Why Health Insurance Isn’t

Last week I wrote about the success of Obamacare in driving people from the private insurance market towards a national healthcare system. Clearly, I touched a nerve when I look at the tone of the responses received. Although I don’t discuss big-picture issues in this space nearly as much as I do day-to-day business operations, there is one more item about the health care market that we should visit.

Did you ever think about the concept of health insurance? First, just to be curmudgeonly, we don’t insure against health, but rather illness. So it should be illness insurance. But I digress…

What is insurance? It is a form of gambling. Like the office Super Bowl pool. Everybody puts a little money in (they don’t call the participant base an insurance pool for nothing), and the “lucky” winner gets his or her bills paid. That’s how it works for cars, homes and property liability.

arab accidentIt’s for that reason that insurance is against the law in Moslem countries. It is considered gambling, even though winning a “prize” requires an unhappy accident. It is still a large number of contributors putting a little money in, so that one of them can get a large sum out.

What would happen to the office Super Bowl pool if it paid off equally on every single box that was purchased? Of course, everyone would only get out what he or she put in. That’s why health insurance isn’t really insurance at all.

Health insurance became a tax-deductible employee benefit after WWII, and grew widely in the 1960s and 1970s. I will beat my demographic drum once again. In the 60s and 70s the workforce was expanding at a record rate with young, relatively healthy Baby Boomers. Just as they did for Social Security, they carried the sick and accident victims in the insurance pools easily.

Today in the US, as in most of the developed world, the three major causes of death are Heart Disease, Diabetes and Cancer. I laugh at those health experts that point out how our unhealthy lifestyles make those the major killers. It is true that obesity, red meat and lack of exercise are contributors. But the biggest factor is age.

Let’s face it, in countries like Somalia or Myanmar, the biggest killers are communicable diseases from polluted drinking water, starvation and bullets. It isn’t hard to figure out why so few people die from diabetes. They don’t live long enough, or have enough food, to contract diseases from unhealthy eating habits.

No shared risk pool functions when everyone expects to take out as much as they put in. In a society where the vast majority will live long enough to require extensive and extended health care, insurance struggles just to maintain a zero-sum outcome.

Health insurance is no longer insurance. It is a lifetime prepayment program for the medical needs that each participant is statistically almost certain to need. About 30% of all Medicare claims are paid in the last 6 months of a patient’s life. Some use that as an argument against extending life, but I bring it up here just to make the financial point. Clearly 30% of recipients don’t pass away every year.

I can’t find any hard dollar figures past the mid-1990s for that end-of-life spending, but judging by my own and others’ recent hospital bills, I would consider $200,000 to be a very realistic number. If you work for 40 years, that means you’d have to save $5,000 a year net over your current health needs to build up enough to come out even. (I’m ignoring both interest on the contributions and medical cost inflation. Just making a point here.)

Of course, for the vast number who can’t pay in that much, someone else has to make up the difference.

There is no simple solution, but first we have to realize that our “insurance” is that in name only. It only works when each participant pays in as much as he or she is going to get back out.

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Posted in Leadership | Tagged , , , , , , , , , , , , , , , | 8 Comments

8 Responses to Why Health Insurance Isn’t

  1. Jim Marshall says:

    I had a great uncle who practiced medicine from the turn of the century until the mid 20th century. In the last chapter of his book “Doctor Do Tell” dealing mostly with his experience delivering medical care to the people of rural Wisconsin……he warned of the evils of “socialized medicine”. Much has changed since the time he practiced….including the willingness of health care providers to be “paid in pickles”. The evils of non “socialized medicine” have become crystal and painfully clear.
    The present health care system based on the idea that competition brings about the best result is a failure if for no other reason that there is and will not be true competition. Nationalized health care can minimize system costs….if design and operation remained focused on the goal of efficient, results oriented care measured by and paying for results. A single payer system that assures and pays for results oriented care (as opposed to pay per procedure) is probably the only way that a nation can bring about maximum care per dollar expended. The only logical single payer is government. If a clear goal (as mentioned above) was the standard to which any plan was held….much better product (our health care) could be brought about for all.

  2. Jim Marshall says:

    I neglected to mention his book was written in 1945.

  3. David Basri says:

    Except that not everyone is going to use all they did (or should have) put in. My mother will turn 99 early next year. She is in an assisted living center that costs thousands monthly, but uses just a small fraction of the services the price is meant to cover. This is good thing. Others use much, much more than they ever did (or could have) put in.

    The only solution is something based on the underlying concept of insurance. Many put in
    X and a fewer number take out Y. Even in countries where there is universal government provided healthcare, the concept is the same with taxes substituted for the bulk of premiums.

    The problem in the US is that the insurance paradigm is private and discretionary. Not everyone has to pay in, so healthier lower cost people opt out at a disproportionately high rate. The insurance companies are profit driven, so left to their own they simply do not want to cover those who represent a higher risk.

    Average life span in the US is into the 70s. That means both individuals and companies have to think very long term to justify the equation. In a system where participation is discretionary, and the actuarial pool is private and focused on making shareholders and executives happy the following quarter, the actuarial numbers will not to add up.

    Human nature simply does not work well in multi-decade time frames. Only an external entity can make the health care actuarial equation work. The ACA is bending the curve, but it is a poor mishmash trying to influence an inherently unworkable model based on private insurance and discretionary participation.

  4. Mike Weaver says:

    I have always thought it strange that people expect routine doctor visits and long term prescription medications to be covered under a health insurance plan. When you buy car insurance your tires and oil changes are not covered are they?

  5. David Basri says:

    It is only strange if you try to equate health care with consumer goods. Same basic problem as trying to force market principles to “control” health care costs. It is not a market or a consumer good, and should not be.

  6. Jim Morris says:

    If the legislature is required to live under the same laws, regulations, and healthcare systems that their constituents live under and lifetime healthcare benefits are eliminated for them, things will change. This will never happen as the fox rules the hen house. Corruption in government has become epidemic and it comes in too many forms and sizes.

  7. David Basri says:

    Most members of Congress may not like it, but could easily afford, good private health insurance. To really understand they should be forced to live six months or a year in the shoes of someone who either cannot afford the insurance, or can buy insurance but not possibly handle a $5000 deductible.

    The sad irony is that far more than enough money is actually being spent on health care in the U.S by citizens, employers and the government to provide excellent health care for everyone. It is the ridiculous wasteful way that we collect, allocate, bill and distribute the pool of money that is the problem.

    • John F. Dini says:

      Agreed, David. Quite simply, physicians, attorneys, hospitals, pharma and the insurance companies are five of the most powerful lobbies in the country with one joint aim – to keep healthcare expensive, unregulated and unbelievably profitable. And I don’t believe that putting everything into the hands of a Federal government that is already a large part of the problem fixes anything.

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Obamacare is Working, or it Isn’t

A few weeks ago I received notice of our annual health insurance increase. This year it was 38% more to keep the same coverage. Last year the proposed increase was 22%. The year before 12%. The year before that, 18%. The next day I got a reminder from my broker that with the increase, my premium would qualify as a “Cadillac Plan,” incurring another 40% non-deductible excise tax on the premium amount over what was considered “reasonable” under the Affordable Care Act. (Employers will calculate the tax and their insurers will pay it, effective in 2018).

Let’s put aside the irony for a moment, since I don’t consider these premiums to be in any way “reasonable.” Of course, we did the same thing we’ve done for four out of the last five years, and reduced benefits until we achieved an increase that was “only” in the low double digits.

How can an act named Affordable be so expensive, and how can I keep cutting my coverage each year but have it still be considered in the “Cadillac” range? Is the ACA working, or isn’t it?

That depends on what the ACA is supposed to accomplish. When I read the bill in 2010 (at least its provisions, not all 1,600 pages), I stated in a four part series here that I thought its main purpose was to drive everyone into a single-payor system. I still do. Here’s why.

The ACA’s supporters promote increased access to health care for those who were left out of the system. In reality, access to care hasn’t improved all that much. What has improved is access to insurance. If doctor’s won’t accept it, or patients won’t abide by the parameters of the system (by staying out of the ER for example) insurance doesn’t translate automatically into care.

dollars and caduceusEvery study for the last 40 years has found that the best way to contain costs is to steer people into primary care dominated networks, where their health is tracked and managed by a physician. The ACA does nothing to change the delivery system. In fact, even the government sponsored exchanges have co-payments for routine doctor visits; co-pays which can be avoided by using the Emergency Room for minor care, even though the costs are ten-fold or more. An ER is not allowed to turn you away over a co-pay. Many poorer patients consider medical collection calls a fact of life. In the ER, they just don’t have to pay right now.

The theory promoted about the ACA was that a more broadly insured community would reduce per-capita costs by encompassing the healthy. Instead, to no one’s surprise except perhaps the ACA marketing folks, easier access to insurance has resulted in adverse selection; the enrollment of people who are sicker than the average. No rational being believed it would be anything else. We are assured that the positive impact will be felt when healthy people eventually are forced to join, but the penalties for not enrolling are so minor, there is no reason to think that will come anytime soon.

So the taxes and penalties have become an income transfer mechanism from private industry to government programs. With the cost per person for health care at around $6,000 annually, how long do you think that the government will leave the tax on uninsured employers at $2,000 per employee, or exempt the first 30 employees from the qualifying head count? The law allowing those taxes is in place (and Supreme Court approved), but the amounts are to be determined by regulators, not legislators. They can change those by decree, and I’m sure they will.

In order to gain passage of the bill, President Obama publicly announced deals with the hospital, legal, physician, pharmaceutical and insurance lobbies to exempt each from specific price controls. Not surprisingly, stocks in all those industries rose on the announcement of the bill’s passage.  That’s not much of a sign that the markets feared the impact on the health care industry’s profits.

When I mentioned the Cadillac Tax a colleague said “Oh yeah, but that’s not until 2018.” Like the frog in the slowly boiling water, we are being gradually exposed to the actual costs of the ACA over time. The expansion of Medicare tax to capital gains, abolishing the taxable income limits, the recasting of how we calculate “full-time” employees, the uninsured tax, the tax on carriers (which they are expected to pass along to consumers) because of “unexpectedly” high costs of care. On the horizon are the Cadillac tax and the expiration of matching funds to states for expanding Medicaid under the bill. If it all came at once, we’d be up in arms.

The ACA has made health care less affordable except for people with medical conditions who were previously denied coverage. It is designed to make private insurance so costly that almost everyone will eventually capitulate and join a government plan. Then the government will have enough muscle to control costs by fiat. That objective is being met admirably, and without the revolution that nationalizing health care would have caused. In that sense, the ACA is brilliant. It’s a British National Health Service where everyone will sign up voluntarily; if only because not signing up costs so much more.

Don’t get me wrong. I’ve been to countries where access to every public building requires negotiating a phalanx of the crippled and deformed, many of which could be saved with basic care. I don’t want to go there as a nation. We need a rational approach to universal health care that controls unnecessary spending and delivers consistent quality.

Unfortunately, the ACA isn’t designed to address those needs at all. It’s primary objective is to put the government in control, and it is working. We just have to hope that better health care will eventually be the result.

 

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11 Responses to Obamacare is Working, or it Isn’t

  1. Will Shain says:

    John, I can’t find fault with any of your logic. I can only speak to my circumstances. Over the past year, my rates have decreased by nearly 7% compared to 2014, but I had to move to a new carrier to get them. If I stayed with the old carrier, I was facing an 18% increase for a silver-level HMO-style plan based on wellness/.prevention. I can’t say that the ACA had any impact on moving to a gold-style PPO plan with a top flight carrier here in New England, but my $500/$1000 deductibles are down from last year’s $2,000/$4,000. We’re clearly paying significantly less than 2014. Maybe it’s New England, but competition appears to be a factor. Only 2016 will tell whether our new carrier will emulate the old carrier for exorbitant price increases.

  2. I agree with you 100% – about the actual intent of the bill, about the way it was put into being, about the sneaky “boil the frog” aspect to make people who don’t think very deeply stay clueless, and about the ultimate consequences.

    I was always very proud of our company paying for all of the employee coverage and most of the family coverage for health care – something that has shifted dramatically over the last couple of years. I have my own employees going out and shopping for better deals because it’s so expensive to have the company plan now. And, we are aggressively looking for the best possible pricing/benefits.

    It’s become a lose-lose for everyone – except those in governmment who want more control over all of us.

  3. David Basri says:

    Our small business experienced outrageous increases to our small group plans year-after-year in pre-ACA times. Finally we gave up and just had ourselves and our employees purchase individual plans for about 60% less than the group plans. After getting to keep the grandfathered individual HD plan for the extra year, we are going to see a huge bump in premiums this year.Basically, all the plans are headed to where small group plans used to be for all the reasons listed by John.

    The pre-ACA environment was completely unsustainable. The ACA itself is a poor compromise instead of a rational plan, but it was all that could be done in this fractured political era.

    There is more than enough money being spent on health care in the US every year to give everyone good care. The problem is that we have the least financially efficient system anywhere in the developed world, by a wide margin. Trying to force market principles on something that is not, and frankly should not be, a market does not work very well.

    The current system is based on the the market-oriented question of whether, when, to whom and how much you would like to PAY for your health care. Under that, however, is the real question: “Would you like your health?” That is a distinctly NOT market-oriented question that people always answer “yes” to given any choice at all.

    The ACA is poorly constructed and is pushing a muddled and convoluted path towards some kind of not well planned change.If it eventually leads in 10 years to the only rational choice of a single payer system, the messy transition will have been worth it. There is not enough political or cultural will in the US to do the rational thing deliberately.

    • John F. Dini says:

      You are right, David. We could never buck five of the most powerful lobbies in the country without restructuring lobbying itself, campaign financing, tort reform, and on and on. That’s why I said ACA was brilliant. Whether we agree with it’s long-term objectives or not, it set us on what appears to be an irreversible road to national health care.

  4. John Hyman says:

    The software industry has benefited by shifting from a transactional model to a subscription model. Now you pay a monthly fee to access the application(s) and get updates to the software automatically, as they become available. The company increases revenue because, in reality, no one always pays to upgrade to the latest and greatest version of the app

    So when will we see this approach applied to wellness? I’d prefer to pay my primary care provider a fee for wellness and care visits, tests and consultations. They’d see improved cash flow, reduce office administration costs, far less paperwork and accounting (sorry, John).

    It’s simple, easier to orchestrate, and could still be subsidized by the Federal Government for people who qualify based on financial need.

    • John F. Dini says:

      You know, John, the model for traditional Chinese village medicine was to pay a monthly stipend to the local herbalist/physician. If you fell ill, you stopped paying until you were better again. Of course, that isn’t “sophisticated” enough for advanced western medicine. 😉

  5. David Basri says:

    Several large providers (Mayo Clinic, Kaiser) are starting to follow a subscription model aimed at wellness, as opposed to services, as John Hyman suggests. That helps, but still does not address the monumental waste baked into a system where the entire payment side consists of competing, for-profit insurance companies.

    At the primary care practice we use, 10% of the employees are devoted to nothing but dealing with insurance. Insane and replicated throughout the provider side of health care. That does not count the billions in advertising, overhead, executive pay and profit that is being sucked out of the system with zero benefit to health outcomes.

  6. Cheryl Swanson says:

    ACA created the worst insurance plan coverage in 2015 we’ve ever had in our entire lives. We basically paid for a family of four all year and never used it due to the high deductibles PER PERSON. It only drives healthcare into the “delay”, “don’t address”, “self-insure”, or “self-treat” categories. Good thing we know doctors personally!

  7. Hello John,
    Perhaps a view from outside of the US, up here in “semi-socialist” Canada. This is also likely more of a big picture comment on national governance than anything.
    I of course cannot comment specifically on rates for medical insurance in the US, but I do think it is a fact that the US is the only really industrialized country that doesn’t have true universal health care. Now, I am by no means holding up our system as the model – after all we were ranked 30th by the WHO and the US, 37th, so clearly we both have a great deal to do in this 21st century world in this regard. (I realize these rankings a re a bit old and do have their flaws).

    What I will say though is that there is plenty of evidence to show that as a country’s healthcare and education systems go, so goes the overall success of the country in the long term. Its a bit like you are only as strong as your weakest link. If you do not provide general access to healthcare and education for all citizens, it is only a matter of time before the social fabric begins to erode – the cost of which is far, far greater than the specific costs of delivering those programs. My observation is that you are seeing some of this in the US – it is likely a key factor that is causing such massive division and polarization in the country politically.
    I personally don’t agree with fully private health-care. I have many friends in many countries in the medical system, and none of them agree with “medicine for profit”. I think the best models are private delivery within a publically managed system that provides equal access. I know many people in the US when they hear this rush to the – “well you have long wait lists in Canada – we don’t”. That really is not a complete picture. If you need treatment, you get it. But if its not required and/or elective, yes you will go on a wait list. Most Canadians (and Europeans) are fine with that. I have a friend who got sent for an angiogram, which found 4 major blockages in his heart. He had quadruple by-pass surgery the next morning – by a team rated as one of the best in North America. This would all be covered by Health Canada and paid in his taxes – no co-pay, no deductibles, no having to take a 2nd mortgage to pay his medical costs.

    At the end of the day, its how you view things – you have lower tax rates than we do, but we pay for our health care in our taxes. Lastly, I think this is a tough transition for the US – it is not going to be easy. You are likely where the National Health or Canada Health or Germany were 30 years ago. But what I think you cant afford to do is leave this to politicians to use as an election football (There is a difference between “politicians” and “public health care” – the former change frequently – the later should be enshrined in law).

    This is not meant to be criticism – like I say – we have much to work on too – but I think objective debate that takes this vital topic out of being called OBAMAcare is needed for long term success.
    Malcolm

    • John F. Dini says:

      Your point is very well made, Malcolm. I will point out, however, that Canada shares a 3,000 mile border with a pay as you go system, which is open to any Canadians who have the money to opt out of their system. That said, I’m not arguing against universal health care, but rather a system that tries to deliver that care in a market with no cost (not price) controls. Despite our low WHO ranking, the US spends a higher percentage of our GDP on health care than any other nation.

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Do You Have a Director of GSD?

One of the biggest challenges for a small company in dealing with a giant customer is navigating bureaucracy. When two smaller businesses are working together, there is discussion, negotiation and decision. In a big organization, that is just the beginning of the process.

A sales call, or more frequently multiple sales efforts, leads to a Request For Proposal (RFP). Submission of the RFP requires a statement of qualifications, delineating your company’s history and track record. Several rounds of negotiation settle the price and terms. Often, those terms are then passed up through several layers of management, sometimes with additional negotiation at each level.

Finally, you win the “contract.” This is the point where a smaller company wants to swing into action. Buuutt Noooo! (Thanks Steve Martin.) First the agreement has to be submitted to Contracting.

A document the size of a small novel is presented, requiring the aspiring vendor to describe their parentage, their affirmative action policy, their compliance with cyber security standards, their willingness to follow Federal contractor wage guidelines, their paper reduction and sustainability processes, and a slew of indemnification clauses that absolve the customer from any screw-ups (often including the failure to pay according to contract.)

It’s a pain, but it’s worth it to land the big sale, right? Wait! It’s time for Procurement. Their job is to make sure you are really qualified to do business with Big Corp Inc. Are your systems compliant with theirs? Do you use any components requiring a Country of Origin certificate? Do you have redundant suppliers or backups for your self-performed services? Who are your contacts for any and every phase of the relationship?

Approval by Procurement gets you passed on to Purchasing. Because Purchasing doesn’t even look at the buying process until you’ve cleared the other hurdles, this is all new to them. More process ensues, unless of course bigger and more important vendors are in line in front of you.

One client of ours who negotiates this labyrinth on a regular basis has a secret. He seeks out the Director of Getting S**t Done. It’s not an official position (but probably should be.) It’s the employee of Big Corp who understands the  system, has developed personal connections in the critical departments, and has the crazy notion that crossing T’s and dotting I’s is a mite less important than accomplishing the objective. Identifying that person doesn’t make the paperwork go away, but it helps identify what is important and what can be glossed over or ignored.

Every business owner needs a Director of GSD. They may appear anywhere in your organization, and at any level or job description. You know who they are.

multitasking businessmanIt’s the employee who never, ever says “That’s not my job.” The one to whom everyone turns for help when they are behind. The one who tackles new projects as a challenge, not a burden. The one who doesn’t say “I don’t know how to do that,” but rather says “I’ve never done that, but I can figure it out.”

If you don’t have a Director of GSD, then it is probably you. If you have one, take good care of him or her. If you have several Directors of GSD, then I’m betting your company is growing and most your time is spent doing the things you should be doing.

And if you can make everyone in your business a Director of Getting S**t Done, you’ll have one h*ll of a company.

Posted in Entrepreneurship, Leadership, Management | Tagged , , , , , , , , , , , | 1 Comment

One Response to Do You Have a Director of GSD?

  1. Mike Wright says:

    These characteristics of dealing with large businesses can be wonderful barriers to competitors once you get in, and they are very similar one to the other. They are used to paying considerably more because of the few small businesses who go after them.

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Will Small Business Win in the End?

A few weeks ago Schumpeter, the nom de plume for each current author of the business op-ed column in The Economist, postulated the decline and fall of the Western Corporation. Could small business be the little furry mammals of the 21st century, triumphing over the seemingly invincible Tyrannosaurs of the business world?

At first, the signs aren’t obvious. Corporate profits are now 10% of world GDP, and at the highest level in proportion to the American economy since 1929 (gulp). The number of multinationals has doubled in the last 25 years. Some are sitting on piles of money sufficient to start a country (Apple’s $200 billion in cash, for example). This wealth and power is increasingly concentrated, as exchange-listed companies in the USA have declined by half since 1996.

T RexFacebook serves as many people every single month as populate China. Entrepreneurs last names, like Musk, Brin, Zuckerberg and Gates are now associated with space exploration,  third-world aid and medical research, usurping the former exclusive province of governments.

Does all this add up to a Rollerball planet, where corporations replace elected officials in deciding what the world will do? (Assuming, of course, that you don’t believe that has happened already.)

Schumpeter says not. The rise of emerging market businesses and the speed with which a new technology can place its owners among the big boys are two ameliorating factors. Privately held tech companies and family conglomerates are breaking the chains of Wall Street’s quarterly expectations to follow a longer term vision.

Populism on both the left and right in Europe and America is casting a bright light (and one that is none too flattering) on many formerly opaque corporate practices. The 99% (anyone making less than $350,000 a year) increasingly demand that their votes be repaid, if not with handouts, at least with the opportunity to make a decent wage and advance economically through an individual career.

Increasingly, elected officials win votes by mandating higher wages and benefits. They bolster their budgets when (as under the specific direction of Attorney General Eric Holder) they file charges against big companies with the express intent of forcing large financial settlements.

I can’t quite wrap my brain around a world without big corporations. There are changes I’d like to see, like a reining in of executives who award themselves multigenerational wealth while providing a lousy return to shareholders. I think Schumpeter has a point, however. The world of big business has only been around for about 100 years, and has been dramatically taken to the woodshed multiple times in the past. It may be happening again.

I don’t think small companies are likely to inherit the business earth, but some leveling of the playing field would certainly be nice. We’ll see if that can happen without just making the life of every employer, both large and small, miserable.

Posted in Leadership, Thoughts and Opinions | Tagged , , , , , , , , , , , , , , , , | 4 Comments

4 Responses to Will Small Business Win in the End?

  1. There is innovation which comes from smaller sized organizations. Then they get absorbed by ← larger fish in the food chain. Economic set backs create the groundwork for entrepreneurial growth – starting a business in lieu of not getting a job with bigcorp or the government. it is a cycle. the proven successful small businesses get acquired by larger companies with capital and no innovation. mom and pop video stores were acquired to make Blockbuster but even these have a life cycle and big does not always mean an enconomy of scale. red box in your grocery store lobby seems to be doing just fine as a vending machine operation.
    none of us lead active business lives in the historic perspective of 100’s of years. We have to make payroll or the rent this week, satisfy the customer with good qualty at a market price which is not increasing and do all of the other things required of us by the community we operate in. Small business people are heroes but because we do such a poor job of economic education in our schools their success is viewed as a lucky lottery instead of hard work.
    we will be in trouble when they start saying why bother?!

  2. Hi John,

    I see small businesses growing and playing a bigger part in the US, and heck, around the world, in supporting economies. As more entrepreneurs get the gist that they are making a difference and with the ease of buying a domain and hosting more folks are growing prospering small businesses. Side note; I’m awake and it’s almost 2 😉

    Ryan

  3. Luis says:

    The longer insterest rates remaiin at zero or below zero levels, the more difficult things will be for SMBs and middle classes. Because real zero rates are just for Big corps, banks, etc. in most of the Western world. This means they can almost print money.
    On the other hand, all the rest of us are deeply indepted with them (either through credits or public bonds), and we have no other resources but our working hours to pay them, competing on a global basis to sell them.
    Inequality is absolutely inevitable, and it will get much much worse beacuse politicans and central banks are into this strategy of ‘asymmetrical capitalism’.

  4. Mike Wright says:

    Last night I heard on the presidential debate that they were going to do something for small business in new tax codes. They also said they were going to do something for the middle class and those at of near the poverty level. All of the money of the wealthiest people cant come close to covering the budget. Maybe the politicians have a plan to bleed the dinosaurs. But, in true financial wealth theory we need to grow companies capable of moving large sums of money into our economy. Curious! When might we start focusing on educating future voters on economics and understanding how capitalism works as a whole. Small furry mammals or cockroaches? We must remain nimble to stay out from underfoot of Big Business, Big Government and Big Labor.

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Boomers and the Lost Generation

Those who read this column regularly are well aware of the huge shifts underway as a result of the Baby Boomers’ coming exodus from the workplace. Those who aren’t familiar with the issue are invited to download my free, 45-page eBook Beating the Boomer Bust.

Almost four years ago I mused about the chances of Generation X, smaller in numbers and less accustomed to competition than the generations immediately before (Boomers) or following (Millennials) becoming another Lost Generation, much like that of the F. Scott Fitzgerald era.

Now, I’m seeing and hearing more evidence that such may be the case. A friend who works closely with the large corporations in the oil and gas industry noted a different trend in the layoffs that are accompanying the fall in prices. The Great Recession, like previous downturns, saw buyouts of many workers who were approaching retirement. This time around, companies are getting leaner by cutting less experienced workers, and keeping their more experienced core regardless of age.

older workerI see a similar trend in smaller businesses as well. Owners who traditionally filled lower and mid-level positions by seeking younger workers are now much more inclined to hire people in their 50s and 60s. What is causing this shift?

First, there is a new expectation about employee retention. It’s well documented that workers from GenX and the Millennials are far less likely to take a job for life. Regardless of how well they are treated, younger workers take a position with the expectation that they will be moving on when they find a better opportunity, or simply when the job interferes with their chosen lifestyle.

The majority of small businesses are still owned by Boomers, and they are often more comfortable with employees who share their experience and attitudes. If a young employee has an employment life expectancy of, say, five years, why not have that position filled by someone who understands that paid time off is something that has to be accrued before it’s taken?

If you have to accomplish more work with fewer people, employers naturally want people who will stretch to get things done. Most Boomer workers accept the need to work late on occasion, and are accustomed to planning personal activities around the job. Younger people often see that as being too docile, or foolishly loyal when “It’s only a job.” Employers, on the other hand, cherish such dedication.

Boomers are generally healthier than preceding generations. They haven’t been great savers, and most plan to work longer than their predecessors. As the pace of change accelerates in almost every industry, a worker who needs little ramping up and can be expected to produce for another ten years looks better and better, regardless of any gray hair.

Not all Boomers have the skills necessary to function in today’s workplace. If you are looking for technical abilities, however, someone in their 30s (a Millennial) is likely to be faster and more savvy than someone in their mid-40s. That’s why Generation X is getting squeezed in the middle.

Of course, as another friend says, “A Millennial will figure out how to use technology to accomplish in a single day what would take a Boomer three. Of course, then he wants the other two days off.”

Posted in Exit Planning, Exit Strategies, Management, Thoughts and Opinions | Tagged , , , , , , , , , , , , | 1 Comment

One Response to Boomers and the Lost Generation

  1. Lb says:

    Growing up, technology was touted as a way to make life easier for the next generation. We have arrived!

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