Depression Talk: 30 Years Later

One week ago, Robert Reich blogged that we are in a Depression. He used a capital D, acknowledged that it's not a Great Depression, but moved away from the milder Mini Depression.

I am a boomer with a specific memory of not knowing what a Depression would mean in concrete terms. It was 1979 and Tom Bold and I were house-hunting. In one realtor's office, Tom and a middle-aged fellow exchanged these words.

Realtor: You want a mortgage that you can handle even in a depression.

Tom Bold: If we're in a depression, a mortgage is the least of my worries.

Realtor: Well, that's true.

And I just quietly filed that away. I was sure we'd never be in a depression because, after all, the Great Depression was something our grand-parents dealt with. It wasn't anything a modern society would allow to happen again. (You know, the same way we count on wars to never be repeated.)

But I still filed it away in memory. I was probably focused on the idea that Tom Bold had an opinion about priorities in a depression and I had no earthly idea what that might mean.

I mean I really filed it away. Tom was standing. The realtor was sitting. Tom had short hair (first year on the job). The realtor's was even shorter. They both wore white shirts and dark pants (1979, remember).

I am certain that in the next several years (early 1980s with their own impressive unemployment figures) I did not relate the conversation to personal finances. Other people might be unemployed but Tom was at the start of his career with options that included job choices and salary jumps.

Today? I am relating the conversation to personal finances. It's not the mortgage per se, as we've consistently lived beneath our means since 1979. Our housing is not a problem. But we certainly are touched by the current Depression, just as Reich describes his own and most Americans' situation. Retirement savings took a hit. Employment has been altered (Tom's lay-off). We're avoiding debt, just as Reich predicts. We see enough changes to make us cautious, expecting to hunker down for a couple of years.

With humility, we appreciate what we have and we sympathize with people who better fit what Tom described to that realtor. People for whom the mortgage is the least of their worries. In a Depression, the worst worries are much worse than making the mortgage.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Make (It) Work: Entrepreneurs in the Mini Depression

The NYTimes has covered it, scores of web sites are promoting it, and a growing number of employed people are doing it: scaling back and starting up.

We're not all born entrepreneurs. That's a good thing because new businesses frequently fail. A stable society relies on most people preferring to join a group than start a group. But in an unstable society, when work groups are disbanded (another way to describe a lay-off), people move to a new preference: covering the rent.

So, we're developing an economy that includes folks without jobs offering services and products to the folks with jobs. Will the start-ups generate enough income to replace the lost paychecks? Or, as some optimists claim, to re-start the economy? I'm betting that most will happily return to the security of employment when that is possible. But they'll have fond memories of working all hours, chasing contracts, and seeing their effort translate directly to dollars. OK, so, maybe the fondness doesn't emerge immediately.

The other thing that doesn't emerge immediately is confidence. The transition from other-employment to self-employment can take months to develop. First, you have to shift your thinking from "where can I get a job" to "where can I get work?" Second, you have to scale back from "how much money do I like to make" to "how much do I really need to bring in?"

After you gain proof that you can make the money you need, you can begin enjoying the freedom of working for yourself. That's where I am. But a little worry can creep in. I commented to a colleague doing the same thing I am, "we're in the honeymoon phase, you know, and next year might not feel so good."

She was sanguine. "Yeah, everyone knows honeymoons are overrated...but they still go on them."

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Tech Sector Lay-offs

Lay-offs in the technology sector are tracked graphically at TechCrunch Layoff Tracker.

TechCrunch (the sponsoring web site) describes itself as "obsessively profiling" new Internet products. (So, profiling the tech sector is not its usual fare.) I enjoyed reading through the Archives, especially the 2005 entries exploring a new proposition called Web 2.0 with considerable attention to the new vocabulary developing around it.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

On hold: recovery.gov

We're on hold. Click http://recovery.gov and set a bookmark in your browser. Eventually a bill will pass and you'll want to look in on this promised transparent view of how the stimulus package is put to work.

In the meantime, refer to Robert Reich's blog (February 9 entry) for his explanation as to why we're on hold.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Finding Humor in the Mini Depression

Rick Moranis' Dialing for Derivatives op-ed column in The NY Times (yesterday) is a great way to start the week. I promise.

LOLFed - Troubled Asset Ridicule Program is harder to read but highly reflective of a mood for laughing out loud (LOL), for which it is named. I don't read beyond the text on the photographs, frankly.

The Onion. An acquired taste, this onion-y view of life can skewer any topic, which can bring much laughter. But if you've been touched by suicide, for example, you may not care for The Onion's mock reporting on the suicide note that came in the form of a 48-slide PowerPoint presentation. (I guess my favorite part of the story is, Copywriter Gita Pruriyaran said the presentation "had room for improvement.") My son introduced me to The Onion when he was a teenager and I saw it as insight into his adolescent development. I have since come to admire the satire.

Learning to love The Onion reminds me of my adaptation to David Letterman. As a young woman, I cringed at what I considered his meanness and mocking. And then I grew more cynical and Letterman grew more circumspect. Or I just got used to him.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

COBRA from another angle

I tend to take COBRA news personally. What emerges from the final stimulus package may well affect me personally but I appreciate what all this news means to employers, too.

For the great majority of employers, COBRA health insurance has been the very short bridge (technically up to 18 months but typically just a few months) offered to a limited number of ex-employees (some reports say less than 10% of ex-workers and other reports say less than 20%) at some percentage of the actual premium (often up to 102%).

That doesn't sound so bad except that employers regularly see the claims from these ex-workers go up, so that the "loss ratio" is around 150%. Put bluntly, the premiums collected from the ex-employees won't necessarily cover the medical costs billed.

The reasoning behind those figures is that the kind of people who purchase COBRA insurance (remember, just a fraction of the ex-employees who are eligible for it) are the kind of people who either (a) do not dare live without coverage because they have health issues, or (b) cannot find affordable insurance on their own because they have health issues. Especially aging ex-employees with pre-existing conditions are likely to purchase COBRA even if the premiums are high.

As employers observe (some with rancor), ex-employees on COBRA may use the bridge time to tend to a myriad of medical needs. Perhaps the ex-employees are uncertain about future medical coverage and therefore want to take advantage of the COBRA insurance while they have it. Or perhaps they simply have a lot of time to devote to doctor's visits.

COBRA was tolerated because not too many people used it. And those who did use it rarely needed the full allotment of 18 months. And for larger employers making intermittent lay-offs, COBRA was an attractive element of a severance package. For example, an employer might offer the laid-off employee "free" COBRA coverage for 6 or 9 or 12 months, after which the ex-employee would pick up the full premium (up to 102%).

Right now, that same employer is worried about the impact of COBRA in a Mini Depression. Record lay-offs immediately translate into more COBRA elections than ever experienced before. (Paperwork and processing costs go up, too, because everyone has to be notified repeatedly of the COBRA option.)

A likely product from Congress will be a federal subsidy to assist newly laid-off workers in purchasing COBRA insurance. That will probably be limited to lay-offs that started in late 2008 and 2009, and to a limited number of months. That subsidy will encourage many more ex-employees to elect to purchase COBRA on the basis of new affordability—and also because they will not feel confident about finding new employment any time soon.

Employers fear the impact of another possible element of the stimulus package: the requirement to offer COBRA coverage to ex-employees who are 55 or older, and younger ex-employees who were employed for 10 or more years with the company. The provision would allow these ex-employees to utilize the COBRA election (without any federal subsidy) until they reach Medicare age.

Employers are looking at their budgets closely to plan for what will surely be a costly event, regardless of what is eventually passed by Congress. One moderating factor is the likelihood that with larger numbers of COBRA participants, the loss ratio will drop. But analysts cannot say how much that drop may be.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Downsizing and the Dirty Dozen

Last weekend I flew out to California for a one-day conference just to sit in the audience (as opposed to serving as a presenter, which will be my reason for flying to California for a one-day conference next month).

I'll comment another day about what possessed me go to L.A. for 48 hours. Today, I want to relate one aspect of the conference day: the presence of 3 b-school speakers. Who would have known that university business schools are into positive psychology?

Kit Cameron of the U of Michigan was one of those speakers and he related some of his older research, suddenly pertinent to the current Mini Depression. Cameron and colleagues used to study downsizing companies, especially those caught by unexpected shrinking markets. The current round of lay-offs in the U.S. qualifies for Cameron's description.

Shorthand version: most downsizing companies don't go about the process in ways constructive or respectful. Negative attributes emerge, what Cameron called the "dirty dozen."

1 - Centralization
2 - Crisis mentality
3 - Loss of innovativeness
4 - Resistance to change
5 - Decreasing morale
6 - Politicized special interest groups
7 - Non-prioritized cutbacks
8 - Loss of trust
9 - Increasing conflict
10 - Restricted communication
11 - Lack of teamwork
12 - Lack of leadership

Companies that take the time to counteract these tendencies can instead involve as many stakeholders as possible in strategizing how to downsize. Those companies can produce a better outcome, if not for all the work force, at least for some.

The stats from the Cameron studies are not encouraging: 80% of downsizing companies deteriorate. The much smaller group of 20% come out of the process stronger and eventually profitable again.

Cameron still cites the dirty dozen but takes a different approach to the study of business today, relying on POS, or Positive Organizational Scholarship. And that's the name of the research Center for POS at the Ross School of Business, U of Michigan.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Names Matter, even for economic downturns

What we call a circumstance frames our response to it. Yes?

Robert Reich uses the term Mini Depression in his blog.

A website opines on styles of economists with this long blog name: Great Recession because it's not a depression. yet.

The lower-case approach is deep recession or economic downturn. Those are terms I have used pretty consistently but am ready to abandon. They do not reflect the toll on the people who are losing their jobs and their sense of security for health and wealth.

I don't care for the Great Recession because it sounds too clever. I want an authentic name, fully aware that the best descriptor may emerge a few years from now.

Bloomberg.com reports that the White House doesn't want to risk what may emerge as The Descriptor. The media types have run focus groups to find out what vocabulary will attract support from the populace. What's being touted for now? Recovery instead of recession. Investment instead of infrastructure.

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.