Whenever you might be tempted to moan about how hard you work or pat yourself on the back about not ever being off the job sick, consider these examples.
A couple Jimmy and Linda have just shut down their independent filling station and corner shop business here in our small town. They operated for 18 years, 7 days a week, more or less 365 days a year, 16 hours a day, starting around 5:00am and closing at 9pm. No weekends, statutory holidays, sick days, "mental health" days, or vacations for them! That amounts to 105,120 hours. Just for fun and comparison, in the government environment where I used to work 37.5 hours a week and three weeks vacation is the minimum, deducting statutory and other days off, the number of working days per year is 233. Per the barometer of government employees, in the space of 18 years Jimmy and Linda worked the equivalent of 60 years together or 30 years each.
Ottawa optometrist Dr Grenville Goodwin once casually mentioned to me as he peered into my eyes that he had just logged 50 years without missing one day due to sickness. Most people don't come close to working that many years.
Hats off to them. These folks have my utter admiration, lazy sod that I am in comparison. Thank goodness for people like them to keep our world turning reliably.
Showing posts with label employment. Show all posts
Showing posts with label employment. Show all posts
Sunday, 8 June 2008
Friday, 28 March 2008
The High Tech Bubble Bust: a True Financial and Human Disaster
When market and financial bubbles finally burst, their consequences are often severe and long lasting.
I've watched the price of stock investments like optical equipment manufacturer JDSU, one of the high tech darlings of the 2000 bubble era decline precipitously - it is currently down 99% from when I bought it and that was not its peak.
Even the strong tech companies of today have not recovered to anywhere near their levels of that time. The Cisco stock I bought in 2000 is currently not even worth a third of its purchase price. The best performing tech company I still own - Nokia - has gone back up to barely over half its purchase price. How long will it be, another decade before previous highs are again achieved?
On the human side, the July 2007 research study by Marc Frenette of Stats Can titled "Life after the High-tech Downturn: Permanent Layoffs and Earnings Losses of Displaced Workers" documents an equally grim picture. This excerpt from the Abstract says it all:
"... the high-tech downturn resulted in a sudden and dramatic increase in the probability of experiencing a permanent layoff, which quadrupled in the manufacturing sector from 2000 to 2001. Ottawa–Gatineau workers in the industry were hit particularly hard on this front, as the permanent layoff rate rose by a factor of 11 from 2000 to 2001. Moreover, laid-off manufacturing high-tech workers who found a new job saw a very steep decline in earnings. This decline in earnings was well above the declines registered among any other groups of laid-off workers, including workers who were laid off during the ‘jobless recovery’ of the 1990s. Among laid-off high-tech workers who found a new job, about four out of five did not locate employment in high-tech, and about one out of three moved to another city. In Ottawa–Gatineau, about two in five laid-off high-tech workers left the city."
We have yet to see how the popping of the credit bubble plays out but we should not be surprised if the financial and human turmoil is severe. Maybe people in the financial industry should have a look at a copy of Anita Caputo and Lee Wallace's book Learn to Bounce (see my review), in which the authors show how to respond positively to the unemployment challenge when the kind of jobs they have been used to doing simply disappear.
I've watched the price of stock investments like optical equipment manufacturer JDSU, one of the high tech darlings of the 2000 bubble era decline precipitously - it is currently down 99% from when I bought it and that was not its peak.
Even the strong tech companies of today have not recovered to anywhere near their levels of that time. The Cisco stock I bought in 2000 is currently not even worth a third of its purchase price. The best performing tech company I still own - Nokia - has gone back up to barely over half its purchase price. How long will it be, another decade before previous highs are again achieved?
On the human side, the July 2007 research study by Marc Frenette of Stats Can titled "Life after the High-tech Downturn: Permanent Layoffs and Earnings Losses of Displaced Workers" documents an equally grim picture. This excerpt from the Abstract says it all:
"... the high-tech downturn resulted in a sudden and dramatic increase in the probability of experiencing a permanent layoff, which quadrupled in the manufacturing sector from 2000 to 2001. Ottawa–Gatineau workers in the industry were hit particularly hard on this front, as the permanent layoff rate rose by a factor of 11 from 2000 to 2001. Moreover, laid-off manufacturing high-tech workers who found a new job saw a very steep decline in earnings. This decline in earnings was well above the declines registered among any other groups of laid-off workers, including workers who were laid off during the ‘jobless recovery’ of the 1990s. Among laid-off high-tech workers who found a new job, about four out of five did not locate employment in high-tech, and about one out of three moved to another city. In Ottawa–Gatineau, about two in five laid-off high-tech workers left the city."
We have yet to see how the popping of the credit bubble plays out but we should not be surprised if the financial and human turmoil is severe. Maybe people in the financial industry should have a look at a copy of Anita Caputo and Lee Wallace's book Learn to Bounce (see my review), in which the authors show how to respond positively to the unemployment challenge when the kind of jobs they have been used to doing simply disappear.
Thursday, 15 November 2007
Job Loss Survey, Emergency Fund and Bounce Book
Thanks to all who ticked a response to my latest mini survey about how many times you have been laid off during your working career. Though the survey is unscientific and comprises a very small sample, the fact that about half of you have been laid off at least once confirms to me that planning and for and making provision for a job loss is important for most people, as I had concluded in my previous post on Emergency Funds: Job Loss.
In a few weeks, I'll be reviewing the newly published book Learn to Bounce, which is about the experiences of a whole raft of people caught in the technology meltdown of 2000, how they turned a negative into a positive in their life. Written by Lee Wallace and friend and former colleague Anita Caputo, the very concept of the book - to show with real examples that a job loss disaster is not necessarily the end of the road - appeals to my philosophy: never give up and never be a victim.
In a few weeks, I'll be reviewing the newly published book Learn to Bounce, which is about the experiences of a whole raft of people caught in the technology meltdown of 2000, how they turned a negative into a positive in their life. Written by Lee Wallace and friend and former colleague Anita Caputo, the very concept of the book - to show with real examples that a job loss disaster is not necessarily the end of the road - appeals to my philosophy: never give up and never be a victim.
Tuesday, 30 October 2007
Why an Emergency Fund? Part 2: Job Loss
This is the second in a series looking at the need for a special emergency fund to tide one over through various crises. Part 1 looked at Death.
Today's installment examines involuntary job loss, aka layoff, firing, redundancy, downsizing - take your pick, they all can hurt just as much financially and perhaps emotionally as well. Maybe some forms of suddenly voluntary quitting a job, like abuse or harassment, can be included too, the principles and effects are the same.
In keeping with the pattern of the series, I'll first look at the probability of the event, then the potential cost/consequences and finally the alternative risk responses to decide whether an emergency fund is needed at all and if so, how much is needed for this component. At the end of the series, I'll add the results up and deal with what form the fund (if any) should take.
Event #2 - Job Loss
Probability - There is no single answer for everyone, it depends on your circumstances and you must figure the chances for yourself.
If you are retired, then it's pretty hard to get laid off, no? Cross yourself off as needing an emergency fund because of job loss. Even the 17% or so of retired people who do work mainly seem to do so because they enjoy it, not because they need to, according to the Fidelity report I blogged about a few days ago.
Similarly, if you are self-employed you cannot really fire yourself, though a lack of work caused by external forces can happen and variations or gaps in income are part of the landscape for most. The self-employed contractors and individual consultants that I know tend to keep a financial reserve to even out cash flow from assignment to assignment. But what follows is mainly about and for those working for an organisation as an employee.
The chances of permanent layoff vary a lot according to a number of factors, as revealed in Stats Can's study Permanent Layoff Rates. Here is a rough summary:
Chance of being laid off within the next year -
+ for younger people
+ higher paid
++ small firm, i.e. double the chance in a large firm
+ manufacturing (the rising loonie effect)
++ primary and construction industry
- public services
- highly educated
The chances of being laid off changed very little (less than a percentage point) between 1989 and 1999, both good periods for the economy. As the study says but doesn't quantify, layoffs rise during recessions. The study only states the risk of layoff within the next year, not a whole working career, which must be a lot higher. In sum, there is thus a significant chance that a person, on average, will be laid off sometime in their career. The risk is not negligible.
Special circumstances may arise at any individual organisation that can cause a very high risk of being laid off. I'd say that almost always, those periods of threat are very visible to the average employee and are also known many months, often years ahead. In my own case, I have been laid off two and a half times in my career - once, in a federal crown corporation that was abolished through a policy change, which took years from idea to action; once, in the high tech meltdown when the internal rumblings and the external slaughter started 8-10 months ahead of my own walk down the plank, and a half once (through an internal transfer I was able to escape my abolished job), at a municipal government where the council's budget problem was highly public knowledge six months ahead. When those storm clouds start building, don't ignore them!
Cost - The impact of job loss is without question enormous for everyone (again excluding retired people) as one's pay is the largest, most often the only significant, source of income to live on. Take your net pay and that's the effect you will feel. It is thus the multiple to use in figuring how many months - from zero upwards - you will need.
Risk Response -
How long will funding be needed?
Before looking at alternative responses, you need to estimate for how long you might need funding. That's a tough one because getting a new job and ending the emergency depends a lot on how much smart effort you expend on the job search and a little on luck (not the other way round ... remember the quote, ''The harder I work, the luckier I get'' attributed to both film mogul Samuel Goldwyn and golfer Gary Player?) It is possible to be out of work for a year or more. An often quoted rule of thumb is about 1 month of search for every $10,000 in salary. My own two layoffs lasted eight months and zero months.
I'd say a year is the maximum I would consider a job loss emergency to last. Beyond that it's no longer a short-term emergency, it's a major life crisis and much more drastic action than a simple emergency fund will be required - e.g. selling and moving home to a new city, career change. Of course, long term, short term it doesn't matter, one still might need to live without a job income and the possibility of such events is a compelling reason to save and invest money. Retirement isn't the only time in life when a person might want to live off savings.
What sources of funding do you automatically receive? These obviously reduce the need for a fund.
In Canada today, we are lucky to have sources of income support to which we are entitled:
Responses -
One big problem is that in practise I would guess those who could most benefit from an emergency fund are the least able to save to have one: younger workers in cyclical, non-permanent jobs.
In anticipation of the discussion on how to provide the fund, one thing I would not recommend in the job loss situation is to rely on a line of credit. Not knowing when a new job will be found and the emergency will end makes the possible accumulation of debt open-ended. There is a limit to what lenders will give out. And it is stressful enough to be out of work without having the worry of a growing pile of debt.
Today's installment examines involuntary job loss, aka layoff, firing, redundancy, downsizing - take your pick, they all can hurt just as much financially and perhaps emotionally as well. Maybe some forms of suddenly voluntary quitting a job, like abuse or harassment, can be included too, the principles and effects are the same.
In keeping with the pattern of the series, I'll first look at the probability of the event, then the potential cost/consequences and finally the alternative risk responses to decide whether an emergency fund is needed at all and if so, how much is needed for this component. At the end of the series, I'll add the results up and deal with what form the fund (if any) should take.
Event #2 - Job Loss
Probability - There is no single answer for everyone, it depends on your circumstances and you must figure the chances for yourself.
If you are retired, then it's pretty hard to get laid off, no? Cross yourself off as needing an emergency fund because of job loss. Even the 17% or so of retired people who do work mainly seem to do so because they enjoy it, not because they need to, according to the Fidelity report I blogged about a few days ago.
Similarly, if you are self-employed you cannot really fire yourself, though a lack of work caused by external forces can happen and variations or gaps in income are part of the landscape for most. The self-employed contractors and individual consultants that I know tend to keep a financial reserve to even out cash flow from assignment to assignment. But what follows is mainly about and for those working for an organisation as an employee.
The chances of permanent layoff vary a lot according to a number of factors, as revealed in Stats Can's study Permanent Layoff Rates. Here is a rough summary:
Chance of being laid off within the next year -
- men 7-8%
- women 3-4%
+ for younger people
+ higher paid
++ small firm, i.e. double the chance in a large firm
+ manufacturing (the rising loonie effect)
++ primary and construction industry
- public services
- highly educated
The chances of being laid off changed very little (less than a percentage point) between 1989 and 1999, both good periods for the economy. As the study says but doesn't quantify, layoffs rise during recessions. The study only states the risk of layoff within the next year, not a whole working career, which must be a lot higher. In sum, there is thus a significant chance that a person, on average, will be laid off sometime in their career. The risk is not negligible.
Special circumstances may arise at any individual organisation that can cause a very high risk of being laid off. I'd say that almost always, those periods of threat are very visible to the average employee and are also known many months, often years ahead. In my own case, I have been laid off two and a half times in my career - once, in a federal crown corporation that was abolished through a policy change, which took years from idea to action; once, in the high tech meltdown when the internal rumblings and the external slaughter started 8-10 months ahead of my own walk down the plank, and a half once (through an internal transfer I was able to escape my abolished job), at a municipal government where the council's budget problem was highly public knowledge six months ahead. When those storm clouds start building, don't ignore them!
Cost - The impact of job loss is without question enormous for everyone (again excluding retired people) as one's pay is the largest, most often the only significant, source of income to live on. Take your net pay and that's the effect you will feel. It is thus the multiple to use in figuring how many months - from zero upwards - you will need.
Risk Response -
How long will funding be needed?
Before looking at alternative responses, you need to estimate for how long you might need funding. That's a tough one because getting a new job and ending the emergency depends a lot on how much smart effort you expend on the job search and a little on luck (not the other way round ... remember the quote, ''The harder I work, the luckier I get'' attributed to both film mogul Samuel Goldwyn and golfer Gary Player?) It is possible to be out of work for a year or more. An often quoted rule of thumb is about 1 month of search for every $10,000 in salary. My own two layoffs lasted eight months and zero months.
I'd say a year is the maximum I would consider a job loss emergency to last. Beyond that it's no longer a short-term emergency, it's a major life crisis and much more drastic action than a simple emergency fund will be required - e.g. selling and moving home to a new city, career change. Of course, long term, short term it doesn't matter, one still might need to live without a job income and the possibility of such events is a compelling reason to save and invest money. Retirement isn't the only time in life when a person might want to live off savings.
What sources of funding do you automatically receive? These obviously reduce the need for a fund.
In Canada today, we are lucky to have sources of income support to which we are entitled:
- severance pay - for salaried workers in a permanent job, there is a rule of thumb of about one month's pay for every year of service, or for unionized workers it is normally stipulated in the labour contract
- Employment Insurance (EI) - the federal government's program kicks in when your severance expires (i.e. right away if you don't get any severance at all) and if you have worked long enough to meet the qualifying requirements detailed here; only about 20% of people who lose their jobs are ineligible for EI according to this 1999 Stats Can study; some of the key points of the EI program are:
- two week period at start of no benefits - the deductible
- max 28 days or less before the first cheque arrives
- payments last from 14 to 45 weeks
- pays 55% of insurable earnings (capped at $40,000 p.a.) up to a max of $432 per week
Responses -
- Reduction of household expenses - most budgets have quite a lot of discretionary spending but of course this is only a partial solution; battening down the hatches is better done once the warning signs appear not when the storm breaks of course
- Job loss insurance - some companies in Canada offer interest protection on line of credit borrowing e.g. the Bank of Montreal's Disability Plus Insurance, some offer balance protection on credit cards e.g. TD Visa's, and others mortgage interest payment insurance e.g. Canada Mortgage and Housing Corp's Mortgage Loan Insurance, Reliant Insurance's Job Loss Program or North Shore Credit Union's Mortgage Insurance; you can thereby obtain cover on loans for house and car, which are the most important and largest expenses, apart from food, that any family is likely to have. Job loss is one of the main causes of foreclosures in Canada. You will be obliged to get insurance if you have a high ratio mortgage but if you are not, get it anyway, it's worth it. Apartment dwellers can obtain lease insurance, such as that of Canada Life.
- Enhance your own human capital - capital is a store of wealth and just as you can have financial capital you can make yourself a more valuable commodity by constantly upgrading skills, competencies and job experience. Your usefulness is what organisations pay for and instead of waiting for an organisation to direct you, take charge, look around and get going where the demand will be and where you have an interest. You might either avoid layoff within the organisation where you are presently or be able to bail out faster at the signs of trouble. Job loss may then even become an opportunity - a programmer who reported to me was also laid off like everyone else, received his severance and then discovered he could make a lot more money as a contractor, pick the jobs he enjoyed and which enhanced his future marketability. He also made sure to set aside time and money for technical training to make sure he would stay in demand. So much for a need for an emergency fund for him!
- Diversify - whether it is having both partners in a couple earning or having more than one source of income yourself, that can reduce the impact of the job loss. Whether it is investing in real estate to rent out, turning a hobby interest into sideline business or something else it is an extra, independent source of income
- Family - sometimes mom and dad, or other family members, are able to help out; for some younger singles, moving back home until a new job is found can become the solution
- Don't take a job you hate just because it offers job security - you will be miserable every day, that's not what life is about
One big problem is that in practise I would guess those who could most benefit from an emergency fund are the least able to save to have one: younger workers in cyclical, non-permanent jobs.
In anticipation of the discussion on how to provide the fund, one thing I would not recommend in the job loss situation is to rely on a line of credit. Not knowing when a new job will be found and the emergency will end makes the possible accumulation of debt open-ended. There is a limit to what lenders will give out. And it is stressful enough to be out of work without having the worry of a growing pile of debt.
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