Update, 2nd October 2020: This was originally written in 2011 but the message is as relevant in today’s pandemic-driven recession as it was then.
Thousands of people have lost jobs and income and, for many in the over 50s age group, the chances of restoring them are small.
Original article starts here:
The economy has changed, fundamentally and forever. And, as a result, the days of mass employment as we knew it have gone.
Since the crash of 2008/09, governments have employed well tried and tested methods to kick-start the economies in Europe and the US. And they failed.
Why? Because the old economy depended on consumer spending but the consumers have stopped spending.
In the old economy, consumers kept the leisure, retail and real estate industries in business and, in turn, created employment in all the support industries: factories, component suppliers, distribution networks, real estate agencies, tour agencies and even accountants.
But, in the process, people in Europe and the US racked up unprecedented levels of debt.
If the crash of 2008 and the subsequent level of repossessions taught consumers one thing it was this: get rid of your debt.
So if people are channelling their earnings towards reducing debt, rather than buying new kitchens, it’s not just the kitchen shops that are suffering – so are all the dependent industries.
And this situation won’t change until people have got their debt levels under control and feel in a position, once again, to start channelling their earnings towards consumer items.
This, in turn, means that unemployment is going to remain stubbornly high for some time to come.
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Impact of technology
Technology, too, has its role to play.
The Internet has transformed the way most businesses operate, and layoffs made during the current crisis are not likely to be reversed when the economy does pick up – technology will have moved in.
Take, for example, a discussion I had with a major Hong Kong blue chip recently: it was all about how they could move their entire business online because this was the only way they could take chunks out of their operating expenses and improve both service and profitability.
So what’s the solution?
For those who are able to change their thought process and look at the ‘new economy’ with fresh eyes, the situation today provides enormous opportunities.
Starting your own business, or forming a small company with some good, like-minded business partners, will put you in a position to provide support and solutions to companies, like that Hong Kong blue chip, who are changing their business model.
Alternatively, you could retail goods in a small niche in your local area, or provide professional services locally.
And technology is your friend here. For example, it enables me to provide web services to a number of small but growing companies in the retail industry who are running their businesses without all the traditional overheads – like premises and employees.
The combination of technology and the general focus on debt reduction, rather than consumer spending, makes this absolutely the best time to start a small business based on providing services, solving problems or meeting needs for people.
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