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<nettime> Fortune says it's all , like , futile dood.
Shaun Rolph on Mon, 7 Oct 2002 03:16:29 +0200 (CEST)

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<nettime> Fortune says it's all , like , futile dood.

...disappearing middle class ...real wages falling...of the wealth the
boom created, the richest households gobbled up a disproportionate
amount... Fortune coming on like Doug Henwood - strange days indeed.

 "I had a college president say to me, 'I don't know how much longer I can
pull this off because people will start to ask, Is it worth this much
money to be that much smarter?' " This'll give you a flavour of the type
of basic assumptions that are being questioned in the article. I mean, if
bought educational advantage won't secure our social status then what will
become of us ?


Generation Wrecked
The so-called slackers are complaining (again) about the economy. This time
they have reason to whine.
Monday, October 14, 2002
By Noshua Watson

Ten years ago grunge musicians and college-age Cassandras who had never
held a day job preached that corporate America would crush their
generation's soul and leave them without a pension plan. Films like
Singles and Reality Bites chronicled their transition from college
graduate to Gap salesclerk.

A few years later the core of Generation X--the 40 million Americans born
between 1966 and 1975--found themselves riding the wildest economic bull
ever. Salesclerks became programmers; coffee slingers morphed into experts
in Java (computerese, that is)--all flush with stock options and
eye-popping salaries. Now that the thrill ride is over, Gen X's plight
seems particularly bruising. No generation since the Depression has been
set up for failure like this. Everything the dot-com boom delivered has
been taken away--and then some. Real wages are falling, wealth continues
to shift from younger to older, and education costs are surging. Worse
yet, for some Gen Xers, their peak earning years are behind them. Buried
in college and credit card debt, a lot of them won't be able to catch up
as they approach their prime spending years.

FORTUNE recently encountered the bitter and (now) experienced voice of
Generation X in a chain restaurant in suburban Dallas. Age 32 and
piercing-free, Karen Doss has found out that the alternative rockers were
right. To pay for college she worked full-time as a secretary at Pillsbury
world headquarters. After graduation in 1993, she accepted her sole job
offer as an advertising copywriter, even though she despised the industry.
She finally quit last year to get her real estate license so that she
could better support her husband while he fulfills his dream of owning a

Halfway to pension age, she has just $5,000 in a 401(k) and $20,000 in
home equity. Ideally, someone her age should have at least $100,000
stashed away. "I don't have a corporate pension, and they aren't what they
were," she says. "Social Security is obsolete and ineffective. And I
already know that I'm going to have to have a private health-care plan.
I'm angry that I can't seem to get a break."

Yes, yes, yes, we know what you're thinking. The free-spending slackers
have only themselves to blame, since the dot-com boom should have made
them rich for life. On the surface that's true. A 30-year-old today is 50%
more likely to have a bachelor's degree than his counterpart in 1974 and
earns $5,000 more a year, adjusted for inflation. But that's where the
good news stops. He also has more in student loans and credit card debt,
is less likely to own a home, and is just as likely to be unemployed. His
salary probably topped out during the boom, whereas his predecessor's rose
throughout his career. Social Security will start to evaporate as he turns
50--or before, if the lockbox gets raided--so he'll have to depend almost
completely on his own savings for retirement. The comparison with a
30-year-old in 1984 isn't any rosier.

Gen X "has done worse than their parents have done according to a number
of dimensions, like net worth and home ownership," says Edward Wolff, a
New York University economist who studies trends in income and wealth. In
a recent paper Wolff notes that young households lay claim to a smaller
percentage of total U.S. wealth than they did in 1989.

Additionally, the inflation-adjusted median net worth of a Gen X household
($9,000) is lower than that of a comparable household in 1989, according
to the Federal Reserve's Survey of Consumer Finances.

Silicon Valley and Manhattan aren't the only stomping grounds for
disgruntled young professionals. FORTUNE interviewed more than 50 Gen Xers
in Dallas, Louisville, and Seattle, with jobs ranging from construction
manager to software engineer (see table). Battered by the economy and the
bad luck of being born between Madonna and Britney Spears, they're
Generation Wrecked.

The kids who toted STAR WARS lunchboxes are the most highly educated
generation in American history: Almost 60% of Gen Xers have some college
education, and 6.6% have graduate school degrees. The Census Bureau calls
their pursuit of higher education the "Big Payoff," since historically a
college-educated full-time worker earns 1.8 times more over his lifetime
than a high school graduate.

When you can't find a job or pay your student loans, though, college can
seem like the Big Rip-Off. Today, the median student loan debt is at its
highest level ever, $17,000, compared with $2,000 when the baby-boomers
were in their 20s. According to educational lender Nellie Mae, graduating
students average $20,402 in combined student loans and credit card debt.
Those who have borrowed to pay for professional school, especially doctors
and lawyers, are increasingly likely to have immense debt that is not
reflected in proportionately higher salaries. Twenty-eight percent of
those surveyed by Nellie Mae had combined undergraduate and graduate
student debt of more than $30,000, and for 22%, their loan payments ate up
more than one-fifth of their monthly income.

After midnight at a young professionals party in Louisville, Steve Flores,
31, and his wife, Jessica, 32, mingle, while the rest of the revelers line
up for last call. Steve is a communications specialist for the party's
sponsor, Brown-Forman, the big distiller. While working full-time, he is
also pursuing an MBA. Although Steve worked to help pay for college, five
years after graduation he has $40,000 of undergraduate debt to pay off;
Jessica, an art therapist and professional harpist, has $50,000 in student
loans. "I haven't started paying back my student loans for undergrad
because they're deferred. I'm not taking any student loans for grad
school," Steve says. He isn't so jovial when he thinks about the total
tab. "We're dreading the day we actually have to start paying."

Those Big Payoff estimates rely on what 50-year-old college graduates make
today to guess what 50-year-olds will make 20 years from now. That's not
all that useful. "Whereas their parents experienced rising wages over
their lifetime, Generation X may not. So college may have been a bad
investment," says Wolff, the NYU economist. Adds Bruce Tulgan, a Gen Xer
and founder of RainmakerThinking, a consultancy that studies labor trends:
"I had a college president say to me, 'I don't know how much longer I can
pull this off because people will start to ask, Is it worth this much
money to be that much smarter?' "

A common misconception is that Gen Xers left college to find work in the
dot-com go-go years. Not so. In fact, the climate in which they began
working--the late '80s and early '90s--was pretty similar to today's: an
economic downturn followed by a jobless recovery. Gen Xers managed to
survive in that environment by denouncing long-held workplace tenets like
corporate loyalty.

It would take a skilled cartographer to map 28-year-old David Li's
convoluted dash through org charts at both big and small companies. After
college in 1996, Li started out as an analyst for Accenture, worked as a
health-care IT consultant for two other firms, and then became CTO of
Claimshop.com, a medical claims processor.

Now, unemployed for a year and living in Dallas, Li says, "I'm not really
looking for an entry-level position. But I need to realize that the job
market now is a lot tighter than it had been when I first graduated from
school." He's looking at jobs that pay around $50,000, 40% below the
salary he was collecting at Claimshop. "I'm just hoping for something more
along the lines of what you would normally expect to see from someone who
has been out of school for four to five years."

Li will probably find a job--at 6%, the unemployment rate among Gen Xers
is around the national average--but he and others are discovering that
previous experience means next to nothing. Jenifer Garcia is temping as a
bartender in Seattle after having worked as a hardware tester for Intel, a
programmer for MSN, and a manager for Barnes & Noble's online division.
Now the 29-year-old is applying for a full-time file clerk position again.
"I feel like I'm 18 again, and not in a good way. I've gone through all of
my savings and moved back in with my mom."

Even some of Seattle's dot-com winners have been humbled. Across town in a
tonier part of Seattle, Rachel Best-Campbell and Alex Campbell bought
their $700,000 house with proceeds from Alex's stock options. They sold
most of their shares of Cache Flow, now known as Blue Coat Systems, at
$96. (The company's stock now trades at $3, after a recent reverse split.)
The Campbells' luck dried up in April, when Alex was laid off, rehired as
a contractor without benefits, then rehired yet again as a full-time
employee but at a lower level.

After months of wondering whether Alex would have a job, Rachel feels no
guilt about getting rich during the boom. "Clearly someone out there had
$96 to pay for that share of stock, and they wanted it, and they bought
it. My dad likes to say, 'My 25-year-old daughter--she's retired now.'"

Those who didn't fulfill their early-retirement dreams in the late '90s
are beginning to realize that they may be in the workforce longer than
their parents. "You don't find many 65-year-olds working in advertising,
so at some point the money must get good enough for people to retire. I
don't know," says Luke Blackburn, a 32-year-old senior manager at a
Louisville advertising firm. Luke has a house--he used money he received
as a gift for a down payment--but little in the way of retirement savings.
(Total: $0. He should have $50,000. Although he and Doss are the same age,
his savings estimate is less since his living expenses are lower.) "I
don't see much future return for investments, either stock or even Social
Security benefits. I plan for the kids, but there's not much room for
extra." Luke doesn't have a financial planner either. "The brokers only
call you if they think you have money," he says. "They started calling me
when they saw my job promotion announced in the newspaper."

At least the brokers' attempts aren't laughable. At a recent Department of
Labor summit, a group of the country's top economists, politicians, and
marketers decided that the best way to get Generation X to plan for
retirement was through targeted advertising campaigns. Slogans included
"It's your money, it's your choice, and it's your future," "Save for
independence day," and "Wazzup." Whatever.

Instead of creating catch phrases, the government should focus on creating
retirement options that give Gen Xers --and baby-boomers too, for that
matter--the flexibility to withdraw money from their accounts if they're
temporarily unemployed, starting a business, or just taking time out, say
financial planners. Most important, the retirement accounts need to be
portable to match the winding job paths of Gen Xers.

A New York Life Investment Management survey of high-net-worth Gen Xers
found that the respondents thought they needed $2 million to retire. Not
even close, says Beverly Moore, who conducted the study. A Gen Xer who
makes $100,000 and wants to retire at 59 needs $7.3 million net of taxes
to sustain that lifestyle. (That means saving $2,600 a month and assumes
an 8% return.) The truth of the matter is that very few Gen Xers are
saving enough to reach even the $2 million benchmark.

And a return to economic good times doesn't guarantee that most Gen Xers
will reach that level. Remember that many of the problems that existed in
the early '90s including falling real wages and the slow disappearance of
the middle class, weren't erased by the boom. In the case of wages, they
only inched up during the dot-com years. (Economists are still trying to
figure out why they didn't rise more. One possibility: the influx of
skilled foreign labor.) And of the wealth the boom created, the richest
households gobbled up a disproportionate amount.

Back in Dallas, Karen Doss says she's angry that she hasn't been able to
rely on family, an employer, or the government to help with her future.
"The biggest problem with Social Security is that we have no control," she
says. "Sure, you can put your money away, but Enron will not go away, and
there is going to be another WorldCom. [Corporate America] will still lie
and steal our money."

So is Karen prepared? On this subject, she does her best slacker
impression. "I can't even tell you how much I have in my 401(k), and I
have two of them floating out there with companies. I'm just going to hope
it works out at this point. I just wanna die young so I don't have to deal
with it."

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