone, violin, viola, violoncello, and contrabass. Or maybe you’d like to get fit: weight training; six courses in fitness; all sorts of group exercise sessions. And get this: you can earn college credit for going on one of several spectacularly scenic hikes! We have caving. We have canyoneering. We have rock climbing. We have mountain biking at Sedona. One credit each.

Then there are the anthro courses: Bones, Stones, and Human Evolution. Buried Cities and Lost Tribes (a semester each: Old World and New World). Magic, Witchcraft, and Healing: An Introduction to Comparative Healing.

After having edited a bunch of Poisoned Pen Press’s best detective novels, it’s occurred to me that I, too, could write those things. But…how to find out enough about detective work to do a decent job at it?

Well. A would-be detective writer could easily cobble together her own course of studies at PVCC. While we’re in the anthropology department, we could start with Introduction to Forensic Anthropology.

Survey of the role of forensic anthropologist, from the crime scene to the courtroom. Understand how a forensic anthropologist can determine life history of an individual. Contrubitions of forensic anthropology to crime scene and other legal investigation. How forensic anthropology is used to decipher historic cases, and how it is depicted in poular culture. Case studies involoving criminal investigations, mass disaster incidents, and global human right issues.

Prerequisites: none

Moving on to administration of justice, the wannabe crime writer can take a three-credit course in Serial Killers and Mass Murderers, and another called Forensic Pathology: Death Investigation (should fit right in with the forensic anthropology training). Then there’s plain old Criminology:

Study of deviance, society’s role in defining behavior; theories of criminality and the economic, social, and psychological impact of crime; relationship between statistics and crime trends. Examines crime victimization and the various types of crime and categories of offenders.

Prerequisites: None

Gosh. Think of that. There are no prereqs for any of these courses. You could actually learn enough to turn yourself into a pretty respectable crime writer.

The tuition is very reasonable: $71 per credit hour; $96 per hour if you want to audit. That’s only about $300 a course—four months of instruction. For dance, fitness, and outdoorsy activities, all one-credit courses, it’s a hundred bucks. You couldn’t get a guided hiking tour of Sedona for that price on the commercial market—and you sure couldn’t get sixteen sessions of dance instruction for that. Most dance studios don’t advertise their prices (if you have to ask, after all…); the Academy of Ballroom Dance charges $120 for just six lessons.

This is a bonanza for the retired and the frugal. At a very reasonable cost, you can develop a hobby, meet new friends, learn a new line of work, get fit. Why join a gym if you have a community college down the road? And why be bored?

Awesome. I can’t wait to get retired.

😀

Carnival of Money Stories is back!

Hey! Gather Little by Little reports Adam at Your Money Relationship has taken the initiative to revive the much-missed Carnival of Money Stories! GLBL Guy will host the inaugural edition on May 11.

Hooray! I’ve always loved this carnival and missed it when it fell into disuse. Adam is looking for hosts, so if you have a bit of time to volunteer, go on over here to sign up. And send your submissions to the carnival here. Let’s try to keep this fun idea rolling. 

 Thanks, Adam!!!

Budgeting and strategies for saving

Some time ago, a financial advisor who was helping me figure out what to do with a small inheritance remarked that I have a special talent for accruing savings by bits and pieces. Well, that does appear to be the case. As we noted the other day, by the end of this year my emergency fund will exceed $24,000—above and beyond the $21,000 squirreled away last year to pay off the Renovation Loan for the downtown house. 

So…how d’you do that?

Truth to tell, I don’t know how others would do it. But here are the basics that work for me:

1. Get out of debt and stay out of debt.

At the outset of my financial journey, I paid off a five-year car loan in 18 months by adding principal prepayments to each regular monthly payment. This freed up the $300/month payments to put into savings. Within a few years, I also paid off the $80,000 mortgage on my house, partly by renting space in my home and using the income to deal with the mortgage.

Debt consumes an enormous amount of your income. Freeing yourself of debt payments effectively “increases” your income even if you never get a raise—you end up with more money to spend or save.

2. Build savings into your budget.

“Pay yourself first” is the operative principle here. This is another way of saying “spend less than you earn.” As I was paying off car and real estate loans, I also set aside a small amount for savings each month. Bare minimum has always been $200 a month. As debts dissolve, some or all of the amount you’ve freed up by paying down debt can be added to the monthly savings.

When you create a budget, an effective way to create savings is to find a place to put every dollar of income. In other words, rather than estimating what you spend on each category (such as food, housing, utilities, transportation) and stopping when those categories are accounted for, build a set categories that will account for your entire net income. One of the categories should be “monthly savings.” This approach is sometimes called “zero-based budgeting.” 

My own approach to budgeting was to carefully track expenditures for a month or two, using Quicken or Excel. This provides a picture of where and how much you’re spending. Expense categories become evident after a month or so of observation. This exercise not only allows you to see where your money is going, it gives you some clues to where you might rein in unruly spending habits (for example, have you run amok at restaurants? did you really need all those clothes?). 

Once I understood my spending patterns, I established reasonable amounts for each category, including a category for savings. Any difference between income and expenditure was added to the “savings” category. Raises in pay resulted in raises in savings; although I might not devote the entire raise to increasing saving (you do have to get a life sometime, after all), I did pay myself better savings on the rare occasions the university gave me an increase.

3. Build side income streams.

Find ways to earn above and beyond the income from your day job. A master’s degree in anything will get you an adjunct teaching job at a community college. Night courses are a lot of fun to teach, because they’re full of adults who are there because they want to be there. Such gigs are not well paid, but every buck counts. I put all my net pay from teaching directly into savings.

You’re not forced to stop with just one side job. If you have a marketable hobby, if you enjoy collecting junk and selling it in yard sales, if you can trade a skill or a product for someone else’s skill, products, or dollars, you can create income that also can build your savings account. In addition to adjunct teaching, I also indulge in freelance editing. Every penny that comes in from that endeavor goes…yep! Right into savings.

Besides helping to build savings, secondary income streams have an enormous potential benefit: you still have them if you’re laid off your day job. Having the experience and contacts in teaching and editing will allow me to ramp up both those enterprises in my coming enforced retirement, and, as we have seen, will support me in the manner to which I intend to remain accustomed even if I never get another full-time job.

4. Take full advantage of your employer’s 401(k) or 403(b) plan.

If your employer  matches contributions to a retirement plan, for heaven’s sake, go for it! Every dollar your employer puts in means twice as much long-term savings for you. 

Allocate these investments intelligently, putting 50 or 60 percent in stocks and 40 or 50 percent in bonds and the money market. You have to assume some risk to make money in your investments; keeping it all in so-called “safe” instruments means your total savings will not keep up with inflation. Though the market does drop every now and again (sometimes with operatic drama!), over time losses and gains level out and and your investments build principal. Put your money in low-load funds to the extent possible (if your employer allows you to invest with Vanguard or Fidelity, these are good choices), because management fees eat into profits at an amazing rate.

Outside of an employment-related plan, go for Roth IRAs. Although these are after-tax instruments, they have the advantage that withdrawals after you reach age 59 1/2 are tax-free, which is huge. Also, they allow you to pass money to your heirs without the nasty tax gouges inherent to 401(k) plans and traditional IRAs. Here, too, set up your IRA with a low-load provider such as Vanguard or Fidelity.

5. Cultivate a frugal lifestyle.

Try to stay sane about this. You don’t really have to live like Our Hero, Scrooge McDuck. But on the other hand, neither do you have to live like an investment banker riding high. Get over the temptation to buy every new gadget just because it’s out there; to accrue stuff because all your friends, relatives and neighbors accrue stuff; to own bigger things and more things than you really need. Learn to distinguish between want and need, and then train yourself to appreciate the nonmaterial riches of life.

Frugality and simple living are the keys to living within your means. Spending less than you earn makes it possible to build savings and, eventually, to achieve financial freedom.