Page 77 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

After 20 years of expanding wealth, unbridled consumption,
and optimism, the world will see a fundamental shift in atti-
tudes and behaviors. A world that is paying back debt is quite
different from a world of infinitely expanding credit. People are
becoming more risk averse, and this will have a profound
impact on the dynamic and growth of an economy.
In the last recession, young graduates looked to traditional
employers and industries for employment—for instance, indus-
trial and consumer goods companies, the civil service, and pro-
fessions such as medicine and engineering. Given the funda-
mental shift in the financial industry and in the political
climate, less financially rewarding—but (possibly) more sta-
ble—employers will once again become more attractive to top
talent. Yet even for white-collar workers, the job markets will be
tough.
The reduced appetite for risk will also affect the current gen-
eration of teenagers. This is the group most likely to suffer the
combined effects of fewer job opportunities and the propensity
of older workers to continue working later in life (in order to
compensate for reductions in their retirement benefits). A pro-
longed shortage of jobs will shape the worldview of this gener-
ation of teenagers. Recent research by Ulrike Malmendier of
the University of California at Berkeley and Stefan Nagel of
Stanford University has demonstrated that the generation of
“Depression babies” growing up in the 1930s was less willing to
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invest in stocks and expressed more risk aversion. Today’s gen-
eration of “damaged-economy babies” will be characterized by a
stronger propensity to save rather than splurge, less speculation,
longer time horizons for investments, and also, perhaps, less
entrepreneurship.

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