Guest post: 4 Arguments for Greater Parent Investment

Contributor: Bernard de Souza

When reading the article ‘High-Pressure Parenting’ and your blog post ‘Am I a High-pressure parent?’ I was drawn to the questions:

• How and why has work changed over the last 15-20 years?
• What is the specific impact on new graduates?

The Push for Outsourcing

With the stock market’s focus on short-term corporate profits, many companies have chosen to outsource with no regard as to the impact of the resulting unemployment on local economic prosperity and their company’s long-term sales (this is one area where I agree with Trump).

With high levels of regional unemployment, new graduates in these areas need to compete with an above average number of people for any available position (many of whom have significantly more experience).

Increase in Contract jobs

Companies initially used ‘try-buy’ as a tool to evaluate potential new hires to determine if they are employee material.

The cost of a contract worker (salary and benefits including pension), is about 50% of a full-time employee — very attractive to cost-conscious companies.  These individuals are often kept on contract status for 5-10 years (I am not speaking to consultants or IT workers who make a very reasonable living on contract).

There are many implications to this:

• There is no loyalty on the part of the worker and so their productivity is not maximized and their turnover is high.
• These contractors (many with university degrees) cannot expect to own a house.  Mortgages are tough and the risk of losing a contract position is high in any downturn.
• These individuals will likely never retire as there are few mechanisms for them that facilitate significant savings.

Elimination of defined benefit pension plans PLUS low-interest rates

This has caused more people to delay retirement.

• Except for unions and government employees, the defined benefit pension (you are guaranteed a certain percentage of your last few year’s salary) is being eliminated. It is being replaced by a defined contribution pension plan.  Most employees must top-up their contribution to have any hope of retiring at a reasonable age.
• Since 9/11, and especially since the Financial Crisis, interest bearing investments have provided very low returns relative to the prior 20 years. Yet, investment advisors continue to direct people close to retirement to hold 40-70% of their retirement investments in such products (and to increase the percentage closer to retirement).  People who have heeded this advice and have purchased government bond funds or have left their money in high-interest accounts have seen little growth in that part of their portfolio unless they have purchased higher riskier products.

Because of the above phenomena, baby boomers have not seen the growth in their retirement account required to stop working and have chosen to stay in their jobs longer than they would have in the past.

This has greatly reduced the opportunity for new hires to enter the workforce on the bottom rung and move up the corporate structure.

Financial Crisis – Uncertainty has reduced the level of hiring by big corporations

Since the financial crisis, companies that survived are hesitant to hire new employees.  By holding back on additional employment these companies have leveraged productivity improvements to maximize profit.  This is reflected by the record stock market results while PE ratios have not become outrageous.

Like the United States government who has put off infrastructure investments to remain within budgets, corporations are doing the same.  Their infrastructure expenses include R&D, engineering, and product development.   It is a very narrow-minded view taken by their CEO/CFO’s to maximize corporate profits.  For long-term growth and profits these companies need to make this investment to compete with their Asian/European competitors.

This behavior has led to many new university graduates being un or under-employed.  With university costs rising above the inflation rate individuals are working hard just to make their university loan payments with little to no hope of seeing a lifestyle like their parents’.

Summary

As a result of these structural/economic changes, the ability to gain a solid foothold with the first position is a great assist.  Parents are therefore taking much more interest and a more active role in their children’s choice of career and the pathway they take to their first job.

 What are your thoughts?

Please reply letting me know if you agree/disagree with the positions above.

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} … Thank you for offering your opinion, Bern.  Encourage our guest bloggers by sending in your comments.

} …  Your perspective matters!  Please enrich the conversation by sharing.

I hope to see comments (or guest blogs) back from across the arc – new parents to the veterans, high school students, teachers and post-secondary graduates, working and those struggling to find a paycheck.

HOPE FOR THE BEST, PLAN FOR THE REST

Whether it is time management, money matters or career ideas, Karena works with her community of clients to make life simpler and more efficient and to manage transitions by bringing an uncommon perspective to what is common.

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THANKS, INSPIRATION, REFERENCES, CITATIONS

• Bern – for taking the time to send in your well laid out thoughts and perspective
• Economist Magazine: High-Pressure Parenting https://www.1843magazine.com/features/highpressure-parenting