Boomers may be going bust
From layoff risks to shrinking house and 401(k) values, older workers may be headed for the most trouble in the financial crisis. Commentator Robert Reich says bailout or no bailout, baby boomers should watch out.
Robert Reich (Robert Reich)
More on Commentaries, Commentary - Robert Reich, Robert Reich, America's Financial Crisis
TEXT OF COMMENTARY
Scott Jagow: We've been asking the question - what happens if there's no bailout? Commentator Robert Reich says the more appropriate question is who suffers if there isn't one?
Robert Reich: If there's no bailout to prevent credit markets from completely freezing up, we're all in trouble, because businesses cannot borrow money to keep producing. And we consumers can't borrow money to buy a car or get a mortgage or send our kids to college. All of which means a deep and prolonged recession, and lots more people without jobs.
Now that's bad enough. But if you're an early baby boomer over the age of 55, you may be in even bigger trouble, bailout or no bailout. In an economic crisis, many employers lay off older workers first, because their seniority makes them more expensive. And studies document that older workers who lose their jobs face more difficulties finding new ones.
That's not your only problem. The house you've been living in for 25 or 30 years and were planning to cash in for retirement is worth far less now than the last time you looked. So is that 401(k) plan you were counting on.
And you don't have enough time before retirement to make up for these losses -- certainly not enough time to reap the gains you expected between now and then. If the economic crisis is as bad as some predict, housing prices and share values might not bounce back for five years or more. Japan's meltdown took 10 years to correct.
We early boomers -- and note I said "we," because, sadly, I'm one of you -- once had all the advantages. We entered the housing market in the 1970's and 80's, when houses were still cheap, and reaped the gains when late boomers came into the market and pushed prices up. We also got the plumb jobs because we were the first into the post-industrial economy, before the boomers who followed us. And many of us got into the stock market early on, and rode that great wave.
So maybe now we're paying the price for our good fortune then. But that doesn't make this any less painful.
Jagow: Robert Reich's book, "Supercapitalism," is now in paperback.
Comments
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From Mentor, OH, 10/08/2008
Baby boomers have trillions invested in the stockmarket; every day they see the value of their 401K dropping by thousands. What happens to the global enconomy if they panic and try to stop the bleeding by pulling their money out of the market and put it in "safe" banks, or under their pillow?
From Tampa, FL, 10/03/2008
On the bright side, watching the boomers eat cat food in retirement may help generation Y be a little more realistic regarding finances. All those boomer assests are worth less now. Can we rename the boomers the "worthless generation"? They certainly weren't the greatest.
Don
From Ashland, OR, 10/01/2008
As someone barely squeaking into the older boomer cohort, my observation is that we've had it pretty easy from time of inception. As the largest (read: most powerful) cohort around, we've been able to manipulate/massage policies to our own best interests. If it's time to pay the piper, so be it. We've already been identified as the sandwich generation: caring for our kids and elders at the same time. So, now we are going to be taxed to not leave a hefty nest egg for our kids; we may have to pay our own way into retirement (vs. having the system pick up the tab); and we may have to work a few years longer than the early retirement we'd envisioned? big deal! I just hope there's something salvagable for future generations, after all the greed penalties have been paid. I, for one, can live without the wall-sized TVs, 3- or 4-figure donations to political campaigns, frequent evenings out on the town, and the multi-level electronics that support this message.
10/01/2008
Professor Reich,
Good comments, as always.
I am not a Baby-Boomer-too young, nor am I a child of Boomers-too old. What strikes me most about your comments is that we are all in ****-storm together. And if the boomers suffer mightily then we will all be responsible for helping them out.
Furthermore, it is my personal belief that if the Boomers lose big, it is their children (the pampered generation-Yers) that will suffer the most. Since it has been their generous parents who have been sharing so much of their good forturne with their children.
Every generation has to eventually leave the nest created by their parents, but never before have a generation of yound adults been so dependent on their affluent parents (many of whom mortgaged everything for the sake of their children). The proverpial "gravy train" may be leaving the station for many american families.
It is interesting that the Boomers learned about hardship and sacrifice from their parents, and the Gen-Yers, many of whom you may teach in California, may not have been taught these lessons of their grandparents, and may not have the perspective to appreciate the long run of peace and prosperity, Ipods and all.
Thanks again. JP
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