Episode 115 - Why won’t people go back to work?

Often it makes me laugh how the macro economists, government advisors and banking experts pontificate on supply chain disruptions, unemployment rates and other statistical data as they pour over spreadsheets trying to find the reasons why things happen. But the answers are simple for this – yet few people are willing to address the truth. Let’s talk about this.

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Show Notes

Recently the media have been reporting of supply chain disruptions, where supermarket store shelves are bare, you can’t get (god help us) toilet paper, etc.  People remember back to the disruptions of 2020 and think that the sky is falling again.

And while the Biden administration would love to do a victory lap on how they stopped COVID dead in its tracks, the 700,000 Americans who have died from the disease (if you trust govt statistics here) would respond with a “Not so fast” answer to that.

So in a world where political approval ratings are plummeting to sub 40% levels, the news media is latching onto this, despite the government wanting to wish it all away.  As each week or monthly labor employment rate numbers come back, they are consistently lower than they would hope for.  Sometimes way lower.

Yet it seems that the White House don’t understand what life is like at the street level.  And this reflects in their approval rating.  All of their time & political capital is being spent trying to make minorities feel better, and to appease the extreme left wing of their party, rather than to get real with what the majority of working Americans are feeling.  I’m not trying to be political here, but the world as it is portrayed on CNBC or CNN or even Fox seems a far cry from what I see on the ground, dealing with my tenants and their economic issues and what I see when I go to the grocery stores, etc.

The general summary seems to be, “If only Americans would just get back to work”.  And no one seems to have an answer as to why they won’t go back to work.

Last night, I heard the White House were considering engaging the national guard to help with supply chain distributions, as a response to the fact that there are not enough dock workers or truck drivers available.  This problem is also shared in other countries – in the UK there is a severe shortage of truck drivers following Brexit and the exodus of eastern European labor from the UK labor force.

Why is all of this happening?  The smarty pants economists and statistics people don’t seem to have an answer.  And the extreme left wing of society are trying to blame it on the fact that the minimum wage is too low or some other such drivel.

But it is really a simple answer.  And it would be obvious to them if they left their ivory towers and came down on the ground level where the action is.

People don’t want to go back to work because the economics aren’t working for them.

It would be easy to blame COVID for this.  As if people were scared to return to the workplace because they fear contracting the disease.  But we live in a world where vaccinations are everywhere and the majority have had at least one shot.  And now with the White House mandating that larger employers must ensure their workforce are vaccinated or suffer severe penalties, one might argue that the lack of employees is due to the anti-vax crowd not wanting to return to the workplace because of vaccination mandates.

But that is not the truth at all.  We are talking about 2-3% of the entire work force who are not returning to work.  When it comes to making money and paying your bills, even the most hardened anti-vaxxer isn’t going to stop earning money.

There’s something else going on here.  And the answer lies in plain sight.

People have realized that they can’t afford to go back to work.

Hear me out….  For the past year or so, the government in the USA (and additionally state governments) have provided financial assistance by way of stimulus payments, welfare, support payments for those furloughed, payments to businesses to not lay off their workers, etc.  These grants have been very generous, but not quite enough money to enjoy full salaries.  At least not for those who were in the mid to upper level “middle class” working positions.

But for the lower middle class workers, who had been earning slightly higher income than minimum wages, the govt welfare programs have been more money than they were getting in employment.

Those people know how to live on basically nothing.  They’ve been hardened to do this by way of frugality, sharing things within their families, friends, community, etc. and they have been surviving for decades like that.  

And additionally, if you don’t have to pay for gas for your care, childcare for your kids, nice clothes to present the illusion that you have value, buy expensive lunches because you are not at home, etc. you have carved a massive drop in your expense budget.  So maybe making less money isn’t such a bad thing.  Remember….  Its not what you earn – it is what you keep.

Who are those people who don’t want to go back to work?  They are the farm workers who pick the crops.  They are the store shelf stockers who work at the grocery store at 1AM preparing the store for the next day’s consumers.  They are the people who drive fork-lifts at the ports where the ships come in.  Often they are the truck drivers, or the ship workers on the container ships that bring in the goods.  They work in the distribution warehouses that house the products ready to be delivered to the stores that service the consumers.  They are the restaurant workers who wait your table or the orderlies that clean up after you.  And they are the retail workers who work in the stores and supermarkets that serve you at the cash register, open the doors, clean the buildings, etc.

All so you can have a Teflon coated experience in buying your goods, getting services and eating your meals.

These people earn very low wages.  And we enjoy the results of that because the big supermarket chains are competing with other big supermarket chains to make the shareholders richer, and costs matter.  There are razor thin margins here and one of their biggest cost factors is payroll.  They have to keep wages very low in order for you to have $2 bread or $1 can of beans.

But there are also upper income demographics who have worked out that the 9-5 working stiff lifestyle isn’t for them.  They don’t see much hope, particularly with the younger demographic, of a world with a dystopian future, climate change, and the blame to the previous generation of poor management – allowing the rich 1% to own more than half of the world’s wealth.  Is there hope if you can’t make it if you earn $75K a year?  Well not in many urban cities in the USA.  I mean try doing that in Los Angeles or San Francisco or New York?  Consequently the exodus from those cities to cheaper places is active and alive, and let’s face it – if you moved to Idaho, Texas, Florida, etc. from those bigger urban cities, and your living costs dropped 40%, would you want to go back to work?

With the lower income demographics, there is an entire eco-system in our economy that the rich never see.  They don’t go into the supermarkets at 1AM and see the store shelves being stocked.  Hell, they probably don’t even go into the supermarkets to get the goods, but order it with Amazon Fresh or have their hired help do that.  They don’t venture out to the farms and see the workers picking the crops.  They don’t go down to the border and see how the workers manage to survive harsh desert crossings to have a chance at getting the pittance of money to pick those crops as illegals, while there is nothing in their home country because climate change has ravaged their ability to grow crops in their own land of residence.

But the results of this under served economic sector not being recognized by the rich is that with fewer workers in those areas, the farms are forced to pay more to attract local workers.  Yet for most Americans, they won’t do the back breaking work of picking fruit or vegetables.  So farms in California, for example, have been forced to offer full salaried employment to farm workers at $35,000 a year + benefits, or pay them $20 an hour for a job they used to pay $8 an hour.  This reflects in the price of those goods at the grocery stores, and that, my friends we simply call “inflation”.

Still the positions remain empty.  No one wants the jobs.  We see that in the employment statistics.  

So the farmers eventually realize they could sell their land to and build luxury apartment complexes for the rich, and due to asset price inflation they do far better.  The farmers can retire and exit the workforce themselves and make more money on the assets of land that they own.  And the circle of life continues.  And the employment numbers drop even further.

Then the world of the warehouse & truck driver comes into play.  With the constant threat of robots taking over jobs, driving those trucks, etc. there are fewer people willing to invest in education to get licensed and certified.  In the UK, this problem reached epic levels when fuel trucks were not able to bring fuel to gas stations and hence gas stations couldn’t deliver fuel to the customer.  Can you get a robot to do that?  Nope.  Not today anyway.

History provides the answer as to why we are in this situation, but it doesn’t provide the solution.

In the past, there was this thing called “unions”.  Unions allowed workers to organize together.  Particularly workers in these types of jobs.  Farm worker unions, transport unions, the “Teamsters”, teachers unions, retail worker unions, etc.  They still all exist, but the organized labor in unions often became corrupted by the very centralized leadership that comes in those organizations.  And deals were made that benefited those at the top – both at the top of the companies who needed the workers and also the top of union leadership.  Corruption ran rife.  And eventually the power of the union is weaker.  Participation levels retreat, and effectively the company wins.  Labor has no way to demand a living wage, and what further complicates this is globalization.  When you can threaten a worker who demands a 20% pay increase that you will send his/her job to China or India or Mexico, then they have no choice other than to back down.  Even the power of organized labor in Unions has no response to that.  The ports where they work are receiving the very container ships from those regions, so clearly all the employment that used to be there in manufacturing was lost due to those very same negotiations.  The power of organized labor was lost due to globalization and the constant demand for more and more shareholder returns on Wall Street.

So imagine yourself in the shoes of the store shelf stocking employee.  They are paid $15 an hour.  They have to work the graveyard shift every day.  The single mothers that do this, the entry level employees looking for a way up in the world, those that just have bills to pay.  They are out there doing the jobs that no one else wants to do.  For $15 an hour.

Would you do that?  Are you that desperate for work that you would do it?  

I generally canvas the audience demographic of our listeners I typically those that listen to this podcast are already upwardly mobile but realize that something is wrong and want to find an alternative path for their future.  They feel constrained but not like that store shelf stocker feels.  Their constraints are not due to decisions that they have control over.  Whereas the upper middle class person with a college education has the ability to make decisions, if they were not stupid enough to throw away that power by taking on debt.

But for both groups, COVID provided them all with a wake up call.  They came face to face with mortality.  On every night on the news they saw the death rates.  Many have close family members succumbing to the disease.  Or know of someone famous who died, or someone not famous.  They had to take time off to grieve the loss of a loved one, or help out a family member with less support.  They were recipients of government welfare during this hard time, but ultimately they learned to live on less.  And they learned to re-calibrate their value systems that life and time is more important than this endless pursuit of money.

That is, if they didn’t have a ton of debt on their shoulders.

Here’s the interesting dynamic though….  I recently watched an interview on the Bill Maher show with a lady who represented low paid workers, particularly in the restaurant industry.  She cited examples of the $2-3 an hour that they get, but rely entirely on tips.  Well of course if the restaurant doesn’t have capacity because of a disease, there are not going to be any tips flying around.  And you won’t get out of bed for $2-3 an hour, so I understand why they represent a large percentage of workers who won’t return to work.

But with that said, it just seems to me that if people are forced to cut back, then they don’t go out to eat that much.  They stay at home and cook.  And if going out is hazardous to your health, then the return to home cooking will remain.  I mean as much as I love great food and selection, do we really need that many restaurants?

That said, for a single mother who needs to earn money to raise her kids, working at the local Dennys for tips is a pretty common option.  But is this a life?  Sure, you defer your own needs to protect and nurture your kids.  I get that.  But there are many other ways to do it.  And let’s not forget that society is returning back to normal.  People will be going out to restaurants again, paying for their 5 star dining experience on the AMEX card, and further entrapping themselves into debt.  And the single mother working as the waitress will return to getting her tips.

At some point I have to think that this is blood money though.  Sure, I love to go out for a special occasion for a meal.  But not all the time.  I have a monthly “eating out” budget and I am very disciplined to never go beyond it.  90% of the time I never use it entirely.  But I don’t roll over the unused funds for some big slap up meal later.  I just realized that maybe I didn’t need it at all anyway.  I’d prefer to know what was in the food I was eating because either I grew it, or bought it directly from the farmer, etc.  I have a distrust of anything with fructose corn syrup in it, and unfortunately that seems to be 80% of the food products at the local supermarket.

So given that people have learned (during COVID) on how to live on basically nothing, and the lower wealth demographics probably have little debt because banksters won’t lend to them, they are the most likely to survive this.  They can pivot to doing gig based jobs like DoorDash, Uber, Lyft, etc.  They can do online work in fulfilment or customer service from home.  They can do seasonal work if they want – hell, they can even pick crops.  There are plenty of better options than they had prior to COVID.  And they are resourceful enough to make it work – after all, they’ve been doing that for most of their lives.

Meanwhile there’s you.  You want the store shelves stocked.  You want the nice sit down experience at the restaurant.  You want to go to the supermarket and buy your groceries at the same price it was in 2019.

Sorry to tell you this but…. It ain’t gonna happen.  The cost of labor will likely rise to eventually return to a level that can keep up with normal life costs.  That means companies are forced to pay 2x (or more) to the lower demographic worker because the power of the worker is shifting back to the the worker.  Sure, you can get some Chinese company to make your stuff, but if it sits on the docks or on a ship and unable to get to the trucks to deliver it to you, what’s the point?  You may as well have had your own factory make it.

People need to be respected.  People need to be able to make a living wage that lets them spend time with the kids, not feel like they can’t go to the doctor, etc.  And people need hope for the future.  If you move all of the wealth to the rich, so that the regular folk can’t participate, then they don’t participate.  And that’s what we are seeing right now.

But here’s where the lesson lies….

Do you want to be living like those in lower economic demographics?  Clearly not.  You don’t want to have to go to battle to just get a decent hourly rate.  And are you able to live like the 1% richest, with all the assets around showering you with cash protection at any moment?  I hope you are part of that demographic, but chances are you are not.  

What if you realized that all people want to do is to pay their bills, spend time with their families, maybe have the odd luxury once in a while, and live a rich life pursuing their real passion without the threat of health events or some future black swan manifestation.   If that was acceptable as a way of peace and prosperity, then it would make sense to generate your income without having to work.  In some meaningful way, of course.  So that what you have is of service to others.

That’s why I am such an advocate of Financial Sustainability and Smart Income.  It isn’t about having some massive nest-egg of cash saved away.  It is about deploying your capital to acquire assets that pay you to own them.  Assets that help others, ideally.  Like rental real estate, where you can provide a roof over some family’s head while they do battle to get a reasonable wage for their toil.

The thing is that you can’t be the one to do the toil.  Or be the one having to fight all the time for remuneration.  You need safety here – you should have your capital deployed into assets that we all need for survival.  Not assets in things that are purely luxury items.  I mean if we have a recession, or a depression, you think people are going to be talking about buying NFTs or Louis Vitton handbags as a regular dinner table conversation?

No – they are going to be talking about their strategies to address the demise of their wealth.  People will go for safe harbor in those times.  But they still need to eat, drink, have shelter and wear clothes.  The basic physiological needs.  Those things always make money in the best and worst of times.  That’s stability and what you should be seeking.

If there ever was a demonstration of the need to seek safe harbor, a pandemic would do it.  Yet even though we have probably passed through the worst of it now, what have we learned?  Have we learned the power of frugality and what capital assets have done well?

Sure, the rich are loving the fact their asset valuations have gone to the moon.  But that is because the Federal governments of the world were forced to issue a ton of money to people for their survival and with that lowering interest rates to 0%.  No wonder things are costing more – there’s more money sloshing around looking to be deployed.  As the asset prices go up, then you need more money to acquire them.  Eventually the cost of funds are pulled back by way of raising interest rates, and then the demand for those assets drops, and with that the asset pricing.  The natural way of the free market will survive.  We’ve just been living in a decade of uber low interest rates that has turned any amateur into a professional day trader who can’t seem to lose no matter what stupid things they buy.

But that can’t last much longer.  When reality comes knocking again, we must all realize that the hangover period starts and it will be painful.  But needed in order to return some stability to the world.  Whether the world can survive such a detoxification of economics is debatable.  I clearly believe central bankers don’t believe it can, which is why the lies on inflation rates have been so brazen and the interest rates kept so low for such a long time.

Maybe now is the time you should be thinking about deploying capital for physiological assets.  Land and real estate is probably relatively safe, although if you are using borrowed money to acquire them then you have to be able to do the deal with the devil that is the bankers and be able to dance to their tunes for a while.  And with the purchase of real estate comes the fact that you can’t just pick it up and move it somewhere.  Your commitment to it is a regional commitment to a region, so you want to factor in ways to mitigate the risk of association.  That may mean property management or some other way you can participate in a physical geography without the downside risk of being shackled to that geography.

But if you do this now, and you can ride out the time period to pay off the real estate (or at least get your tenants to pay it off for you), then the day will come when the rents coming to you will negate your need to work.  No more submission to a job, a boss, a pay check.  No more negotiating for a better wage, when you have little or no power to negotiate.  
Now I’m not going to tell you that there are no some bumps in the road with whatever strategies you follow.  If you are the landlord, then you rely on the well being of your tenants (particularly their employment) because indirectly they are doing the work and pay you the rent from it.  So if they don’t work, you don’t get paid.  

 But if they are doing the work and you are not, that’s not such a bad thing.  You ensure you have reserves on hand, and you ensure you are renting in a region that allows you to evict quickly in the case that the tenant falls on hard times.

Yes, that sounds horrible.  I mean anyone who is not a landlord would hear me saying this and think, “That guy is an unfeeling asshole”.  But no one looks at the plight of the landlord that bought the property, signed a deal with the banks to fund it, and is responsible to make sure the bank gets their money.  And the city government rates, property taxes, insurances, utility bills, etc.  That’s all on the shoulders of the landlords.  We sign a contract with another party, and as much as they expect us to honor that contract, we also expect them to honor it too.  When they don’t (ie. They don’t pay the rent), we need to recover back the property and rent to the next guy.

Life is hard.  But that’s not the burden to the landlord.  It is the burden to the government who seem to be more interested in climate change investments, and how to tax billionaires than they do about understand what life looks like at street level.  And that will eventually come back to bite them.

Our current social climate is favoring minority groups with an axe to grind, and we see that playing out with people like Dave Chappelle and Netflix.  The tail appears to be wagging the dog here – the minorities have lobbied to get such power by way of a cancel culture or shaming others, that they are changing the social dynamic towards their causes.  I don’t have any issues with their causes, but I am of the opinion right now that there are major level issues at hand that are being ignored and the result will be that the administration who is not willing to get real with what is going on at a street level in the USA, will likely not survive a one term presidency.  It isn’t that you don’t like the President, but if the feeling is that they don’t care about you, then you won’t support them.  

That said, these problems didn’t appear under the watch of one administration.  They are issues that go back many decades and are representative of a systemic problem in the way that society works that shows….  Well it doesn’t work.

Just like people don’t want to work either.

Sometimes you have to question social mantra.  You have to step away from the day to day goings on in your country and realize exactly how life has become a setup – a three moves ahead chess game.  And who really are the players?

Simple.  The banks.  The banks, with their biggest operator being the central banks, are defining your life, your net worth, your goals & ambitions and manipulating government to enact laws and policy that favors them.  Not you.

If you are expected to be in debt at the age of 18 until the day you die, and they do that by selling the illusion of what a successful American looks like – nice car, nice house, kids go to the best college, and you sign up for that, then you are blind.

Blind to the fact that people are dying in the streets with no healthcare that they can afford, most people’s expense budgets focus on a society that is litigious and therefore 30% of the average expense budget goes to insurance products to protect (inadequately) against the risks and those fears, and the cost of physiological needs of food, shelter & clothing are enough for most to fear losing their job.  Where 78% of people are unable to handle an unexpected $500 expense and live pay check to pay check.  And where the end game of a “career” is the less than 50% chance that you may be able to retire, and yet most discover that they can’t – right at a time in their lives when they can’t fight it.  Meanwhile life expectancy is dropping at a level that only gives you maybe 10 years of life left if you work until the government wants you to work, based on their mismanagement of social security.

And a constantly increasing tax policy that makes it harder and harder for you to ever keep what you earn.

It is no surprise of the rapid number of Americans who are renouncing citizenship and moving abroad.  Or at least being expats and avoiding being within the blast range of this ticking time bomb.

So that’s why people are not returning to work.

Yes, at some point they will have to.  They will run out of money and it will be either return to work, or live down in the bowels of the city as homeless people.  Maybe get an RV and try and cut it out on the open road – sleeping in Walmart parking lots or “boon-docking” as they call it.  Living like the cast of Nomadland.

But that’s not a life.  At least not a life that you can really pursue passions, stay healthy and be financially safe.  You are one breakdown from homelessness and you are putting your home on wheels into the world of accelerated entropy with every mile you put on the engine down the road.

This is the dystopian future that you were worried about.  Do the same as your parents did, and you will end up broke, sick and hopeless.  Do the same as your personal financial advisor says, and you will help him or her avoid being broke, sick or hopeless.  But not yourself.

Put all of your faith in saving money, investing it in passive income funds, or the stock market, and you run the risk of losing it all.  When interest rates re-balance, which the eventual recognition of inflation will force the hand of the central bankers, the stock market will deflate.  How fast will it deflate?  I think most are under-estimating how fast.  Remember the rapid loss of 30% of its value in March of 2020?  What stopped that decline?  0% interest rates.  If you can’t pull that lever, we’re all going down like a deflating balloon.

If the answer is to just keep working hard on the treadmill, maybe the fact that millions won’t return to work is just a recognition that our social mantras don’t work and finally people are able to demonstrate that they don’t want to continue to sign up to these false statements of hope.

Reclaim back your power and realize that you control your decisions.  Live frugally so you can get through this.  Save, but more importantly deploy your wealth into assets that pay you to own them.  Smart income assets like rental real estate, dividend stocks, vending machines, technologies that are automated that pay you some licensing fees, businesses that pay residuals.  Diversify because things will get choppy ahead.  Don’t put all your eggs in one basket – and most importantly that includes regional loyalty.  The country of your birth may not be the best place to put all your faith & hope.

If you want an example of that, consider how my life would be right now if I never left my home country of Australia.  Lock downs, dystopian surveillance state, socialist/communist based authoritarianism, etc.  Is that what you want?

Move your income production to cyber space if you can.  At least you can take that with you wherever you go.  Digital nomads have it right – they have more flexibility to go to where they are treated best, and clearly the revolution against traditional jobs in the USA that is going on right now seems to support their strategies more than the local office worker at the company.

Maybe the best investment you can make in the short term is a new laptop and a better Internet service.

Good luck, stay safe and we’ll see you on the next episode.

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