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Are recessions bad for everyone?

  • 29-12-2008 5:36pm
    #1
    Closed Accounts Posts: 12,382 ✭✭✭✭


    Hello

    Maybe this is a stupid question, but if I keep my job throughout the recession, does this mean the recession is good for me, as my cost of living is now cheaper?

    Or are recessions generally considered bad for everyone?

    The reason I ask this is because I've noticed my quality of life has improved since the recession started - my money is going further.

    I know recessions are bad in general, but on an individual level, does it depend on the individuals circumstance?


Comments

  • Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    Well, it's both bad and good for you. Good in that disinflation, and probable deflation, will increase the purchasing power of your money. A recession leads to excess stocks of goods, firms lower prices to clear the excess stocks (how quickly that occurs depends on how "sticky" prices are, or your ideological perspective on "sticky" prices), and you should be able to buy more. Depending upon the industry you work in, it could have ramifications for you. Some jobs are supported by, for example, export jobs of other firms. Say, small contractors working for Microsoft, or Intel, and so on, will depend upon demand for Microsoft's goods.

    With a general drop in the price level, and although your nominal wage will have remained the same, your real wage will have increased (real wages are nominal wages over price level); again, meaning your money goes further. You may then be asked to take a wage cut to restore your real wage to its previous level, so that can be a negative I guess (or just neutral, depending on how you see it :pac:). Even though you may have not received a pay increase, you effectively have/will (I hope that makes sense). All that matters to each person is their private economy. If you're well positioned, i.e. not in construction, or banking, then you should be, relatively, better off than others. Some industries are counter-cyclical, like mental health (cruel, but true), with demand increasing during recessions.

    It's not good from a social point of view, with unemployment meaning greater strain on public services, and what will likely happen when the government cuts the services it provides due to a drop in tax revenue. So that can be bad for you.

    Edit: You could also consider the positives for the country, as a whole, being better placed on the competitiveness scale, and the reduction in house prices will help first time buyers.


  • Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    f you're well positioned, i.e. not in construction, or banking, then you should be, relatively, better off than others.
    I deal with a lot of small businesses on a day to day basis, and the recession is no longer confined merely to construction and banking. Probably one in five would consider themselves unaffected, and one individual merrily making record returns (bicycle shop). With 70,000 retail jobs set to go in the new year (more than double the amount in construction) the ramifications have extended far beyond construction and finance.

    There are no safe jobs anymore.


  • Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    I deal with a lot of small businesses on a day to day basis, and the recession is no longer confined merely to construction and banking. Probably one in five would consider themselves unaffected, and one individual merrily making record returns (bicycle shop). With 70,000 retail jobs set to go in the new year (more than double the amount in construction) the ramifications have extended far beyond construction and finance.

    There are no safe jobs anymore.
    Well, I meant that this year they would have been relatively better off than construction and such. I have no doubt of ripple effects in industries of conspicuous consumption, and their suppliers. Good old Keynesian multiplier and such :cool:. But, I agree; few jobs are "safe."


  • Registered Users, Registered Users 2 Posts: 6,334 ✭✭✭OfflerCrocGod


    There are no safe jobs anymore.
    That is good - we are better for it. What is more important is job creation if job creation is allowed free reign then we should be able to pick ourselves up quickly.


  • Registered Users, Registered Users 2 Posts: 1,196 ✭✭✭pyramuid man


    While I agree that the recession may be good for some for the time being, one thing that really rang through when I was reading that 70000 retail jobs may be lost was that there will inevitably be a decrease in competition in the future. If it is a case that Sterling recovers and Ireland is still deep in recession, well the retailers that survived the early stages may be left without competition and are free to set prices whichever way they want and with the government departments being cut I would imagine the likes of consumer bodies being cut as they are seen as surplus and therefore if this happens there is nothing to stop these retailers setting prices as they please.

    Can anyone see anything like this happening?

    At the moment Retailers in ROI are competing with retailers in NI and this is reducing prices all over which means that competition is increased as shops are no longer just competing with the other shop down the road. If Sterling recovers and goes back to what it was a year ago, shops will not be competing with northern retailers and are finding their market with less competition that previous years, so who is to stop them from raising prices to make up for the losses they incurred when competing with northern stores?


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  • Registered Users, Registered Users 2 Posts: 1,676 ✭✭✭genericgoon


    While I agree that the recession may be good for some for the time being, one thing that really rang through when I was reading that 70000 retail jobs may be lost was that there will inevitably be a decrease in competition in the future. If it is a case that Sterling recovers and Ireland is still deep in recession, well the retailers that survived the early stages may be left without competition and are free to set prices whichever way they want and with the government departments being cut I would imagine the likes of consumer bodies being cut as they are seen as surplus and therefore if this happens there is nothing to stop these retailers setting prices as they please.

    Can anyone see anything like this happening?

    At the moment Retailers in ROI are competing with retailers in NI and this is reducing prices all over which means that competition is increased as shops are no longer just competing with the other shop down the road. If Sterling recovers and goes back to what it was a year ago, shops will not be competing with northern retailers and are finding their market with less competition that previous years, so who is to stop them from raising prices to make up for the losses they incurred when competing with northern stores?

    In such a situation you would assume new players would come into the market to take advantage of the artificially high prices and undercut them. If their was an overshoot in the contraction of the retail sector, you could reasonably assume there would be a lot of free retail space which could be snapped up at very low prices when (if? :P) market conditions start to pick up again.

    During this recession, increased consumer awareness and the continuing contraction in people's purchasing power will make it highly unlikely that retailers will be able to get away with setting their prices being set artificially high. The consumer credit binge is over for the near-future at least.

    Also, even without the cuts the regulatory bodies have already endured, their past performance wouldn't inspire confidence anyways.


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