The Staying Put Trap

A long time ago I was on a panel at a conference. We had all presented different aspects of the media landscape and the moderator said he was going to hit us with some big questions. Most were pretty vanilla but, at the end, he asked each of us to discuss briefly a strength of the America economy. We all had to think fast and the early answers were obvious things such as our relatively free market, American entrepreneurship, and rule of law. The guy next to me seemed flustered but blurted out that America had a relatively abundant water supply. People laughed but it was a pretty thoughtful response. I came last and pulled a gem out of my derriere--America, I said, had a secret strength in its economy--mobility. A few people rolled their eyes but afterward some attendees stopped me and said that they had never thought of it before.

If you look at the last 50 years, American unemployment rates have often been far below our friends in Europe as we Americans tended to be willing to move where the jobs were. I vividly remember talking to a clergyman about a small city in Italy where many families had lived in apartments in the same building for up to six generations. He said, “How wonderful” while I, the crass capitalist, said there had to be some talented people who never reached their potential by staying put for 150 years. The European Union has changed some of this but there still appears a reluctance to cross borders even if it is to another province.

Looking clearly at the data, it appears that American mobility is stalled somewhat. To me, there appears to be a few reasons. The biggest is two-career couples. If one is offered a job, a tough decision often has to be made. Can the other member of the couple find a similar job in their new city? Sometimes yes, sometimes no. What about child care? In your hometown, in-laws and grandparents often cheerfully provide it for free. That strong safety net disappears.

Some columnists on both the left and right have often questioned why more blue collar people in depressed areas don’t simply pack up and leave and go to boom towns. I read several such rants during the shale oil boom in North Dakota a few years back. Well, if you are struggling, is it easy to rent a truck, and conjure up money for a security deposit plus rent if you have no job? Week to week rentals are very expensive and you likely know no one in the boomtown. So many simply stay put.

A final issue that I observed that hinders mobility may not be obvious superficially. It is simply the American dream of home ownership. This is a deeply embedded part of the American culture. Yet, there is a problem. Owning a home often makes it damn hard to move. Back in October, 2010, Media Realism published a four part series entitled “Mid-Sized Malaise.” In part two, a talented young creative told me that he was underwater on his mortgage and felt as if he were an indentured servant at his shop where raises were nowhere in sight and there was literally no other place to work in town. I hunted him up and found that he is still there. He said, “I am not underwater on the mortgage after seven more years of payments. The problem is that my market (a mid-western city that will remain anonymous) has never really bounced back from the great recession. So, it could take me a year to sell our place. I cannot afford to go to a new market and pay rent and also continue to pay the mortgage on my home here. Also, my wife might have a hard time getting a similar job in a new market. I do a bit of freelance for people 1000 miles away but I may be stuck here forever.”

Separately, an agency chief whom I have known for decades tells me that he wanted to hire a very promising writer currently toiling in a depressed market in a flyover state. The guy was not too demanding on salary but asked that my friend buy his house as part of his employment package. My friend said that he was not in the real estate business and the deal fell through.

Some agencies hire the footloose millennials who can attach their possessions to a U-haul and arrive quickly. If things do not work out, they can leave their apartment and move on. Not so with homeowners.

So a surprising number of people are caught in a difficult situation. The downscale may not have the resources to move or a support team when they arrive at a new venue. Even potential agency stars are hamstrung by being caught in homes that are difficult to sell.

Were I on a similar panel today, I would certainly think twice about naming mobility as a secret strength of the American economy.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Gresham's Law in Media?

In economics, there is a long standing monetary principle called Gresham’s Law. Succinctly, it states that bad money drives out good. In other words, historically if there were two forms of a commodity in circulation that a government gives similar face value, the more valuable commodity would disappear.

There have been many examples throughout history. I even witnessed one as a youngster. American dimes, quarters, and half dollars were largely silver through 1964. The next year dimes and quarters were a mixture of nickel and copper and half dollars had only 40% silver until 1970 when silver disappeared from US coinage. What happened? Gresham’s Law kicked in with a vengeance. I vividly remember seeing people get a roll of quarters from the bank, opening it, taking out the pre-1964 (silver) coins and hoarding them. One gentlemen at the time shook his head and told me the nation was finished as we had replaced silver in our money with cupro-nickel slugs.

Relax, I am not going to call for an immediate return to gold and silver as our sole form of money. I tell the story as, to me, it seems, a version of Gresham’s law seems to be in play in the media business.

With the growth of dozens of new platforms, advertising clutter is at an all time high and, despite protests from practitioners, advertising effectiveness is at an all time low. There is so much low quality or debased advertising currency on thousands of sites, that the most valuable outlets are getting weaker. Couple that with huge increases in advertising avoidance and you can see why launching a brand is often more difficult than ever.

What do I think will happen as this trend continues? Call me crazy but I think we will revert to a 1950’s model of sponsorships. One of my earliest memories is seeing The Men From Texaco opening The Milton Berle Show and Dinah Shore singing “See the USA in Your Chevrolet.” Maybe soap operas will make a comeback in the sense that large personal care or household product companies will sponsor programs again but they will not be daytime dramas. There will be far fewer commercial messages but the sponsor will be clearly identified. Think of the intros to Masterpiece on PBS. Programming will likely be interrupted minimally but the sponsor will be well known to the viewers.

This also sets up well for established brands and large, deep pocketed companies. They can afford to keep reminding the consumer of who they are but still reach advertising shy millennials.

The other option would be to go toward a heavy pay TV model which is really what Netflix and Hulu Plus and others are providing right now.

What do you think? Is there a modified Gresham’s Law moving in to the media world?

If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com

Will Millennials Become Wage Serfs?

In recent weeks, I have read several articles discussing how Millennials (those born from 1977-1995. Different demographers use varying time spans so I stuck with the Nielsen Media Research dates) may often become wage serfs. Amazingly, two people e-mailed me in the past few weeks and described the fate of some Millennials as Medieval serfs.

If you remember from grade school or a course in western civilization a Medieval serf led a pretty sorry existence. They were essentially peasant farmers who worked part time on their master’s land and, in exchange for their labors, they would get to use part of their master's land to grow their own food. It was a life with virtually no ability to rise. In your entire life, you may never stray more than a few miles from your master’s holdings.

Why are both pundits and my correspondents making such a harsh judgement? To me, it stems from an idea that most of us Americans have believed for a few hundred years. The idea is that each succeeding generation is better off than the one that preceded it. The “better off” is not just financial. It can mean education, sophistication, a healthier lifestyle or leading a life that matters.

The Great Recession of 2008-2009 had a profound effect on many Millennials. A number of observers have commented that it did long term economic and social damage to that youthful demographic. Some have said that this generation is rootless--many do not want to own homes or have allegiance to their employer. I do not see it that way. The issue to me appears to be economic hardship and fewer opportunities.

Here are a few Millennial factoids that I hope make my point:

--Seven out of ten students have borrowed for college. On balance, many people say that borrowing gives many an opportunity for a good education that they may not otherwise have. True, but student debt by definition has to slow economic growth. Many have a six figure millstone around their neck when they graduate and, unless they get in to a high paid field such as medicine or finance, they may be paying off the debt for 20 years. Go to graduate school and the meter really runs wild. Interestingly, many would be better off to attend a state school, work part time and finish in six years rather than four but few seem to want to go this route.

--Some 82% of Millennials say that they want to be home owners. Why are they not buying homes in great numbers in their late 20’s? They cannot afford it! Many are saddled with high levels of student debt and others live in wildly expensive cities. Right now, 22-35 year olds are paying as much as 45% of their salaries for apartments in cities including Los Angeles, San Francisco, New York or Miami. Others in the heartland are much lower. I remember that decades ago when I made my way in the world, rental agents would not write a lease if the monthly tab was more than 28% of your salary. So, how can Millennials save up for a downpayment when they are literally struggling to meet their monthly rent?

--The U.S. Census Bureau reports that people in the Millennial age bracket earn $2,000 less in REAL TERMS than they did in 1980.

--The Federal Reserve Bank of NY finds that for recent college graduates wages have only risen 1.6% in the last 25 years when adjusted for inflation. Put student debt and rising rents or housing costs and these youngsters face an uphill battle for achieving financial freedom.

--The Huffington Post reported that in 1990, those who took college loans only borrowed 28.6% of first year income. By 2015, the average loan is the equivalent of 78.3% of first year earnings and some owe much, much more with students loans now totally a staggering $1.3 trillion.

--The financial return on education is dropping. This may simply be the result of college tuitions wildly outstripping inflation.

So, while describing these fine young people as wage serfs offends me, I can see how many people who lack my optimism would come to that conclusion. Also, why did Bernie Sanders appeal to so many Millennials in the 2016 primaries? It is pretty simple to me. He promised free college education and universal medical care. Were I 22 years old, I can see why that might be appealing!

Are Millennials doomed to be 21st century serfs? I hope not. Yet, as logarithms gobble up more and more jobs and technology marches forward, young Americans are really going to need to differentiate themselves in the labor pool to keep the American dream of upward mobility with each generation alive.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.