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You've Got No Job!

A glimpse into the future of (un)employment
Friday, February 7, 2014, 1:45 AM

Today, the pundits are a-buzz making sense of the latest lackluster jobs report. Expect much hand-wringing over the impact of the 'polar vortex' and that Punxsutawney Phil saw his shadow.

But most of us care more about the state of one particular job: our own. How relevant is this latest bit of data to that? Not very.

So, to better understand the trends in the work environment most likely impact our own paychecks, it will help to look at another bellwether similar to our fuzzy groundhog friend: AOL.

AOL, a once-important pioneer in the transition to the 'digital economy,' is once again showing us where the future of work is headed.

Unfortunately, like the health of AOL's business over the past decade, it's not a pretty picture.

The Expendable Employee

As we've transitioned to an economy in which corporate profitability and thereby, stock prices is THE metric for success, the employer-employee relationship has become much more superficial than in past generations.

No longer do workers expect (or in many cases, aspire) to work for a single company for their entire careers. And with the cost efficiencies offered by automation, outsourcing, temporary workers, and related trends, companies are much more inclined to view their workers as expendable and/or easily replaceable, especially when facing a business downturn.

We've seen this dynamic play out in spades since the arrival of the 2008 credit crisis. Companies immediately shed workers in droves as the economy slowed down. But as things stabilized by 2010 and then the "recovery" of 2012-2013 sent corporate profits soaring, the pace of hiring those displaced workers back has been nothing short of anemic:

(Source)

And of the jobs that have been added over the past five years, the majority have been temporary jobs. Read that as "Low Pay/No Benefits" jobs:

(Source)

It turns out that companies used the 2008-2009 layoff wave as an opportunity to reduce their dependence on human capital (at least U.S.-based). A vigorous debate can (and should) be waged on whether that happened for good reasons or not, but the fact remains that the employment market remains frail over 5 years later.

More cynical critics will note that lower hiring budgets are NOT a result of companies investing more heavily in productivity-boosting capital expenditures. In fact, since 2008, CAPEX has remained depressed by over 20% compared to historic averages. Rather, it seems that companies have been fattening profits by focusing on cutting costs with the main intent of boosting stock prices. Profits of companies within the S&P 500 are at all-time highs right now. It's clear they're being artificially inflated, most likely by means that can't be long sustained. 

Many companies have doubled down on this approach, spending corporate profits on stock buyback programs. This has only served to send shares higher. (As I type this, a headline just announced that Apple bought back $14 billion of its stock over the past two weeks.) Is it any surprise that this is going on when company executives have fantastically-sized compensation packages that are based on increases in.....oh, that's right... the price of their company's stock?

"You've Got No Job!"

Enter AOL, which incidentally bought back $600 million worth of its shares last August, along with a $1.1 billion special dividend to line its investors' pockets.

Since its ill-fated merger with Time Warner 14 years ago, AOL has been a train wreck by most business metrics. It received a dose of much-needed hope when former Google executive Tim Armstrong was hired as CEO in 2009 to turn things around.

I'll leave it other writers to opine on Armstrong's degree of success since then, but not surprisingly, during his tenure, he's made a lot of cuts. AOL has had a steady parade of layoffs over the years (including, six months after Armstrong's hiring, announcing it would cut 1/3 of its workforce).

And it's the relentless drumbeat of its mass firings and more notably, the antiseptic manner in which they've been handled that I think is emblematic of the new era of the disposable worker.

Here's a powerful example. One of Tim Armstrong's first strategic deals after taking the reigns at AOL was to buy a company he had earlier founded, called Patch. There was a boatload of drama around the Patch saga at AOL, but in order to avoid getting too diverted, let it suffice to say that Patch proved a massive distraction for the company. Armstrong was very personally invested in its performance and made many promises to both its employees and Wall Street that ultimately didn't materialize.

Last summer, Armstrong rallied the Patch team, calling on them to "fully commit" to the company's plans for the future, which he promised he was hell-bent on supporting. Then, jarringly, in mid-sentence during this pep talk, he was momentarily distracted by an employee, whom he then fired on the spot in front of an audience of 1,000 (you can listen to this drive-by canning here). This incident was reported at wildfire speed among the tech blogs, sparking a debate about the treatment of employees in the modern workplace and questioning the wisdom of randomly firing people during an event intended to boost morale.

But even more soulless is the latest sad development at Patch. Despite proclaiming his "full" commitment as recently as August, Armstrong sold the controlling stake in Patch last month to investment firm Hale Global. Not surprisingly, soon after this deal was announced, the hatchet soon swung. 

I want you to listen here as hundreds of Patch employees, many of whom stuck with the struggling company for years at Armstrong's urging, learn that they are losing their jobs, effective immediately:

"Thank you again. And best of luck." Oh, and you need to be out of the building by 5pm.

Don't Remain Vulnerable

Was AOL too cruel here? Or is this simply the healthy Darwinian nature of capitalism in action?

I'm going to leave that for others to debate, because that's not the point of this article.

The point is: If you're an employee (which most folks reading this are), recognize that the trend here is not your friend. For a variety of reasons some defensible, some not corporations are increasingly less motivated to train, compensate, develop, and retain workers than in the past.

The question I want you to ask yourself is this: How impacted would my life be if I unexpectedly received a pink slip tomorrow?

For most people, the answer is: Substantially. For too many: Devastating.

Bills, debts, family obligations, etc. keep most people soldiering on in their current jobs. Fears of lost income or the weak hiring market prevent folks from taking career risks. Most just keep their heads down and hope the axe doesn't fall on them. Of course, many of those who just celebrated 99 months collecting unemployment once felt that way, too...

The unhappy truth here is that it's an increasingly vulnerable time to be in the rank-and-file. And by 'rank-and-file,' I mean pretty much anyone not senior enough in their company to have a voice in headcount decisions.

If that definition applies to you, don't give in to denial or despair. Neither will help you. And even if it may not feel like it at the moment, you have much more agency in your career destiny than you likely realize.

There are defined steps you can take and investments you can make that will dramatically reduce your vulnerability to the fickle hand of a company layoff or a bad economy. A lot of the foundational work is described in depth in my 2013 book on career transition, Finding Your Way to Your Authentic Career, and much more can (and will) be written on the subject at PeakProsperity.com. The following are *not* quick fixes; they take a lot of inner work, dedication, perseverance, and time to complete. But these steps are indeed achievable and will make your chances for career success and security a heck of a lot higher than if you don't do them. The basics include:

  • Identify the work you're best suited for based on your natural aptitudes, interests, and work experience For many, this is the hardest step. Our educational system is notoriously bad at helping people actually figure out what kind of career path is right for them. The good news is that there is a defined process that, if followed conscientiously, makes your chances of identifying a "best fit" field highly probable even if you've been in the workforce for decades. It's what the first half of my book focuses on.
  • Make a career transition if you're currently in a 'bad-fit" field If you're not on a career track that plays to your strengths, you need to move out of it. If you're in a bad-fit position, it's hard to outperform (or even perform at the average), and you'll be in danger of being one of the early casualties during a culling of non-essential employees. Making a transition to a new career track is time-intensive, but again, quite doable once you know what direction to head in (see above bullet). Not surprisingly, this transition process is the focus of the second half of my book.
  • Become a domain expert with organizational ownership Management values most the talent it needs that is expensive (time and/or cost-wise) to replace. It can always reduce budgets or department staff levels, but it will do its utmost to retain talent that does work others can't (or can't do as well or as cheaply). 
  • Develop a professional support network Make yourself known in your field, particularly outside of your company. Be a source of useful industry insights, and seek to learn as much as you share. Help other people. Seek out mentors. People change firms often throughout their careers; after a few years, you'll find you have contacts across numerous companies. Should you fall victim to a layoff, you'll have insiders at other firms working on your behalf to get you hired in.
  • Develop a personal support network Talk actively with family and friends about what you are willing to do for each other should one of you lose your job. How can you help ease the burden (meals, child care, loans, etc.) of the uncertain time between gainful employment? Figuring a plan out in advance, and making deposits in the Bank of Karma by supporting struggling folks in your community, will result in payback that will dramatically reduce the shock of sudden job loss.
  • Create multiple streams of income Ideally, you want to develop enough diversity of income that the loss of any single one won't compromise your lifestyle dramatically. Again, there are no easy shortcuts here. But options include: taking on a second job, moonlighting, starting a side business, enabling an unemployed family member to start a paying job, investing in assets that produce cash flows/coupons/dividends, consulting, monetizing existing assets (e.g., renting out a room on AirBnB), etc. Spend some time deciding which approach seems most appropriate for you and start with that one. Once you've got that second income started, ask yourself: How can I make it bigger? What other new sources can I add next? 
  • Save Start by amassing a rainy-day fund equal to 3 months of your current monthly income. Then expand it to six. Then, if you're able to, a year. This cushion will take the pressure off immensely if you find yourself unexpectedly out of work. Concurrently, strive to not only live within your means, but below them. Learn to appreciate non-material joys in life. You'll reduce your expenses (the difference of which should go straight into savings) in the immediate term and be able to better maintain your quality of life if your income takes a hit.
  • Develop a plan for business ownership In the end, it's better to be the one calling the shots than answering to them. Yes, there are other types of risks that apply to business owners, but your employment and income destinies are much more within your control as long as the business remains solvent. As you currently build your domain expertise, develop a plan for converting it into your ticket to independence. How can you use it to create value that others will pay you for, versus depending on the single check from your employer? If you have multiple customers, it's unlikely they'll all stop doing business with you at once. With an employer, it's all or nothing.

This list is just a starting-off point, as entire books have been written on each of the steps above. But if you fall in the 100% vulnerable-to-a-pink-slip category, you should start thinking now about which one makes the most sense to tackle first.

As help for those at the beginning of this process, Peak Prosperity is offering its first-ever Countdown Deal for the Kindle version of Finding Your Way to Your Authentic Career. The promotion starts on Saturday, February 7, runs for a week, and depending on the day, will offer the e-book for as low as $0.99 (earlier buyers get the deepest discounts)

And the Hits Keep Coming

Even those who feel 'safe' in their jobs are seeing erosion of their 'purchasing power' as employees. Let's look at AOL again.

Like most other companies in the U.S., AOL will incur costs in complying with the Affordable Care Act. Its compliance expenses will be in the $millions, annually. So today, Tim Armstrong announced that AOL was cutting 401k benefits for its workers:

AOL Blames Obamacare for Plan to Reduce Retirement Benefits (Bloomberg)

AOL Inc. (AOL) blamed President Barack Obama’s health-care law for its plan to reduce spending on contributions to employees’ 401(k) retirement plans.

AOL, owner of websites such as the Huffington Post, will still match employee contributions to retirement plans up to 3 percent of their paychecks, Chief Executive Officer Tim Armstrong said. Under the new policy, it will make the matching payments in a lump sum at the end of the year, forcing employees who leave before then to forfeit the benefit, he said in an interview today on CNBC.

“Obamacare is an additional $7.1 million expense for us as a company,” Armstrong said. “We have to decide whether to pass that expense to employees or cut other benefits.”

The White House is defending the law from criticism that it causes consumers more economic harm than good. Republicans have seized on a report this week by the Congressional Budget Office, which said Obamacare will reduce the hours Americans work by the equivalent of 2 million full-time jobs in 2017.

Armstrong didn’t specify how the health-care law had increased costs for New York-based AOL. The CEO told employees today that the health-care expenses of two employees in 2012 played a role in his decision on which benefits to cut, Capital New York reported. The two workers had “distressed babies that were born,” costing AOL $1 million each, he said, indicating that he’d rather prioritize health care over retirement among the company’s benefits.

(Source)

So, even the 'safe' salaried professionals are more vulnerable than they realize. Do you think they have any alternative to this news other than "take it or leave it"?

Parting Shot

If this article hasn't already driven home the point that employers are increasingly motivated to find ways to cut employee costs and employees themselves out of the picture, perhaps this simple example will do the trick.

In the past, those finding themselves between jobs could often rely on unskilled but unpleasant work to provide temporary subsistence income. Well, more and more of those jobs are going away, largely due to performance advancements and cost declines in automation.

Ever see a sign spinner on a street corner and think, I guess if I couldn't find work elsewhere, I could always do that? Not anymore. The robots are taking over:

Not only does the encroachment of automation remove income options for those temporarily out of work, but it's increasingly limiting the options for the large pool of unskilled labor with few other alternatives. Of course, this opens up a whole spectrum of economic, social, technological, and policy-related questions, which will have to wait for another day...

But the takeaway is: Don't be 100% vulnerable. If you're employed but at risk, use the time and income you have now to reduce the upheaval that a pink slip could wreak on your life.

Even a 10-20% reduction in your vulnerability will mean a world of difference if you find yourself suddenly out of work. Your future self will be extremely grateful of the steps you take today.

~ Adam Taggart

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60 Comments

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Ironically, I'm Looking for workers

Interesting read from my perspective as owner of a construction company. Maybe it's Texas instead of Adam's California, but there is high demand for skilled workers (and even unskilled) here.

Yes...this is blue collar work and hard work, but I've made a great living with my hands over the last 35 years. The labor pool has dried up. People are waiting months to get jobs done, and I'm turning down large homes and being very choosy about who I agree to build for. 

Maybe students ought to opt for 2 years of trade school instead of pursuing a master's degree with huge student loan debt attached.  Some jobs like custom home construction, by their nature, can't be automated and mass produced, and the risk of layoff will truly depend on skill level and performance.

 

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
Under employed for over a year

My job of 37 years was eliminated in October of 2012.  After having survived countless workforce reduction events, my job elimination was, interestingly enough, somewhat self inflicted.

I wrote a number of company web based tools used by finance and engineering across North America.  When the CEO decided to split the company into two separate entities, it was decided that my systems were need by both companies going forward.  IT took over my tools and I became unnecessary.

I was around long enough to watch hundreds of my co workers jobs eliminated.  I watched new professionals being hired with benefit packages that did not include a retirement plan.  These two trends show clearly that the company I worked for was not worried about or supporting the future.

The simple math that I could not ignore is that eliminating 250 or more management jobs so that you can pay the CEO a salary commensurate with todays market, eliminates 249 people who might buy your products. A CEO does not buy any more cheese or lunch meat than a manager.  You are un-employing your very customers.

I prepared appropriately for retirement.  If real interest rates were even 1 or 2 percent, I would be snow birding in New Mexico right now.  If I believed that social security represented a dependable promise in real dollars, I'd be smiling in retirement.

Unfortunately, honestly believing the evidence disseminated on websites like this forces me to proceed on the assumption that retirement will not be a viable option for all but a very few in the next 20 to 30 years.  Hence, I have job applications in process.

There is no complaint here.  I am better off than most. I just don't have the ability to pretend that somehow things will be fixed and the future will look like the past.  That is what almost everyone around me is doing.

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
Oliveoilguy wrote:The labor
Oliveoilguy wrote:

The labor pool has dried up. People are waiting months to get jobs done, and I'm turning down large homes and being very choosy about who I agree to build for. 

If I still lived in Texas, I'd probably come see you.  I framed homes during the summer in Dallas, when I was working on my undergraduate degree and I can still put in a full day of physical labor.  My family was building custom homes in Dallas during the 70s, before the double digit interest rates decimated the industry.

I agree with you regarding trade school.  As energy becomes more expensive, physical labor will have to fill in, not only riding bikes to get somewhere, but using less energy intensive tools.  I recommended to my daughters that my grandchildren should consider technical school or at least pick a career that makes sense in todays job market.

Another problem you face is that fewer young people today are willing to get their hands dirty earning a living.  That is not something that xbox, video games and smart phones prepare them for.  When I was growing up, most high school kids had part time and summer jobs.  That does not seem to be common any longer.  More than a few people are graduating college with no work experience.

 

treemagnet's picture
treemagnet
Status: Gold Member (Offline)
Joined: Feb 13 2011
Posts: 344
Same here...

I cannot find people who can or are willing to do the job.  Its no ones fault - cheap money has flooded the area and mal-investment is the order of the day.  Every 'rock' has been flipped over looking for opportunity.  Now the work that I have (which used to, for decades, paid really well...) is bottom tier, somewhat seasonal and hurting for customers as well due to industry over-capacity.  Thats right, I'm now almost a broker, looking for the right customer and the right employee - and I'm not alone.  Most applicants I talk to are extremely....well, not what I'm used to talking to.   My starting pay is $14-$18 and you can get to the mid-20's.  Horrible to the average PP reader, but you've got to remember its industry specific in the upper midwest.   What's most alarming is the up and coming generation - the millenials.  I've read about them, truly I have - and believe whoever figures 'em out will win.  I'm not impressed and frankly, everyone I talk to knows why.  Now, no one expects anything from them - and they seem cool with that.  But, if you're writing an Iphone app.....

I have never, ever, experienced such a group of intellectual lightweights.  Its not that they can't try, they won't try - to learn more about the processes and work related issues.  They're late more than they're on time.  If you bark at 'em, more than once or twice, they're gone - quitting is a perfectly good justification to them and more importantly, their parents.  Very, very few will 'play hurt' and go to work when they're not "feeling it", so the ones I have that can and do I bend over backwards for - and make sure they know I know how much they are appreciated.  The best ones I have, are going to go far - as many have before them based on the background checks I field from various agencies. 

But, I suspect the issue will resolve itself soon enough for all the reasons known by most here.   I doesn't matter what skills and opportunities you have these days in my opinion.  Whatever they might be, the landscape is changing so quickly that most will not be able to find firm career footing to live a life you can build on.  Until this thing resets - like after WWII, what plans can you make that don't involve a constant and never ending focus on your ability to earn on shifting ground?  I know I'm generalizing, and this is nonsense to anyone with a perceived rock solid job or business - then it happens to you. 

VitalyGo's picture
VitalyGo
Status: Member (Offline)
Joined: Aug 9 2013
Posts: 22
Surprised

I didn't know AOL was even in business anymore.

When I first started in IT, a consultant told me to save up a years worth of money to cover all of my expenses. This has been some of the best advice. Nothing worse than going to a job interview and being desperate.

The other advice I got was from an IT recruiter, always change jobs at least every 2 to 3 years. That way you learn new technologies, meet new people and get used to change. At the time a major corporation had laid off a bunch of people and he was having a hard time placing people that had 10 to 15 years at the company. They just weren't marketable for a number of reasons.

If you can break into upper management or the executive level it probably pays to stay longer. However, one CEO that I worked for has moved companies every 3 to 5 years. 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5569
Apple and Google Turn Evil on Hiring

Considering the brand equity that both Apple and Google seek to build around the idea that they are hip, awesome, non-evil companies, their actions say otherwise on several fronts with the most awkward and distasteful episode du jour being this:

Emails Show Apple's Steve Jobs And Google's Eric Schmidt Allegedly Conspired To Screw Over Employees

Jan 24, 2014

Apple founder Steve Jobs and Google CEO Eric Schmidt appear to have secretly cooperated to drive down the salaries of tech workers by agreeing not to recruit each other's staff, according to emails uncovered by a class action lawsuit filed in federal court in California.

Pando Daily has an excellent deep dive on the suit, which has been going on for years.

What's most shocking about the emails is how unambiguous they appear to be, according to the ruling allowing the case to proceed. Jobs and Schmidt exchanged emails to ensure the pact was enforced, and Jobs threatened "war" if he caught Google breaking it by wooing Apple workers over to Google.

Apple, Google and the other companies named in the suit have been fighting the litigation, and many of the emails have been aired before. But the new ruling gathers the emails together in such a way that the scale of the alleged cartel — and the way it was supervised personally by tech's top executives — is breathtaking. Google has previously insisted that it aggressively pursues talent. Apple has mostly declined comment on the debate. The company did not immediately respond to our request for comment.

If this was a simple case of agreeing not to poach each other’s senior talent, I could forgive this, but the effort, as alleged, was clearly designed to save a few bucks on free market wages during a period of time when the companies were raking in so much cash they barely knew what to do with it all.

Why not reward your employees?

I think that’s part of the main thrust of Adam’s post – companies now feel it is well within their operating constructs to screw over employees….that’s just how “business” is done today.

But when exactly did that happen?

When did it become about “us vs. them” instead of companies being about delivering both good products and a shared sense of purpose and livelihood?

This says something…

 

VitalyGo's picture
VitalyGo
Status: Member (Offline)
Joined: Aug 9 2013
Posts: 22
Underpaid

Are workers at Apple and Google underpaid relative to their peers at other companies like Oracle or Microsoft?

VitalyGo's picture
VitalyGo
Status: Member (Offline)
Joined: Aug 9 2013
Posts: 22
Not getting it

I just read that article and I'm not getting the crime. Seems that the big conspiracy centers on the fact that the CEO's told their recruiters not to recruit from each other. Seems to me Eric Holder has better things to do like investigate Wall Street and the IRS.

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 433
VitalyGo et al

Okay let an old lady take a stab at the problem here.  If a job applicant from company A applies for a job at company B we would hope that they would be considered based on their qualifications.  Simple and straight forward.  The problem is people are excluded because of other reasons like - where they currently work, their gender, age, color of their skin, religious beliefs, sexual orientation and so on. Some of us think that's wrong.  It is not a free market when you are being discriminated against.  But then some people have no problem discriminating against and using and abusing others. 

AK Granny

KeithM1116's picture
KeithM1116
Status: Bronze Member (Offline)
Joined: Sep 10 2012
Posts: 77
Price Fixing

Vitaly

The crime is price fixing.  If two CEOs get together and decide how much the price of a new laptop computer will be, all consumers are damaged, and the crime is obvious.  In this case they're getting together and setting the price on engineering talent (by eliminating the possibility for those individuals to increase their salaries by changing employers).

Keith

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2766
Standard

Pretty confident that this is ubiquitous within the tech industries and probably others as well.  A wink and an node between HR leads...

cmartenson wrote:

Considering the brand equity that both Apple and Google seek to build around the idea that they are hip, awesome, non-evil companies, their actions say otherwise on several fronts with the most awkward and distasteful episode du jour being this:

Emails Show Apple's Steve Jobs And Google's Eric Schmidt Allegedly Conspired To Screw Over Employees

Jan 24, 2014

Apple founder Steve Jobs and Google CEO Eric Schmidt appear to have secretly cooperated to drive down the salaries of tech workers by agreeing not to recruit each other's staff, according to emails uncovered by a class action lawsuit filed in federal court in California.

Pando Daily has an excellent deep dive on the suit, which has been going on for years.

What's most shocking about the emails is how unambiguous they appear to be, according to the ruling allowing the case to proceed. Jobs and Schmidt exchanged emails to ensure the pact was enforced, and Jobs threatened "war" if he caught Google breaking it by wooing Apple workers over to Google.

Apple, Google and the other companies named in the suit have been fighting the litigation, and many of the emails have been aired before. But the new ruling gathers the emails together in such a way that the scale of the alleged cartel — and the way it was supervised personally by tech's top executives — is breathtaking. Google has previously insisted that it aggressively pursues talent. Apple has mostly declined comment on the debate. The company did not immediately respond to our request for comment.

If this was a simple case of agreeing not to poach each other’s senior talent, I could forgive this, but the effort, as alleged, was clearly designed to save a few bucks on free market wages during a period of time when the companies were raking in so much cash they barely knew what to do with it all.

Why not reward your employees?

I think that’s part of the main thrust of Adam’s post – companies now feel it is well within their operating constructs to screw over employees….that’s just how “business” is done today.

But when exactly did that happen?

When did it become about “us vs. them” instead of companies being about delivering both good products and a shared sense of purpose and livelihood?

This says something…

 

AKGrannyWGrit's picture
AKGrannyWGrit
Status: Gold Member (Offline)
Joined: Feb 6 2011
Posts: 433
Price Fixing

Doesn't matter what you call the activity, if the practice harms another especially in the pursuit of profit, it's wrong.  I find it hard to comprehend why people choose to be hurtful and apathetic.

AK Granny

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2766
Geography

My belief is that this becomes common within discrete geographic locals...e.g. biotech companies in San Diego would probably have a working HR relationship, however going from one state to another - not so much.  Minimizes having your employees "walk down the street" to the next guy for a better deal.

jtwalsh's picture
jtwalsh
Status: Gold Member (Offline)
Joined: Oct 1 2008
Posts: 263
Be Your Own Boss

Having owned my own business for twenty-seven years I do not think I could ever go back to being an employee.  Any business is difficult to start, will always have smooth and rough times and will take hard work and responsibility.  The rewards of not having a "boss" (except your customers) and being able to make your own decisions, has a value that is right up there with the monetary rewards.

Technology and economics have greatly affected the employment landscape.  In my field, when I was in graduate school, thirty years ago, it would take three or more secretaries to process the workload of one manager.  Today, with the aid of computers, two managers often share one secretary or assistant.  Technology has also allowed my clients to "follow me" wherever I am.  It is thus no longer so important to have an assistant, or assistants,  to "hold the fort" while I am traveling or tied up in projects.

The costs of following state and federal requirements force many small business to operate with as few employees as possible.  Matching social security payments, workers compensation, workplace safety requirements, while important, also have the effect of depressing the labor markets.  The fewer employees you have the less expensive are these built in costs.

The Affordable Care Act will further affect small employers' ability to hire.  My partners and I have always prided ourselves on providing health insurance as a benefit for our full time employees. Upon until very recently we covered 100% of the cost.  Several years ago we began requiring the employees to pay 10% so they would understand how much the costs were rising.  Our coverage renews each February so we just went through the process.  The first hit was to learn that our prior plan did not meet the standards of the new law so it could not be bought at any price.  A comparable plan, with less coverage and double co-payments, is costing us approximately ten percent more than we paid last year. Our insurance advisors also let us know that our costs under the new plan are more directly affected by the ages of our employees. (Meaning we need to get rid of our over forty crew and seek younger, healthier workers.  All of you middle age folks looking for work, think about how this further limits your possibilities.)  What we will pay this year for health insurance for seven employees is more than enough to hire another full time employee, if we did not offer the insurance. 

No matter how you look at the future, the prospects for wage employees do not appear to be improving.

JT

VitalyGo's picture
VitalyGo
Status: Member (Offline)
Joined: Aug 9 2013
Posts: 22
Huh?

I don't think there was any price fixing based on the article that Chris posted. What the article stated was that the CEO's made a deal that their recruiting departments would not actively recruit each others employees. For those that don't work in IT, that basically means you don't have recruiters calling and emailing you all day long asking if you are looking for a new job. Until proven otherwise, I bet an Apple employee could reach out to Google for a new job and not be discriminated against.

Personally I think there are two less visible themes to this story.
1) Politicians want to extract campaign contributions from IT companies through ridiculous lawsuits.

2) Government upset they are losing tax revenue on 9 billion dollars in wages they think should exist.

Once again I pose this question. In a world of scarce regulatory resources, where should we focus?

1) Corruption and fraud in Wall Street and Banking

2) Technology companies agreeing not to poach employees from each other.

Arthur Robey's picture
Arthur Robey
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Party Time.

Looks like you struck a nerve Adam.

A previous government of Australia, Wee Johnny Howard, got religion about freeing up labour so that companies would be free to hire and fire at will. The companies got all excited and started hiring contract labour.

The whole thing was a disaster because loyalty is a two way street. Labour began to jump all over the place like fleas on a dogs back. If the guy next door was offering 2 min extra for the lunch break everyone up sticks and goes to him, no notice required by either party.

Labour hire companies were pulling their hair out. I had one bawling his outrage that I had accepted a better offer over the phone. I hope my patient ear made him feel better. Come to think about it- I should have billed him for my time.

Isn't economic rationalism wonderful?

Arthur Robey's picture
Arthur Robey
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Take heart. It is unfolding as it should.

Terrance McKenna has a different angle on the whole employment thing.

I have to agree with him that Chaos is the healthy state of affairs. I have posted recently on the hazards of conformity because of destructive harmonic oscillations.

VitalyGo's picture
VitalyGo
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Things that make you go hmmm....Thanks Arsenio Hall

I wish I would have had the chance to meet Steve Jobs in person and work for him. It would have been one heck of a challenge and a pretty wild ride. I was over on Wikipedia and reading about him and a couple things jumped out to me. This is from Wiki not original work.

In a speech Jobs gave at Stanford University in 2005, he said being fired from Apple was the best thing that could have happened to him; "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life." And he added, "I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful-tasting medicine, but I guess the patient needed it."

"As the new CEO of the company, Jobs oversaw the development of the iMaciTunesiPodiPhone, and iPad, and on the services side, the company's Apple Retail StoresiTunes Store and the App Store. The success of these products and services provided several years of stable financial returns, and propelled Apple to become the world's most valuable publicly traded company in 2011.The reinvigoration of the company is regarded by many commentators as one of the greatest turnarounds in business history."

Apple employees should thank Steve Jobs. They got to participate in an amazing time.

Wildlife Tracker's picture
Wildlife Tracker
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Can't blame the millenials

You older folks built the infrastructure to make my generation so shitty. You brought the technology and allowed the corporate fashion and media trash into our lives at  young age. We also grew up at the most prosperous time in human history and we don't know how else the world works.

That being said, the few of us that are hard-working, and want to make a difference can't do it because you folks are holding onto your jobs and can't offer much beyond unpaid internships for entry-level work.

I'm fortunate enough to have a full-time job that pays a decent wage, but there is no career path to pursue beyond that. The prosperous careers right now all have a lifespan. What will happen to all the nurses when Medicare and Medicaid run dry? What will happen to all the worthless tech jobs when the world realizes all the shit they make is useless garbage? 

I almost enlisted in the Air Force a couple years ago. Did you know enlisting in the military is competitive now? I qualified for every job in the Air Force, but opted out because I thought an 8-year commitment was too risky. 

Our entire economy in the USA is based on digging holes and filling them back in. Our natural resources are either gone or are too expensive to extract, therefore we can do nothing but offer services to ourselves and the rest of the world. 

Housing prices are outrageous. The cost of having a family is outrageous. The cost of living single is outrageous. The cost of education is outrageous.

Everything is different now for us. Primitive and pre-industrial skills are really hard to acquire now, but that is where our future lies, and it sucks.

 

 

Adam Taggart's picture
Adam Taggart
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Hitting the mark

JT -

I enjoyed your post very much. It hit at the heart of my article above.

I'm really hoping we hear from more people who have made the transition from salaried employee to self-employed professional/business owner. Both the pros and the cons of the switchover. By demystifying the risks and rewards, my hope is we'll help folks better assess whether they, too, are fit for such a transition.

But I have to admit my bias here, which is similar to yours: I just can't see myself returning to an employee role. The ride of being an entrepreneur requires a higher risk-tolerance, but the fulfillment of being in control of your own destiny is more than worth it, IMO.

Arthur -

I'm not surprised if this article stirs up strong emotional reactions. In researching my book on career transition, I quickly discovered that the majority of workers carry a lot of unspoken angst regarding their job. (studies show that 70% of people are unhappy with how their careers have turned out).

In addition to the folks who have transitioned to business ownership, I'm also hoping this thread allows those in traditional salaried roles to share their voices. Do they feel vulnerable? Would they switch if they could? Or are there advantages that outweigh the vulnerabilities highlighted by my original article above?

Wildlife Tracker - 

I really appreciate the perspective you've shared (just be sure to stay within our posting decorum guidelines). This site doesn't have enough representation from the millennial generation in the general discourse here (yet). Please keep your observations coming - and recruit some of your peers to chime in!

berensma's picture
berensma
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I have my own business, too.

I have had my own business for almost 10 years, and maybe I have some useful input.

Don't have employees. Have contractors and pay them well (to make up for the extra taxes they will owe). You won't have to manage any of their taxes, your filing requirements related to them are limited to annual 1099s, and you won't take on the financial and paperwork burden of a full-time employee (and the corresponding stress of consistently having to find things for them to do). There are some important caveats with this approach, like you can't control your contractor's work hours or how they go about their work, but that fits in with another item essential (I think) to small business success -- learning how to delegate.

If you can avoid it, don't have a physical workspace. Have a "virtual company." Saves money, saves time, people are more productive and if they are parents of younger children (as most of my colleagues are) they will love this.

Ideally, start a business that requires a limited up-front capital investment, or where the capital investment (computers, tools, specific types of supplies, etc) is something that would be valuable for you to make, regardless. 

Don't be afraid to have to train your workers. If someone has initiative and potential, there's really no reason to resent becoming a teacher/guide in terms of the hands-on skills. Corporate and other jobs used to provide employees with this. Now, more often than not, they avoid it. I think we are all worse off for this, and too often our professional relationships cease to be meaningful because they've lost the expert/apprentice component they used to have.

I realize the points above are a bit ahead of the case for people who have not yet begun, so let me say that I could not agree more with the need to diversify revenue streams in this day and age. People used to ask me if I felt insecure being a freelancer/small business owner and I used to tell them "No, it's more secure to have 20 clients than 1 employer." People don't ask me so much about this anymore. 

Having your own business is not for everyone. Your paperwork burden increases in general, and things are nowhere near as predictable (at least for a while). The barrier between home:work can become non-existent at times (although many "jobs" are this way too). You have to learn how to market yourself. You may have to learn how to become more self-directed in your work. But along the way you are likely to redefine what "work" means to you, and there are those wonderful moments when it sinks in that no one is telling you what to do any longer, no abuse is being hurtled your way that you have no control over, and no one is telling you to work all weekend (though you may still choose to work all weekend). 

 

treemagnet's picture
treemagnet
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Read post #4

I hear what you're sayin, and agree.   Xer's got a bad deal (worse in some ways).....millennials got the worst in others - at least the ones (like single digit %) presumably like you who push themselves rather than be pushed.  The rest of them are gonna look to mommy and daddy till the bitter end.  Good luck.

 

Wildlife Tracker's picture
Wildlife Tracker
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My comment was actually in response to your comment treemagnet

I agree with you. My generation isn't very encouraging. I went to school to study ecology and I know about systematic thinking more than most. I've tried to engage folks my age in these topics and it is just as challenging as trying to engage a baby boomer. Some older millennials recognize the problems, but are apathetic or fail to recognize how these problem directly affect their lives. 

For me it was connecting the financial problems to natural resources that connected me to the urgency of the story. A timeline is important. 

Peak oil and climate issues do not mean much when you recognize them as a steady transition, but when you recognize them as demanding lifestyle change within a short period of time with resourced struggles, financial apocalypse, etc. Things become more clear,

exomatosis's picture
exomatosis
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Our deteriorating local employment outlook

Within a 5 mile radius of the small town I live in with a population of 20,000+, here's what I've observed in the past year.  On one side of town, an interior decorating firm closed, a good sized local trucking company closed, and two restaurants that have been in business for decades have closed.  A furniture store that was in business over 100 years closed.  In town, the hospital system was bought out by a large national healthcare corporation that promised no lay-offs, no cuts in salary, and no cuts in benefits.  Instead, they have laid off many, cut salaries, and cut benefits.  On the other side of town, a large national retail outlet is closing.  Another regional retail outlet closed.  A liquor store closed (that one is a sign of REAL problems).  Another family restaurant in business for decades closed.  The two local malls are like ghost towns.  The car dealers have swollen inventories that aren't moving.  A power plant is up for sale.  A mine some distance removed from the town, a very large local employer, may be closing within the year.  Obamacare has reeked havoc in small businesses with many workers having their hours cut and businesses suffering under the costs of increased premiums for their workers.  A neighbor just sold his business that was faltering.  He was very fortunate to find a buyer.  My sense is that the new owners will go under in a year or two.  Other friends with small businesses are struggling to get by.  Commercial real estate is under occupied as evidenced by For Rent signs all over town due to new business start-ups becoming progressively more rare.  A local credit counseling agency closed.  Many small businesses are cannibalizing one another because of insufficient discretionary income to supply them all with sufficient customers.  The latest is that a surgeon closing down his office.  Other medical doctors have sold out to the large corporate entity and become employees rather than small business entities, often under duress from the large healthcare corporation.  A young chiropractor can't find work.  Young people are having difficulty finding employment that offers any opportunity at upward mobility.  More and more individuals are going on Social Security disability as the new form of unemployment.  And I'm sure there's a lot more I'm not even aware of.  The area still looks relatively prosperous to the casual observer but it's like a house with carpenter ants.  All looks well until structural collapse ensues.

       

thatchmo's picture
thatchmo
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Blame game?

Everything is different now for us. Primitive and pre-industrial skills are really hard to acquire now, but that is where our future lies, and it sucks.

 

 

Careful now WT.  Everything will be different for all of us- regardless of generation- by-and-by.  Nobody knows exactly what the future will bring.  Certainly not for any given individual.  OOG states there's some good construction jobs available in Texas.....Aloha, Steve.

Oliveoilguy's picture
Oliveoilguy
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Exomatosis

Wow.....Bleak picture you see. Just the opposite in South Central Texas. We have growth, new business startups, a fairly vibrant local economy. I have to wonder first what state you are in? (Geographical not Mental) And if your town is truly representative of the larger area or is there some local explanation?

Thanks for the detailed view...it is quite disturbing.

treemagnet's picture
treemagnet
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Then what?

After the cheap money ends, each and every currently strong towns, cities, and states will rot from the inside out.  It's incredibly strong here too, for now.  Seriously, what economic heroin can push this inflationary based high higher?

exomatosis's picture
exomatosis
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Hi Oliveoilguy, As I said, on

Hi Oliveoilguy,

As I said, on the surface, it looks pretty good here too.  Not great, but good.  We're in the upper Midwest.  We have an award winning town with many new upgrades in recreational facilities, buildings, and other infrastructure.  There's also new private construction going on, and, God bless 'em, a few new businesses starting up.  One of the new constructions is a large (for the area) theater/entertainment complex with hotel and other amenities.  Folks with business savvy are asking themselves though, who is going to patronize these new businesses when the pre-existing ones are just getting by.  My sense with a number of the new business owners is that they're first timers, overly optimistic, don't realize what is occurring and what the risks are, and will be belly up in the not too distant future.   But overall, the growth has slowed and the cracks are beginning to appear more and more.  Money is definitely tighter.  You can see it in falling charitable contributions and the growing size and needs of the poor and working classes and you can hear it in how people talk.  People are keeping a brave and cheery front but privately, they're concerned.  If they're not concerned, they're too naive to know they should be.  When municipal, county, and state government employers begin to pull back (which you can see the first signs of), the decline will likely accelerate.

A friend who is a boilermaker and makes a very good income travels all around the country but notes work is down from what it was (in the past, he could work as many hours as he could physically handle).  He talks about idle rail cars, closed steel mills, closed factories, empty warehouses, etc.  All the things that are indicators of the health of the engine of growth of the country, according to him, are trending downward.  This is mostly in the Rust Belt and Plains States but he also goes to the South and both Coasts which seem to be doing better than the Heartland. 

BTW, if young folks are looking for careers, boilermakers seem to do very well.  An accountant friend told me of a boilermaker client who is collecting a $100K/year pension from his union alone, not including savings, investments, and social security.  Hard and often dangerous and potentially unhealthy work but the pay is good and the demand is still there.  Good welders and electricians are being sought out as well.  

I'm not surprised things are looking better in Texas.  Except for the bad years in Houston, whenever I've visited Texas, things seemed to be bustling and healthy economically.  I think Texans, in general, have a more can do, grab the bull by the horns attitude.  Plus, they don't seem to knuckle under to the federal government as much.  There is a stronger, more independent spirit, something that is gradually disappearing in much of the country as despair spreads and the dependency mentality grows. 

 

charleshughsmith's picture
charleshughsmith
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Posts: 691
wages no longer adequate method of distribution

As I have written elsewhere, it's clear that wages are no longer an adequate method of distribution of an economy's surplus, and a different arrangement will be made whether we like it or not.  The future does not have to be bleak by any means, unless we insist on clinging to failed models until they collapse.

It seems that local economies based on either energy or various credit/asset bubbles are doing well and everyone else is not. But given that bubbles in real estate, tech stocks, tourism etc. will all collapse along with the primary driver of all these bubbles, credit money, those are not quite as solid as many seem to believe.

As Peter Drucker observed decades ago, enterprises don't have profits, they only have expenses. The key to surviving/prospering is lowering expenses to the absolute minimum, and that means eliminating the costly overhead of labor wherever possible.  Many of us who once employed dozens of people have concluded the only way to survive, financially and psychologically, is to never hire another employee, ever, under any circumstance. We are all one-person shops that contract out whatever help we need to other independents. It's a flexible ecology and as a result it is resilient, adaptable and secure, as noted above by other self-employed people.

The more real skills a person can bring to bear on problems, the more value they can create and the greater their opportunities to contribute.  It sounds overly simple but it boils down to that.

Wendy S. Delmater's picture
Wendy S. Delmater
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Posts: 1982
regional differences

Wow, exomatosis, your town in the upper Midwest sounds where I lived in the 70s. Long Island, NY was depressed like that after all the defense contractors closed (Grumman and all those who supplied Grumman). Hard times.

Where I live, in SC near the state capitol (population 129K ), in or near my town (population 19K) they just built five new chain restaurants, three new gas station/convenience stores, a new headquarters for a major insurer, two new elementary schools, a new high school, and added onto the main mall.

Here we have a decent economy, but I would not call it robust because some of the drivers are more fragile than others. My local area is being sustained primarily by money from large military bases, retirees, and higher education. However, and not federally funded and therefore actually sustainable, SC in general has resources: We have a huge agricultural base: forestry/lumber, and food-producing agriculture (poultry and eggs are the biggies, followed by turkey, beef. Those seem to be trending away from factory farming at a good rate) and - well, read the list at this link. At least we grow a lot of food here; fruits and vegetables and nuts and honey. Lots of manufacturing, but not all of what we make will be useful after a crash and too much of it is based on petroleum: chemicals are our biggest product mostly used in textiles. Maybe we can become the land of cotton again. Oh, and some mining.

One thing we have is water. Oliveoilguy, how's the water situation in your part of TX?

When my son in FL could not find work, he moved here. I've met workers who moved here from Detroit. There seems to be a migration to places like SC & TX where there is work.

Woodman's picture
Woodman
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Posts: 1028
Employment at smaller businesses

Some nice things for me working for a small consulting firm include that each employee is not treated as expendable.  We're small enough to all know each other and work more efficiently without unwieldy layers of management, but with enough diverse and professional staff to compete with the big national firms.

TechGuy's picture
TechGuy
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Posts: 367
" My starting pay is $14-$18

" My starting pay is $14-$18 and you can get to the mid-20's"

Well that probably not much more than they can collect from unemployment or wealthfare entitlements. A lot of workers at the low end can do better by simply working for a short period, enough to start re-collecting unemployment again. They continue to repeat this cycle as long as states continue to  offer generous unemployment benefits. Why would they want to work full time, year round when they can get a six month or more paid vacation using unemployment benefits? Its not that they lightweights, they just have a better deal than working for you. You best option would be to seek out retirees looking for part time work to suppliment thier income, or people 40+ years that have a mortgage or other obligations that requires them to work. You will never find a reliable 20 something willing to work for $14-$18/hr. 

As a small business owner for well over a decade, I am closing up shop this year. With rising taxes, ridiculous regulations, retroactive fees imposed by my state, I've giving up. There is no point working 60+ hours a week when 60% or more of my income pays fed, state and local taxes. 

I see the economy imploding this year. I think it will be a lot harder to make a buck by the second half of the year as Obamacare starts doing real economic damage. Perhaps if you located in a region tied to the shale oil boom you'll do OK for 2014.

TechGuy's picture
TechGuy
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"Just the opposite in South

"Just the opposite in South Central Texas. We have growth, new business startups,"

Thats likely because of the oil boom (shale/LTO), which is going to peak in the next year or two. The biggest issue I see for TX is water and a large number of people moving from Calfiornia and other big debt states to TX. I have a feeling that TX demographics are going to change dramatically, and not for the better. Sooner or later the shale/LTO is going to switch from a boom to a bust, but there will be a lot more people living in TX and probably a lack of long term employment opporunties for them after the shale oil goes bust.

Here in the northeast, the economy has not improved since 2010 and is starting to slip back into recession as states in the Northeast have increased taxes and business are leaving or downsizing.

 

 

Khannea's picture
Khannea
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So what do you do..

..when you have zero chances to get back in the labor markets - at a reward more than rent, food expenses, other necessities?

I am disabled, living in western Europe. I simply can not work a full week. I get disability  Off late I have been finding that even when I send an inquiry for unpaid volunteer work they aren't interested. I do not have the skills to start a business, and even if I had, I'd lose every penny I'd make relative to my disability. There is zero incentive for me to work .. in fact there is considerable disincentive

To make more money with "a business" than my N disability I'd have to make about 2N worth of money since I'd lose 0.3N worth of subsidies on top of my disability and a third in taxes. In other words, completely impossible. People who have their own companies can't even find contracts right now. At my age, with my resumee, with my background there's massive competition. 

What are my best options? Join some radical extremist left wing populist party and prepare to storm the barricades and murder the rich a few years from now? Because that's what will happen, eventually. 

I am not the only person in this situation. There are at least a million in my country. That's more than 5% of the population, not even counting pensioners. Most these people have simply given up and crawled away in their welfare, games, TV, alcohol and ignore the world.

If all these people get cut off, sooner or later, there will be hell to pay.

Oliveoilguy's picture
Oliveoilguy
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Posts: 578
Wendy

Wendy said "One thing we have is water. Oliveoilguy, how's the water situation in your part of TX?"

So far water is holding out. In San Antonio if there is prolonged drought and the aquifer level drops, they  start restrictions.  The water in our area is very hard, so many people in our community have installed rain catchment systems. We use well water for our livestock and rain water for domestic use.

One ranch nearby pumps 18,000 gpd to fill a recreational lake. That seems wrong to me since much of it evaporates.

Also I'm concerned about the impact of the shale oil boom, but not concerned enough to stop driving.l 

Arthur Robey's picture
Arthur Robey
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Porn, Anyone?

Lambert here: “Twenty years of schoolin’ and they put you on the day shift.” –Bob Dylan. Of course, that’s oldthink. Back in the day, they had shifts. Real wages have been flat for thirty years. Seriously, are we to believe that economists and the elites they service just got around to noticing? Pas si bête.

From The Nikked Capatilist.

And

At the same time the share of employment at the upper and lower ends of the occupational skill distribution has increased substantially

My interpretation: Society is stratifying. However:

No-one is immune to automation. Did you think that you might get a job as a night watchman? Maybe not. We've got that covered too.

Perhaps your job is at the high end. Like say having to make split second decisions on the Stock market? Eer.  .  .  . Nope.

My belief in my model that humans are becoming irrelevant to the economy is becoming stronger.

TechGuy's picture
TechGuy
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Posts: 367
Hi Adam, I've run a

Hi Adam,

I've run a successful consulting business for well over a decade. I had worked for several companies in the past and I ended up giving up as I was unsuccessfuly in getting these business to adapt to the changing economy. Most of the managers and business owners didn't want to change until disaster hit, which forced them to make drastic cuts or revert into crisis mode to rectify the situation. As Employee, I could see the train wreck coming, and continued to jump ship before the wreck hit them. After several iterations I gave up trying  and started my own business. I end up taking over the clients from many of my previous employers that could not provide the quality of services or at a competitive cost (After they lost them or they went out business). Switching from a employee to an self-employed business owner, I more than doubled my salariy with in 18 months.

However that said, times are changing. Its becoming more difficult to run a small profitable business as the gov't is piling on the regulations, and taxes. I am closing up shop this year as i've become worn out and i am not willing to submit 60% of my pay for taxes. 

My advice if you plan on striking it out on your own:

1. Speak with an accountant that specializes in small businesses. They will explain most of the important things you need to be concerned about: Corp Registration, Taxes, which type of corp you should use (ie C-Corp, LLC, etc). Getting Business liability insurance, etc. Either they will have an in-house attorney to file the Corp Registration or recommend you a business attorney to work with.

1. Get all of your corporate registration work completed before you leave your current employer. It can take six or more weeks before the Fed and states will issue a tax ID. Without a TaxID you make find it difficult to get Business to Business work as companies can get fined big $$$ if you don't have a TaxID and you didn't pay your taxes in full.

2. Try to get a some work set up before you leave and besure to have four to six months of living expenses saved up. When you first start up you may not have a signifcant number of "paying" clients to offset your living expenses. It may take you six months or more to establish enough clients. This depends on your business model and what types of services or products your offering.

3. Avoid all overhead. Do not stock any inventory, run out of your home office. Do no hire workers or contractors until you have enough work to justify a full time position. You don't want to take on unnecessary risks or overhead. Rememeber HP and Apple started out of a garage in someones home. There is no reason to rent an office.

4. Avoid retail customers!, and deal only with other businesses. Retail customers are a pain and are more likely to stiff you (ie not paying an invoice, getitng you to do a lot of presales work and switching to anther vendor). Before comitting to a project with a business, do a background check on them to see if they stiff vendors or are late paying invoices (Google, D&B ,etc) are your friends. Be sure to alway put the payment terms on your invoices with a 5% to 10% penality for invoices beyond 30 to 45 days past due. You may wish to work with a business attorney to create a business contract template to avoid getting stiffed. Agrreements should be signed and dated by both your client (either the manager or owner, not a low level employee) and yourself. The Agreeement should state the work that is being performed, the rate your charging and any expenses you need to charge back (travel, equipment, etc). The signed agreement is your only recourse if there is a dispute. For in-state work, note on the agreement that you will be including the current state\local sales taxes, for out of state work, state the business owner is responsible for paying the state\local taxes (unless you obligated by law to collect it). 

5. Don't use Quickbooks. Its sucks and they try to nickel and dime you to death. I managed to just use customized excel spreadsheets.

6. keep a finaling cabinet or file box with all of your invoices, recipients and other business related paperwork. Organize expenses or other periodic paperwork in monthly folders Prepare monthly expense reports (ie internet, phone, travel, postage, office supplies, equipment). At the end of the year you will need to create a categroized yearly expense report for your corp tax filing. Ask your account to give you a list or sample form.

7. Since Fed\State tax payments are electronic, set up a separate business checking account for electronic payments. Should the Fed\State Revenue offices get hacked they will likely try to drain any cash in the account. Put only the funds needed to cover the taxes due, plus a couple of hundred dollars. use a seperate account for business operations and non-electronic payments. 

8. If you need health insurance, or plan on offering for your employees, then use a C-Corp instead an LLC since you can deduce it as an expense. To my knowledge health insurance is not deductable with an LLC (maybe that has changed).

9. Expect to file quarterly tax returns. These aren't too difficult to do. For the first 5 or 6 years I used to file them myself, but later I got too busy (and lazy) and choose to have my account take care of it. To make it easy for them, I still prepare monthly expense reports and a sheet with all of my invoices with sales taxes and expense reimbursments listed on a spreadsheet. if you have all of the documents and sheets readily available they will not charge you much to handing the quarterly returns for you.

10. Avoid fix costs projects at all costs! Use a time and material form and provide a range. ie this project will require between 40 and 60 hours of work to complete. The lower number should be the maximum time you expect to complete the job. Customers have a habit of not providing all of the details need to accurately estimate a project. Be prepared for design\implementation changes during thr project. If any of these deviations will take considerable more time, notify the business and document the adjusted changes to reflect the additional cost and project results. You don't want to get stiffed working 200 hours on a project originallly quoted for 100 hours because of customer changes requested half-way through implementation.

11. Avoid needy, less profitable customers. From time to time, you will run into customers that penny pincher and get you to under-budget the cost, or constantly change the scope of the project forcing you to commit more time than you expect. This can be serious problem if you are supporting multiple customers, and are unable start work at another client you previously scheduled. At a certain point, they are not worth the extra time and expense needed to satify them. Your time is better spent focusing on other customers or finding new customers. 

12. Stand by your work. If you make a error, fix it at your expense. Its better in the long term to provide quality work and get repeat customers than it is to spend many unpaid hours finding new customers. If your work is top notch, you may not need to waste any time with sales,  as word of mouth will direct new customers too you. (not always, but it does happen). Choose an implementation that has the least risk, Avoid experimenting with something that your completely unfamiliar with, as your likely to make mistakes and under-estimate the time to implement. You also want your project to function as intended and not have glitches that reduce stability or reliablity (which usually results in unhappy customers).

13. Document your work and have the customer sign a project completion document that states all of the projects goals, changes, work performed and costs. This will help avoid invoicing disputes, especially when the scope of the project had changed.

Hope that helps!

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Why the Germans are Successful.
  1. Building loyalty is high on their agenda.
  2. The Trades are highly valued.

They get an hour for lunch. Mothers stay at home with the result that the population is well adjusted.

 

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Dumping Bad Clients

Good info Tec Guy.....even for a 30 yr. business owner. I appreciate the detail. And totally agree about dumping bad customers. I had a Lady and her husband approach me on a home and barn and ranch infrastructure project. I didn't get a "warm fuzzy" but agreed to do the barn and some other work. And thought that if that went well I would do the house. Without going into gory detail,  suffice it to say that she was impossible to please. She offended 4 of my subcontractors who made it clear they would never work on her projects again. So...I walked away from a 1.5 million dollar house not having anything of that size to replace it.

But...Good decisions usually breed good results, and shortly thereafter I got a large home with some of the sweetest, kindest clients I have ever met. Just knowing them has been a blessing and made this last half year very pleasant.

Chasing money is not always the top priority when trying to grow a successful business. Focus on good work and integrity and the money will come.

 

treemagnet's picture
treemagnet
Status: Gold Member (Offline)
Joined: Feb 13 2011
Posts: 344
I gave you a thumbs up, but

You're off about going near the oil fields.....they pay three times, for starting, than I can.  It's like parking next to Death Star.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5569
Great Advice!

Techguy,

What great advice and learnings you provide. Thank you for the rich detail; I would advise anyone starting a business to follow along and not skip a step. Adam and I have learned most of the things you write of, as experience is a great teacher, but the tuition is ridiculous.

I also sympathize with your decision to exit the arena, because, as a small businessman, I feel like my various governments (state, local & fed) consider me to be a source of nutrition and nothing more. Well, perhaps an annoyance, should I ask for any assistance or remedy from them.

And every year the layers of demands just climb and climb, more fees and taxes and regulations, most of which defy any logical analysis or common sense. They simply mount, because that’s how a bureaucrat justifies their existence – they do more.

In the meantime, I have not yet received my final Obamacare bill but have been told to expect at least a 30% increase for my family of five this year. That will place our insurance costs at well over $20,000 for a healthy crew, which makes no sense whatsoever.

It’s like sending a kid to college every year for the rest of time…

This income transfer was done by the D.C. crowd at the request of the insurance industry, which will see more than a trillion new dollars flow through their fingers each year, skimming merrily as it does, while zero incremental health outcomes result.

It’s just a massive transfer, and I am in the unfortunate crowd that has been tagged to pay for it all.

And this is just one of the new insults this year.

And so more and more people simply give up, not because they lack gumption, but because it is the logical thing to do. People respond to incentives, and if you make it easier to not work than to work, then we’ll not work.

More to the point, if you make it almost literally impossible to work, then businesses won’t opened and people won’t be hired and work won’t be done.

From my vantage point, this is the direction we are headed, and I really don’t have the first indication that any government officials have a clue about any of this.

TechGuy's picture
TechGuy
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 367
Obamacare

Chris wrote:

"In the meantime, I have not yet received my final Obamacare bill but have been told to expect at least a 30% increase for my family of five this year. That will place our insurance costs at well over $20,000 for a healthy crew, which makes no sense whatsoever."

My insurance premiums  for 2013 are just a tad less than double of my 2012 premiums, and I am healthly. The issue I have with Obamacare, is that your not really buying health insurance, its a tax. As soon as your medical costs exceed the deductible and premiums, the health insurance providers will raise your premiums to match your medical costs. I am sure you've read about all of the people with pre-existing conditions see there premiums go form a few hundreds per month to tens of thosands per month which matched their medical costs. While Obamacare prevents providers from dumping patients, there is nothing in Obamacare that prevents insurance providers to raise your premiums to match your medical costs.

Even the ACA subsidies are a joke, since the subsidized plans still have the $6K deductible. If a poor person can't pay the prenimum, there is no way for them to pay the deductable either. In my opinion, ACA is engineered to fail so the gov't can switch to a single payer system. The single payer system would tighten the grip of the federal gov't as they can choose who gets health insurances (those that vote for incumbents) and those who get denied (Libertarians, Tea party). Few people will be willing to buck the power of the federal gov't after they control the healthcare system.

I am hoping that medical concierges become easily accessible in the next year or two so I can dump health insurance. The only reason why I continue to pay for health insurance is that I think unless you have medical insurance (errr tax),  hospitals and doctors wil likely turn you away, even if you willing to pay out of pocket. I have read news articles about hospitals and medical offices turning away patients because of lack of insurance.

"And so more and more people simply give up, not because they lack gumption, but because it is the logical thing to do. People respond to incentives and if you make it easier to not work than to work, then we’ll not work. More to the point, if you make it almost literally impossible to work, then businesses won’t opened and people won’t be hired and work won’t be done."

Yup, this is why I am dropping out. I am also worried that dollar is going to be massively devalued in the not too distant future. I am doing something simular to you, by converting my dollar wealth in resources to become self-reliant. The risks for remaining in the dollar and continuing to accumlate savings now outweigh the risks of not converting my savings into tangible assets. I am putting down my laptop and picking up a hammer to become self reliant.

BTW: See a gold company (I think Lear capital) offering DVD copies of your crash course program. It would be interesting if you could get shown on PBS.

 

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2237
"The Sensible Tax"

Chris wrote:

And so more and more people simply give up, not because they lack gumption, but because it is the logical thing to do. People respond to incentives and if you make it easier to not work than to work, then we’ll not work.

More to the point, if you make it almost literally impossible to work, then businesses won’t opened and people won’t be hired and work won’t be done.

From my vantage point this is the direction we are headed and I really don’t have the first indication that any government officials have a clue about any of this.x:

I wish I could find a children's story I used to read my son when he was younger, from a collection of "Silly Stories".  I think it was called "The Sensible Tax".  It was all about a country or kingdom whose treasury went bare, and so they had to think of some new kind of tax  to fill up the treasury again.  But everything they could think of had already been taxed!  So one of the ruling class came up with the idea of a "Sensible Tax" that would allow them to tax ANYTHING sensible that their very responsible, sensible countrymen did.  They knew they'd fill the treasury up again in no time.

Pretty soon, people were getting taxed for going to work to make a living, taxed for opening umbrellas to keep dry when it rained, and taxed for eating healthy meals. Until one day, someone got wise and did the exact OPPOSITE of what was sensible.  And they did not get taxed.  So pretty soon others caught on: people were wearing PJs all day long, skipping work and playing all day, eating ice cream for dinner, and closing their umbrellas when it rained.  Before you knew it, the incoming tax revenue slowed to a dribble.  The moral of the story -whether spoken or not- "people respond to incentives"!

jtwalsh's picture
jtwalsh
Status: Gold Member (Offline)
Joined: Oct 1 2008
Posts: 263
Starting up or out.

TechGuy’s list, is excellent. I will add one comment. TechGuy actually alluded to this when he said avoid all overhead, but I will say it directly. When starting a new business try as hard as you can not to go into debt: either by borrowing money, or by signing long term leases or purchase agreements.  I cannot emphasis it enough.  Do not go into debt. 

I have worked with a number of start-up businesses over the years.  One of the most difficult things to watch was the person with a great idea who borrowed a large sum of money to “get going.”  More often than not the cost of the debt service was the thing that choked the business before it had a chance to take off.  Start small.  Try to pay as you go.  This is easier if you do not yet have commitments like a family, mortgage, student loans, car payments, etc.  I must admit that I began my business after my wife left her profession to be at home with our then three children.  We had all of the above debts.  We made it, but not without some great difficulty and with a huge amount of grace and grit on the part of my spouse. Having an understanding and supportive life partner also goes a long way in helping you get on your feet.

Wildlife Tracker’s posts are also excellent.  I have five children ages twenty-one to thirty-three. I watch them and their friends trying to make lives for themselves.  It is extremely difficult. We baby boomers have made a complete wreck of the economy and our children and grandchildren are being devastated by what we created.  My oldest is an attorney married to an engineer.  They have very good positions.  It takes all of their income to pay student loans and the mortgage on a modest but ridiculously priced Boston suburb house.  My other four, although working, are not at all settled in anything I would call a career or life track position.   

Thirty-five years ago my wife and I started out looking up at our feet.  We owned our clothes, two decrepit cars, my student loans and our college degrees. At that time it was enough.  We could find cheap safe rental housing.  Food, gas, utilities were manageable. Health insurance was inexpensive and there was employment available.  Not so anymore.  Except for a few entry positions in the professions, a starting position no longer pays enough for a person to cover their expenses.

Wildlife Tracker, I urge you to stick with us and give us your thoughts and opinions.  Invite your friends.  We desperately need new ideas and ways of looking at things.  I don’t think the answers for tomorrow are going to come from the folks my age and older.  We created the mess and our way of looking at things will not result in necessary change.

steamengenius's picture
steamengenius
Status: Member (Offline)
Joined: Apr 26 2009
Posts: 9
Millennials, asset mapping

I'm a millennial too, 29 years old, and I've enjoyed this site for many years. (There must be a bunch of us around here....maybe in the woodwork not posting so often, like myself.)

I'm fortunate to have a relatively stable job with benefits, and this article and others highlight the necessity to branch out and have reality-based expectations.  On that note, and regarding my generation there's an entertaining article on a website I discovered a few days ago that I think resonates with a truth (may be a bit exaggerated - still entertaining)

http://waitbutwhy.com/2013/09/why-generation-y-yuppies-are-unhappy.html

A key takeaway, "Happiness = Reality - Expectations", reminds me how lucky I was to encounter Chris's "Crash Course" early, around 2008 or 2009, when I was graduating college.  (I think it was the first significant "red pill" experience of mine that helped temper a more naive optimism.)  The material tempered my expectations and reinforced that today's outcomes are a blend of personal circumstances and many of the systemic situations PeakProsperity discusses. 

Back when I was a kid, I had a shelf of soccer trophies, mostly for "participation" -- it's hard to imagine that had a salutary effect on my expectations for the world :)  But, each generation does have its own issues and to some extent we all inherit a "crap sandwich" in various ways.

(BTW, in the spirit of that Generation Y article the username I have doesn't speak to a sort of "genius" self-image...I may change it but it's from a Modest Mouse song and I found it funny in ironic ways...)

In terms of adaptive responses, I like Nicole Foss's admonition to "be worth more to your employer than he is paying you".

http://www.theautomaticearth.com/how-to-build-a-lifeboat/

Of course jobs in medium and large institutions may not be permanent so a priority is to make myself useful to people around me, and one of the most intriguing ways I've seen (and want to try in my community) that's both charmingly small-scale and relatively systematic is asset mapping.  Donnie Maclurcan has a great primer on it here (and it certainly works sans the Occupy tie-in):

http://postgrowth.org/asset-mapping-occupy/

I wonder if others here have tried asset mapping?  If so, I wonder what success they've had and the extent that it might satisfy some needs otherwise covered by traditional employment?

Boomer41's picture
Boomer41
Status: Silver Member (Offline)
Joined: Nov 30 2008
Posts: 132
Government job creation.

Khannea wrote "To make more money with "a business" than my N disability I'd have to make about 2N worth of money since I'd lose 0.3N worth of subsidies on top of my disability and a third in taxes. In other words, completely impossible."

This is the socialist welfare trap that so many Europeans find themselves in today. For one reason or another they wind up on welfare. After a while they realize that any attempt on their part to go back to work is penalized by the government. To the point that many of them just give up and settle for a life of poverty.

Of course, the money to support the welfare recipients has to be extracted (taxed) from those who are gainfully employed or are generating employment by operating a business. This is such a huge disincentive to would-be entrepreneurs that small business creation is being strangled at birth.

Clearly, these two effects are destroying any possibility for Europe to work its way back to prosperity.

The best thing any government can do to increase employment is simply get the hell out of the way.

Khannea's picture
Khannea
Status: Member (Offline)
Joined: Sep 28 2010
Posts: 8
"The best thing any

"The best thing any government can do to increase employment is simply get the hell out of the way. "

I vehemently insist you clarify what that means. Because if you mean that it should imply that governments do NOT generate my current disability levels by means of taxation and redistribution it pretty much means me being exposed to likelyhood of death.

I am keenly interested in learning if you advocate (!!) a form of attrition where the market should take over in terms of supply & demand mechanics and welfare/disability should be reduced. But if you are advocating that, given current conditions, you are advocating (in my case) policies where people literally die. 

After rent, expenses my food budget is 40 euro a week. That's not enough. Conversely if you advocate the state gives me a lower monthly stipend it immediately means several hundred thousand people in the Netherlands go hungry. 

We can argue that the state deceitfully generated means to make itself indispensible, sure. But fact remains that for a sizeable part of the electorate yes redistribution is essential for survival. 

So once you argue alternatives rule 1 is to come up with alternatives that do not murder by proxy, To not do so, is criminal. You have to take into account the mess we created. If you don't you risk severe societal breakage.

 

 

 

treemagnet's picture
treemagnet
Status: Gold Member (Offline)
Joined: Feb 13 2011
Posts: 344
As the fire rages

And continues to burn the remaining economic oxygen, how do you justify your take - at the expense of others.  When those who pay in, and must deny their own to offer up their tribute to others....strangers like you, who first object and finally become unable to 'pay in', well....do you see how this ends?  

Of course you do, but then misery loves company or so they say.  Not to worry, we'll all be relatively equal soon enough.  In 1945 America had 42 workers for every retiree.  Now, we have 2.5 and excluding parasitic government "workers", we're at 1.6.  Let that sink in for a moment.  1.6 needy relying on me.  I'm not that strong, it's a load beyond my ability.  Doom's-a-comin', no doubt about it.

That said, legitimate claims for injury, disability, aid....whatever, unfortunately, will be first diluted and finally ejected from every economic model.  Plan and prepare, complain if you must but just remember it won't help and nobody will care.  Someone here at PP will sandbag me for these comments, just as they'll gaslight you about their concern for you (don't waste time waiting for their check).  Do what you can, plan and prepare.  

I know it sucks.

Boomer41's picture
Boomer41
Status: Silver Member (Offline)
Joined: Nov 30 2008
Posts: 132
Fixing the Mess We Created

 

Khannea,

In your first post (the one I responded to) you very succinctly identify the government-created barriers which prevent you from either obtaining a job or starting a business which makes financial sense. I agreed with your analysis and suggested that the root cause of your problem is excessive government interference in the free market which destroys the incentive of you and other would-be entrepreneurs to start a small business or even take a low paying job.

 

A society which has a rich, vibrant economy with many small businesses, competing with each other for the available workers, will automatically raise living standards for everybody and practically eliminate unemployment. Such a prosperous society will have the means and the will to take care of its members who are disadvantaged or disabled.

 

I most certainly do not advocate that people in your situation, who are genuinely unable to work, should be sentenced to hunger or death. Such a situation should be unthinkable in any modern country - especially a prosperous nation with a healthy economy.

 

However, when a nation (or more properly stated its government) creates an impenetrable mass of what amount to anti-business laws and regulations it stifles enterprise and innovation. It creates, as you said, “a considerable disincentive” to the generation of wealth by the fundamental process of human beings adding value to raw material by their creativity and labour.

 

I don't think that storming the barricades and killing the rich is a solution. If all the rich and productive members of the population are killed there will be nobody left to fund the redistribution. Because, clearly, some form of redistribution is essential – I just don't think it should be at gun-point.

 

The real solution, and the one I advocate most strongly, is for your government, my government, any government, to be told by the populace that its efforts to create jobs by manipulating interest rates, the money supply and increasing taxation are futile and ultimately destructive of the very jobs they seek to create. The best government is a tiny government. One that is respectful of the liberty of its people and does not hinder their efforts to better their lot and take care of those who cannot take care of themselves.

 

A recent article on this site "The Government Comes Up With The Money" describes perfectly how an overblown welfare state eventually destroys the economy and ultimately the ability of the state to fund the welfare system itself.

 

We all need to tell our respective governments in no uncertain terms that we are not the helpless sheeple they assume us to be. We are perfectly capable of creating wealth for everyone, if only they will get out of the way and let us get on with it. We cannot ignore “the mess we created” but the ultimate solution is to fix the mess not kill the rich.

 

I sadly realize that this is no help to you in the short term. But I respectfully suggest that it is the only real solution if you, and I, are to have any hope of a bright and prosperous future.

Khannea's picture
Khannea
Status: Member (Offline)
Joined: Sep 28 2010
Posts: 8
The era of mass employment is

The era of mass employment is over. Period. The percentage of irreversibly employed will go up every year and the systemic jobs lost will never be replaced, at least not by humans. Somewhere mid century the vast majority of jobs will be gone, and available automated systems will do any job done by a human easier, cheaper, more accurately, safer and better than it can be done by any human.

Still societal efficiency and productiveness will increase every year, and as a result profits will only accrue to a small percentage of people who hold rare skills, talents, investments, money or special social consideration (or networks). The vast majority of people will be left in vicious competition, superstitious denial (as you can read from above replies) and irrational veneration of the privileged (as you can see in above replies). The end result will no doubt be a range of conflicts and these conflicts will quickly escalate in bloodshed.

Unthinkable though it may be among the cargo cult worshipers of economical evangelism, we'll see a total reformat of world wide economy in to either a new oligarchic feudalism, or a society kept in a humane dignity by some form of basic income. Capitalism and mass-prosperrity will be long since a memory before 2050. 

http://www.scoop.it/t/concentration-of-wealth-existential-risk

[Admin: removed per violation of this site's editorial guidelines]

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