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Jobs Are The New Assets
Wanted to share an interesting article I just read...
Remember when jobs weren't worth your small talk? Think back a year or two. Picture yourself at a cocktail party or maybe picking up the kids from soccer. How did the conversation go? You talked about your house. A new deck! You talked about your portfolio. Gotta go small cap. Did you mention how much pleasure you derived from bringing home a steady paycheck? Probably not. "Land was valuable, and capital was valuable, and labor — who cared?" says David Ellison, a Boston-based money manager. "The attitude was, As long as I buy a few homes and invest in a hedge fund, I'm done. I can sit in my chair and watch football games."
We now know how that ended up. Your portfolio is down 50%, your mortgage is worth more than your house, and your savings account is barely visible. The job, meanwhile, is making a roaring comeback. Not in a statistical sense, of course. We are in a recession, after all: at 8.1%, unemployment hasn't been this high since 1983. But in terms of the American psyche — and a household's balance sheet — we're rediscovering the job as the most valuable asset a person can have.
For years, we felt quite the opposite, and understandably so. From 1999 to 2006, the value of real estate owned by individuals more than doubled as the homeownership rate hit a record high. The money the typical family had in the stock market soared from just 28% of financial assets in 1989 to a full 53% in 2007 as the percentage of families in the market jumped from 32% to 51%.
Houses and stocks — those were the things we paid attention to, the things that gave us the confidence to be good American consumers (hello, home-equity- lines of credit). At the same time, the percentage of income we saved dropped and dropped and dropped -until, thanks to the power of credit cards and other debt, it went negative in 2005. That was neatly explained away by the "wealth effect": we spent money we didn't have because we felt — and technically were — richer because of our assets.
All the while, we blissfully ignored a little concept economists like to call human capital. The cognition you've got up there in your head — your education and training — it's worth something. We can extract value not just from our homes and our portfolios but from ourselves as well. The mechanism for extracting that value? A job. "The income you earn from working is like the stream of interest income you might get from owning a bond," says Johns Hopkins University economist Christopher Carroll. "Think of it as a dividend on your human wealth."
Human capital is worth quite a lot. Gary Becker, the Nobel Prize-winning University of Chicago economist, figures that in a modern industrialized economy, 75% to 80% of a person's economic output comes from human capital (as opposed to, say, land or machinery). Of course, during the bubble years (first stocks, then housing), the noneconomists among us didn't exactly think about it that way. "People became mesmerized by how rich they were," says Becker, "and didn't realize the crucial asset they had in their earning power."
The tide is now turning. To see how, let's check back in with the savings rate. After it went negative in late 2005, it meandered back into minimally positive territory. Then, last year, it started bounding upward. By the fourth quarter, we were saving 3.2% of what we brought in. In January we hit 5%. No longer are we disrespecting our paychecks, treating employment income as an also-ran source of wealth. "People are realizing their job is their real source of financial stability," says Ellison, "that they have to live within the means of their job, not within the means of their assets. We're relearning how to create wealth."
As we do this, we'll start looking at our jobs differently. If that thing you do at the office every day is suddenly your sole financial lifeline, you'll approach it more cautiously. When you've got only one chip left, you're much less willing to put it on the table. In this new era, a predictable salary is more appealing than the chance of scoring big with bonuses and stock options. And having a government job — one of the last bastions of security — looks even better. One day soon you might find yourself perusing a list of the fastest-growing, best-paying professions, trying to picture yourself as an actuary. And instead of spending thousands of dollars to build a new deck, you're more likely to use that money to take a class.
Careers expert D*** Bolles sees another shift coming. If as a society, we turn our attention back to work — if we dote on our jobs as much as we did on our homes and portfolios in an earlier era — then we'll have to start asking deeper questions about why we do what we do. In December, Bolles noticed that a book he wrote in 1970 was back on the best-seller list. What Color Is Your Parachute? is about job-hunting and career-changing, but it's also about figuring out who you are as a person and what you want out of life. "Why are people rushing out to buy a book that talks about more meaningful work?" asks Bolles. "They're realizing they have to rethink work if they've got no Plan B. It reframes the whole issue of, What type of work am I willing to do?"
That almost sounds like a happy ending: the flagging economy has finally set us straight on how valuable our work is. Too bad it has also made work that much harder to come by. So often we don't know the true value of what we have until it's gone.
Remember when jobs weren't worth your small talk? Think back a year or two. Picture yourself at a cocktail party or maybe picking up the kids from soccer. How did the conversation go? You talked about your house. A new deck! You talked about your portfolio. Gotta go small cap. Did you mention how much pleasure you derived from bringing home a steady paycheck? Probably not. "Land was valuable, and capital was valuable, and labor — who cared?" says David Ellison, a Boston-based money manager. "The attitude was, As long as I buy a few homes and invest in a hedge fund, I'm done. I can sit in my chair and watch football games."
We now know how that ended up. Your portfolio is down 50%, your mortgage is worth more than your house, and your savings account is barely visible. The job, meanwhile, is making a roaring comeback. Not in a statistical sense, of course. We are in a recession, after all: at 8.1%, unemployment hasn't been this high since 1983. But in terms of the American psyche — and a household's balance sheet — we're rediscovering the job as the most valuable asset a person can have.
For years, we felt quite the opposite, and understandably so. From 1999 to 2006, the value of real estate owned by individuals more than doubled as the homeownership rate hit a record high. The money the typical family had in the stock market soared from just 28% of financial assets in 1989 to a full 53% in 2007 as the percentage of families in the market jumped from 32% to 51%.
Houses and stocks — those were the things we paid attention to, the things that gave us the confidence to be good American consumers (hello, home-equity- lines of credit). At the same time, the percentage of income we saved dropped and dropped and dropped -until, thanks to the power of credit cards and other debt, it went negative in 2005. That was neatly explained away by the "wealth effect": we spent money we didn't have because we felt — and technically were — richer because of our assets.
All the while, we blissfully ignored a little concept economists like to call human capital. The cognition you've got up there in your head — your education and training — it's worth something. We can extract value not just from our homes and our portfolios but from ourselves as well. The mechanism for extracting that value? A job. "The income you earn from working is like the stream of interest income you might get from owning a bond," says Johns Hopkins University economist Christopher Carroll. "Think of it as a dividend on your human wealth."
Human capital is worth quite a lot. Gary Becker, the Nobel Prize-winning University of Chicago economist, figures that in a modern industrialized economy, 75% to 80% of a person's economic output comes from human capital (as opposed to, say, land or machinery). Of course, during the bubble years (first stocks, then housing), the noneconomists among us didn't exactly think about it that way. "People became mesmerized by how rich they were," says Becker, "and didn't realize the crucial asset they had in their earning power."
The tide is now turning. To see how, let's check back in with the savings rate. After it went negative in late 2005, it meandered back into minimally positive territory. Then, last year, it started bounding upward. By the fourth quarter, we were saving 3.2% of what we brought in. In January we hit 5%. No longer are we disrespecting our paychecks, treating employment income as an also-ran source of wealth. "People are realizing their job is their real source of financial stability," says Ellison, "that they have to live within the means of their job, not within the means of their assets. We're relearning how to create wealth."
As we do this, we'll start looking at our jobs differently. If that thing you do at the office every day is suddenly your sole financial lifeline, you'll approach it more cautiously. When you've got only one chip left, you're much less willing to put it on the table. In this new era, a predictable salary is more appealing than the chance of scoring big with bonuses and stock options. And having a government job — one of the last bastions of security — looks even better. One day soon you might find yourself perusing a list of the fastest-growing, best-paying professions, trying to picture yourself as an actuary. And instead of spending thousands of dollars to build a new deck, you're more likely to use that money to take a class.
Careers expert D*** Bolles sees another shift coming. If as a society, we turn our attention back to work — if we dote on our jobs as much as we did on our homes and portfolios in an earlier era — then we'll have to start asking deeper questions about why we do what we do. In December, Bolles noticed that a book he wrote in 1970 was back on the best-seller list. What Color Is Your Parachute? is about job-hunting and career-changing, but it's also about figuring out who you are as a person and what you want out of life. "Why are people rushing out to buy a book that talks about more meaningful work?" asks Bolles. "They're realizing they have to rethink work if they've got no Plan B. It reframes the whole issue of, What type of work am I willing to do?"
That almost sounds like a happy ending: the flagging economy has finally set us straight on how valuable our work is. Too bad it has also made work that much harder to come by. So often we don't know the true value of what we have until it's gone.
Views: 37
Replies to This Discussion
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Permalink Reply by Honey B Hooligan {Madam} on
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I have to agree with "recession proof" jobs. My husband's Military career = recession proof; my job in Computer IT and business Computer Consulting = recession proof (EVERYONE has a computer these days and rely on technology). Although we're pretty good right now, my heart goes out to the thousands of Detroit folks (and everywhere else in the world) that have no jobs, food, or homes. I'm a big believer in not complaining about stuff that you cannot change, or refuse to change.
One thing I hear about constantly (especially here in the Detroit area) is OBAMA OBAMA OBAMA! I'm happy the guy got elected (sorta...lesser of 2 evils IMO), but he's not going to change the U.S. drastically during his term. I'm just sitting back and waiting for all of these supporters of Obama to turn on "Dear Leader" (that's what the Military calls him...at least the Military I know!) They're going to expect results, and expect them NOW...and unfortunately, he's just not going to be able to deliver on one term in office.
As for my history knowledge, I may not have known WHY I was living in a 15 passenger van with my mom and 4 sisters outside of my Elementary school, but I sure as hell REMEMBER it. I remember eating Ramen noodles right from the bag, and cereal w/out milk. I remember standing in line at the food bank, and I remember being laughed at mercilessly by other kids when I stepped out of my Van and walked to school. My mom worked night and day to try and get our house back, but she couldn't. Instead of complaining, she started her own business, using government loans. Yep, the government helped my mom go to a woman who was living in a van, to a woman who made $250,000 per year, with a net worth of 6.8 Million dollars.
My mom was a smart Lady, she made herself indispensable to the Medical Liability field, she's one of THE most highly respected Consultants in the U.S. to this day. (recession proof hehe) I took my queue from her! I work hard, I make myself an expert in everything that I attempt, and I make sure that my boss looks good (it helps that I have the best boss on the planet)
My boss tells me that I'm well on my way to owning part of the company in the very near future!
Work hard guys, everything will be fine if you have the determination to make it that way.
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Permalink Reply by Delyssia LaBelle {Madam} on
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my grandmother once told me"things cant always be bad, and they cant always be good, everything changes, its a cycle" and that phrase gives me hope. im tired of hearing about the 'resession' and the media trying to scare us into hysteria, yeah things arnt great, they will probably get worse before they get better, but worring gets jack crap done about it.
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woot! inspirational B.
Honey B Hooligan {M} said:I have to agree with "recession proof" jobs. My husband's Military career = recession proof; my job in Computer IT and business Computer Consulting = recession proof (EVERYONE has a computer these days and rely on technology). Although we're pretty good right now, my heart goes out to the thousands of Detroit folks (and everywhere else in the world) that have no jobs, food, or homes. I'm a big believer in not complaining about stuff that you cannot change, or refuse to change.
One thing I hear about constantly (especially here in the Detroit area) is OBAMA OBAMA OBAMA! I'm happy the guy got elected (sorta...lesser of 2 evils IMO), but he's not going to change the U.S. drastically during his term. I'm just sitting back and waiting for all of these supporters of Obama to turn on "Dear Leader" (that's what the Military calls him...at least the Military I know!) They're going to expect results, and expect them NOW...and unfortunately, he's just not going to be able to deliver on one term in office.
As for my history knowledge, I may not have known WHY I was living in a 15 passenger van with my mom and 4 sisters outside of my Elementary school, but I sure as hell REMEMBER it. I remember eating Ramen noodles right from the bag, and cereal w/out milk. I remember standing in line at the food bank, and I remember being laughed at mercilessly by other kids when I stepped out of my Van and walked to school. My mom worked night and day to try and get our house back, but she couldn't. Instead of complaining, she started her own business, using government loans. Yep, the government helped my mom go to a woman who was living in a van, to a woman who made $250,000 per year, with a net worth of 6.8 Million dollars.
My mom was a smart Lady, she made herself indispensable to the Medical Liability field, she's one of THE most highly respected Consultants in the U.S. to this day. (recession proof hehe) I took my queue from her! I work hard, I make myself an expert in everything that I attempt, and I make sure that my boss looks good (it helps that I have the best boss on the planet)
My boss tells me that I'm well on my way to owning part of the company in the very near future!
Work hard guys, everything will be fine if you have the determination to make it that way.
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**bows** ah-thankyouverymuch
Delyssia LaBelle {M} said:woot! inspirational B.
Honey B Hooligan {M} said:I have to agree with "recession proof" jobs. My husband's Military career = recession proof; my job in Computer IT and business Computer Consulting = recession proof (EVERYONE has a computer these days and rely on technology). Although we're pretty good right now, my heart goes out to the thousands of Detroit folks (and everywhere else in the world) that have no jobs, food, or homes. I'm a big believer in not complaining about stuff that you cannot change, or refuse to change.
One thing I hear about constantly (especially here in the Detroit area) is OBAMA OBAMA OBAMA! I'm happy the guy got elected (sorta...lesser of 2 evils IMO), but he's not going to change the U.S. drastically during his term. I'm just sitting back and waiting for all of these supporters of Obama to turn on "Dear Leader" (that's what the Military calls him...at least the Military I know!) They're going to expect results, and expect them NOW...and unfortunately, he's just not going to be able to deliver on one term in office.
As for my history knowledge, I may not have known WHY I was living in a 15 passenger van with my mom and 4 sisters outside of my Elementary school, but I sure as hell REMEMBER it. I remember eating Ramen noodles right from the bag, and cereal w/out milk. I remember standing in line at the food bank, and I remember being laughed at mercilessly by other kids when I stepped out of my Van and walked to school. My mom worked night and day to try and get our house back, but she couldn't. Instead of complaining, she started her own business, using government loans. Yep, the government helped my mom go to a woman who was living in a van, to a woman who made $250,000 per year, with a net worth of 6.8 Million dollars.
My mom was a smart Lady, she made herself indispensable to the Medical Liability field, she's one of THE most highly respected Consultants in the U.S. to this day. (recession proof hehe) I took my queue from her! I work hard, I make myself an expert in everything that I attempt, and I make sure that my boss looks good (it helps that I have the best boss on the planet)
My boss tells me that I'm well on my way to owning part of the company in the very near future!
Work hard guys, everything will be fine if you have the determination to make it that way.
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VendorPermalink Reply by Kim Bombshell on -
Yep, your mom is an inspiration!
Hard times make the good times better, and make you appreciate what you've worked for so much more!
Honey B Hooligan {M} said:I have to agree with "recession proof" jobs. My husband's Military career = recession proof; my job in Computer IT and business Computer Consulting = recession proof (EVERYONE has a computer these days and rely on technology). Although we're pretty good right now, my heart goes out to the thousands of Detroit folks (and everywhere else in the world) that have no jobs, food, or homes. I'm a big believer in not complaining about stuff that you cannot change, or refuse to change.
One thing I hear about constantly (especially here in the Detroit area) is OBAMA OBAMA OBAMA! I'm happy the guy got elected (sorta...lesser of 2 evils IMO), but he's not going to change the U.S. drastically during his term. I'm just sitting back and waiting for all of these supporters of Obama to turn on "Dear Leader" (that's what the Military calls him...at least the Military I know!) They're going to expect results, and expect them NOW...and unfortunately, he's just not going to be able to deliver on one term in office.
As for my history knowledge, I may not have known WHY I was living in a 15 passenger van with my mom and 4 sisters outside of my Elementary school, but I sure as hell REMEMBER it. I remember eating Ramen noodles right from the bag, and cereal w/out milk. I remember standing in line at the food bank, and I remember being laughed at mercilessly by other kids when I stepped out of my Van and walked to school. My mom worked night and day to try and get our house back, but she couldn't. Instead of complaining, she started her own business, using government loans. Yep, the government helped my mom go to a woman who was living in a van, to a woman who made $250,000 per year, with a net worth of 6.8 Million dollars.
My mom was a smart Lady, she made herself indispensable to the Medical Liability field, she's one of THE most highly respected Consultants in the U.S. to this day. (recession proof hehe) I took my queue from her! I work hard, I make myself an expert in everything that I attempt, and I make sure that my boss looks good (it helps that I have the best boss on the planet)
My boss tells me that I'm well on my way to owning part of the company in the very near future!
Work hard guys, everything will be fine if you have the determination to make it that way.
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She's my hero, that's for sure!
Kim Bombshell said:Yep, your mom is an inspiration!
Hard times make the good times better, and make you appreciate what you've worked for so much more!
Honey B Hooligan {M} said:I have to agree with "recession proof" jobs. My husband's Military career = recession proof; my job in Computer IT and business Computer Consulting = recession proof (EVERYONE has a computer these days and rely on technology). Although we're pretty good right now, my heart goes out to the thousands of Detroit folks (and everywhere else in the world) that have no jobs, food, or homes. I'm a big believer in not complaining about stuff that you cannot change, or refuse to change.
One thing I hear about constantly (especially here in the Detroit area) is OBAMA OBAMA OBAMA! I'm happy the guy got elected (sorta...lesser of 2 evils IMO), but he's not going to change the U.S. drastically during his term. I'm just sitting back and waiting for all of these supporters of Obama to turn on "Dear Leader" (that's what the Military calls him...at least the Military I know!) They're going to expect results, and expect them NOW...and unfortunately, he's just not going to be able to deliver on one term in office.
As for my history knowledge, I may not have known WHY I was living in a 15 passenger van with my mom and 4 sisters outside of my Elementary school, but I sure as hell REMEMBER it. I remember eating Ramen noodles right from the bag, and cereal w/out milk. I remember standing in line at the food bank, and I remember being laughed at mercilessly by other kids when I stepped out of my Van and walked to school. My mom worked night and day to try and get our house back, but she couldn't. Instead of complaining, she started her own business, using government loans. Yep, the government helped my mom go to a woman who was living in a van, to a woman who made $250,000 per year, with a net worth of 6.8 Million dollars.
My mom was a smart Lady, she made herself indispensable to the Medical Liability field, she's one of THE most highly respected Consultants in the U.S. to this day. (recession proof hehe) I took my queue from her! I work hard, I make myself an expert in everything that I attempt, and I make sure that my boss looks good (it helps that I have the best boss on the planet)
My boss tells me that I'm well on my way to owning part of the company in the very near future!
Work hard guys, everything will be fine if you have the determination to make it that way.
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Permalink Reply by Ellie Retrophilia on
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That's if that 7% was guaranteed. With ARM loans the rate goes up after a specified amount of time if you do not refinance before that time is up. Folks were not reading the print that specified the rate hike. An interest rate of 7% could balloon to over 20% after the time specified was over. Most of the folks losing their homes now, bought homes they either could not afford or bought them with an ARM.
Kim Bombshell said:300K at 7% over 30 years works out to a mortgage of about 3k a month. 150K Salary, after taxes, is about 9-10K a month. That is a reasonable risk.
It's the "liar's loans" that broke the industry. Refinance and using fake documents to verify income that people didn't have. Also loans that didn't verify income. It mostly happened to low-income people. This was made possible by the Senate passing the "fair lending act" (Senator Obama played a big part in getting it passed!) and it was signed by Clinton. It forced institutions to allow these "Liar's loans." Subprime Loans were often granted under the "fair lending act." Greedy real estate brokers, and Loan officers were the biggest culprit in this down swing and banking crisis.
Ellie Retrophilia said:I don't tend to trust in "earn fast money" schemes to begin with which is exactly what the hedge fund is. And many of the stock options. True "wealth" is made by working hard. There are few executives that do that...made it to the top through honest to goodness hard work. Some are born in to luxury and others were overnight. My method has always been to save money, learn to do without some things and don't buy what I can't afford. If I have to use a credit card and can't pay it off within a short period of time then I don't necessarily need it. Really the whole recession boils down to people having very few financial skills and making very poor financial decisions...one of them being the subprime mortgage. That fiasco has been contributed to by banks wanting to make easy money fast and borrowers who don't educate themselves, read the fine print or realize what they can truly afford. You can't buy a $300K house on a $150K per year salary.
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Y'know what gets me about folks who complain about Obama? Most of them complained about Bush too. I wonder how they chose their congressional representatives...eeny meeny miney moe? Seems a lot of folks forget that the President can't do crap without the House of Representatives and the Senate. He can veto or approve all he likes but that bill still has to make it through both the House and Senate. Checks and balances. They wanted real change then they should have booted the old doddering guys who haven't connected with the American public in over 50 years and have been in Congress for just as long. Never understood why they limited the term of the President's office but Congress doesn't have a term limit.
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Permalink Reply by Harmony Walker on
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wow! Thanks for posting this!! something to chew on for the day!! It is very interesting to read and think about!! personally here im living in montreal with my boyfriend, cant say the recession has hit us because we've been living paycheck to paycheck for the past 5 years!
i have now money but I have a great job and am doing what i love! we have food and a roof over our heads(small and cheap) but MOST important we are Happy! we manage to cover these things...and we dont by toys for grown-ups and ecessive personal items though the want is there!
but most of all we are truly happy living the way we do and happy with what we have!
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