Unemployment May Help Create Internet Microbusinesses

Unemployment in the UK is up to just over 7% officially, with no sign of letting up anytime soon. It seems too that over one out of every four people of working age in the UK are no longer working for wages. On the back of this news, the US unemployment rate has risen to nearly 10%, the highest level since the early 1980s. It is not approaching the levels of the 1930s yet, but there are metropolitan areas where the unemployment rate is much higher. Agricultural areas like El Centro in California are feeling it, with 27% of the population unemployed at present.

This is a worrying trend, as it means less income will be coming into these households where someone has lost a job. This then means less disposable income spread throughout the economy and as a result will inevitably extend the recession. The stock markets around the world understand this, and have nosed dived once again with the increasingly bleak employment news out of the world's largest economy along with worse than expected employment news from the Euro zone countries.

Still, people need to make a living. In South Africa, where the official unemployment rate is approaching 25%, more people have taken to the streets as vendors, selling whatever they can to make money to survive. As an aside, I sincerely doubt that the ANC will be able to live up to its promises to create a half million jobs in South Africa amid the current global recession.

This approach to unemployment may mirror itself more and more in the First World through online hawkers, with new Internet-related businesses that sell things through their websites and individuals utilizing eBay, or other online sites, as platforms from which to sell goods and services. I know personally two artists, Mike and Jaime, who utilize free social media sites to advertise their wares, which they also have been known to sell online through eBay. This seems not to be such an outlandish method for promoting art, as I found another unemployed artist advertising her conceptual artwork.

Online micro-businesses may indeed become the wave of the future rather than jobs at traditional businesses, and not just among artists either. It is relatively inexpensive to set up a website, and there are options available that allow you to develop a website virtually for free. With such things as Google AdWords and affiliate marketing, people can even generate residual income. Unlike much of the hype surrounding making money online, the world of Internet marketing requires hard work, just like any other business, but it can be done even in these difficult financial times.

According to Joel Orr, there are a number of businesses that a person can start online:

• writing and promoting e-books, recordings, or video online
• finding other people's products to sell online (aka affiliate marketing)
• opening an online store - listing products that can be drop-shipped to keep inventory low
• finding items at garage or yard sales and selling them online

Social networking sites, which I mentioned earlier, can essentially become free advertising tools for those who know how to use them. Sure, they can be incredible time wasters, and I have yet to figure out how to increase my following on Twitter, but developing networks of potential buyers is essentially the same thing as traditional advertising. It's all meant to drive traffic to your business. A good resource I found would be a site called "gainfully employed", which deals with Internet marketing and web-related business.

With this positive spin on unemployment in the UK, US, and around the world, it is indeed an exciting time for many of us to be alive. Those with the creativity and gumption to make it work will survive unemployment and possibly create a bit more wealth than they would have by staying in their nine to five jobs...

Is the Housing Market Finally Recovering?

There is some good news these days in the UK housing market. Due to legal changes in how houses are foreclosed upon, the number of foreclosures in the UK has declined by over 40% for the first three months of 2009, compared with the same period in 2008. As it usually takes eight weeks to file a possession order in the UK, this coincides with the new pre-action protocol for mortgage possession claims that was put into place on November 19, 2008. Through these new rules, the government intended to make it more difficult to remove those who were delinquent on their mortgage payments from their homes. This still does not mean the UK housing market has recovered, as the last down period in the housing market, from 1989-1996, shows that there were rallies followed by ever steeper declines until the first quarter of 1996. Home builders, however, have noted that there has been an increase of 60% in home sales over last year as prices and interest rates declined. Banks, however, have still not been eager to lend, and that is what is keeping residential property sales in the UK from increasing more rapidly.

Now, turning towards the US, the news unfortunately is not so good. Housing prices have fallen by about 2% per month in 2009, and nearly a quarter of Americans now owe more on their homes than they are worth. Sure, interest rates and tax incentives have made buying a home right now more affordable than in many years, but the lack of lending due to stricter controls and more stringent lending practices, the highest levels of unemployment in a quarter century, and continuing waves of foreclosures will continue to keep residential property prices down.

Andres Carbacho-Burgos, an economist with Moody's Economy.com, says this about the US housing market:

‘We have a lousy job market and an excess of around 1 million extra homes that has to be worked off. The housing market is not going to hit bottom before mid-2010.”

There is good news, however. The US property market is not just a single entity, and certain areas have been less affected by the plummeting housing prices. There are many nuances to it, and in some major metropolitan areas, housing sales have actually increased. Still, there is a glut of at least a million residential properties, which will mean that it may take another six months before the stone reaches the water in the bottom of the well.

Now, here's a little secret. While property prices in other parts of the Western world sank like a certain luxury liner in the North Atlantic, residential properties in Israel have actually increased. This has happened even as Israel goes into its worst recession in years, with its economy expected to contract by about 2% this year. This is due to two factors. Banks in Israel generally have been conservative, requiring a down payment of 30% from purchases, meaning that they are not saddled with a great number of bad loans like their counterparts in the US. Also, there is a shortage of homes in Israel, as many developers scaled back because of the global economic malaise, meaning that the available stock now commands higher prices, at least for the foreseeable future.



Now... on to my own locale: South Africa and the fairest Cape. Property prices here were rocketing out of control until right before the subprime mess emerged in the US and, while residential property prices have dropped by a good 15-20% in the past year throughout South Africa, they have dropped less than 5% in the Cape Town metro, meaning most of the gains made by speculators in the area will be kept. All in all, the housing market dipped by about 8% nationwide. That is good news for locals, who will not have to deal with anything like the disappearance of trillions of dollars of property wealth that vanished in the US and other Western housing markets.

Everyone is Looking for More Money

I just read today that the minimum wage is being raised in the UK by nearly four percent for all age groups. On July 24th, the US will follow suit, with 29 states affected by the increase in the federal minimum wage to $7.25 per hour. Other countries like Morocco are also raising their minimum wage, which went up last year and is set to rise again for a total rise of 10%. Other countries too are talking about raising their minimum wages to keep people out of poverty.

While this may all sound like good news, for the world's economy as a whole it may not be. Although it is good news for those who are already employed and who are working for minimum wage already, it will not encourage job growth in a stagnant job market. Employers are inevitably going to hire less as their costs for labor increase. That means fewer jobs will be created overall.

Now, the argument is that minimum wage jobs are essentially entry level positions, and should therefore not be seen as positions that are meant to support a family. There are plenty of families in the US and other countries that do have families dependent upon the minimum wage. Besides which, what about the teenagers and college students who need jobs to gain experience so that they can get ahead? Current US unemployment figures for teens are at 24%, the highest in a quarter of a century. The rise in the minimum wage will only exacerbate this problem.

Peter Schiff explains in detail how employers will tend to use higher skilled workers who are able to produce more in less time than workers with lower skills, and how some workers will even be replaced by machines. The last time I was in the US I saw an increase in automated cashiers, which means jobs are being lost among these types of low wage jobs. Sure, the people who manufacture and repair these machines are getting more work, but I have a feeling that they were getting more than minimum wage anyway. It is for this same reason that fast food establishments use throwaway cutlery, plates, and cups. In so doing, they have no need to hire a dishwasher. This is the same for other unskilled positions, such as movie ushers or baggers at grocery stores. Those jobs have been essentially lost due to the minimum wage laws.

There is another cynical effect of the raise in the minimum wage, at least in the US. It will keep people off of welfare programs. As it stands, a worker on the bottom of the pay scale will benefit from various government programs, which help to feed, house, and provide medical coverage for the poorest in our country. By raising the minimum wage, some workers will no longer get these benefits and will actually be worse off. Now, while this is good for government coffers, which are in the red after massive bailouts to large corporations, it may in fact cause more suffering as families are cut off from needed food and medical aid. Obama's plan to ensure medical coverage for all Americans may end part of that argument, but people must still eat and have a place to live.

Now, I am not advocating that there should be no minimum wage, but in the current economic climate in which we find ourselves, is it not better for a person to have a job than not? Raising the minimum wage, whether it be in the UK, the US, or South Africa, will not solve anyone's problems, least of all the unemployed.

Abandon the Culture of Poverty: Changing Attitudes on Wealth Creation

I look around and see a lot of poverty in the city where I live. And no, it's not because of the current global economic meltdown. Cape Town has one of the highest differentials between rich and poor of any city in the world. On the Atlantic seaboard, there are properties worth tens of millions of dollars, some of them bought by Hollywood stars and people of influence from around the world. Just a few miles away, there are people living in shacks, many living without plumbing, electricity, or running water. And from my experience, though the people in the First World arguably have it better, the poor can be found in every major city throughout the world, even in London, New York, Paris (remember the riots there in 2007?), and other major cities...

Why am I talking about poverty on The Creating Wealth Blog? Isn't poverty the antithesis of wealth? That's exactly why I'm talking about it. It was Michael Harrington who initially wrote about a culture of poverty that prevailed among America's poor back in the 1960s, and it is this way of thinking about wealth, and the lack of it, that needs to change. In a nutshell, it is the idea that poor living conditions create poor health, creating a cycle that keeps people in poverty for generations.

Creating wealth, however, is really just about making intelligent decisions with the resources you have available, and creating wealth is not just for millionaires and billionaires. It is for anyone who wants to improve their lives, and the lives of their children, and the lives of their descendants. It can happen a dollar, or even pennies, at a time. Creating wealth is altruistic in that the wealth that is created for the next generation, whether it be for a person's own children or given to worthy causes, such as is the case with Bill Gates or Warren Buffett.

In this sense, the American government has been failing its citizens for decades, as it has spent more than it takes in since the 1970s, except for a couple of years around the turn of the millennium. The United States has been spending the wealth of the next generation, and in doing so will create a generation for which life is not better than it was for their parents.

That said, the United States has also been a beacon of hope for many who came to its shores penniless. Horatio Algers, Jr. wrote about such hope in his novels in the nineteenth century, about impoverished children who "made it" through sheer determination, hard work, courage, and a concern for others. These rags to riches stories are the basis for the optimism in American culture and for the idea of the American Dream. That is what America offers. Hope. And if that offer of hope can indeed be turned to a reality by some, it can be turned into a reality for all.

Perhaps someday in cities like London and New York and elsewhere in the First World, people will find a way to end the cycle of poverty that keeps people from achieving all that they can in life. Perhaps after that we can then even solve the problem of poverty where I live... in Africa and elsewhere in the Third World.