Tuesday, February 2, 2010

Economic Survival

Last weekend I attended a talk by prominent author, journalist, and local talk show host David Sirota, who discussed the state of journalism in Colorado and the nation. At the time, I was in the midst of some serious planning about my financial and professional future, and had been toying with the possibility of expanding my creative writing to include journalism, possibly even as a new career.

Sirota advanced his opinion that journalism will be forced to become more and more local, since national reporting is becoming both expensive and easily available from centralized sources. I wasn’t too surprised to learn that success in journalism, like any business, depends on increasing demand and providing an exclusive supply to meet that demand. This is aided by making oneself identifiably unique (branding) and having a large and reliable readership (a platform) that your work can be marketed to. Surviving by writing is difficult, a lesson I learned a few years ago when evaluating the economic viability of different types (this led me to make a living at technical writing while writing my own content on the side).

I couldn’t resist economic modeling of my own situation to determine the limits that needed to be placed on both my professional options and my family’s expenses. Of course, I had to also generalize it. The result was a bit of a shock: To be able to survive at a fixed level to the age of 90 with a projected 3% inflation rate and no increase in income over one’s working life (from age 18 to 65), an individual must have an income nearly 5.2 times annual expenses. For someone spending $40,000 per year at the beginning, that corresponds to an after-tax income of $206K or more than $99 per hour (with a 20% tax rate, that corresponds to a wage of $248K and $119 per hour).

Those who can’t command six-figure salaries have the option of investing in stocks to make up the difference, but now growth in consumption is past its peak, and the rates of return people have counted on will (on average) only shrink as the depletion of resources becomes more obvious. This leaves the vast majority with the choice to either increase debt to meet their expenses or to reduce their expenses; at 3% per year, both options are unsustainable and lead quickly to poverty. Our government is, in fits and starts, attempting to keep this unfolding disaster in check by trying to spur growth, which has the potential to merely exacerbate the problem as resources decline more quickly.

There is a fierce, and now very personal urgency to finding and implementing an alternative to our current economic paradigm, since I find myself among those who are unlikely to make the gains it demands in order to even survive.

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