Page 76 - Accelerating out of the Great Recession

THE NEW REALITIES

returning to or staying in their jobs and are taking on more sec-
ond jobs in a desperate effort to support their debt-repayment
programs and to close their personal pension gap. The conse-
quence will be even higher youth unemployment. The high lev-
els of unemployment triggered by the Great Recession (which
will continue to feed through for some time as cost cuts take
hold) may well help to shape the attitudes of the generation com-
ing into the workforce in the same way that the Great Depression
influenced their grandparents and great-grandparents.
Those living on their savings and investments—especially
retirees—have been among the big losers as governments and
central banks have tackled the credit crunch by reducing inter-
est rates to record lows. Although, as the economy recovers,
their dividend income may recover as well, the income they
derive from deposits will not.
This is an important trend for business leaders to understand.
Why? First, these retired people will spend less. Second, they
will rely more on their families for support. Thus, there will be
a group of cash-strapped consumers—members of the “sand-
wich generation”—who will find themselves supporting both
their parents and their children. They will divert spending away
from anything but the essentials.

Consumers Will Become More Conservative
The media are full of stories about the differences between
today’s “here and now” generation and an earlier generation
whose behavior was shaped by the experience of the Great
Depression or World War II—and how these differences are
fading fast. These writers are not exaggerating. It is clear that a
whole generation will start to spend less because its members
will tend to borrow less.

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