Posted on 06/19/2003 8:04:02 PM PDT by technochick99
The Smith family--yep, like Jayson Blair, I'm making this up--lives in Redwood City, 20 miles south of San Francisco and on the northern edge of what is known as Silicon Valley. The head of the household, John, works as a software coder at Sun Microsystems. He's a good coder but not a superstar on the level of Sun's cofounder, the legendary Bill Joy. John Smith makes $95,000 a year, which sounds plentiful to most Americans. In truth, it doesn't go too far in Silicon Valley, where the cost of a modest 1,900-square-foot house with three bedrooms and one and a half baths crowded onto an 8,000-square-foot lot is--hold your breath!--$786,000. But that's the house where John, his wife, Rosa, and their two children live.
Rosa met John at Sun, back in the early 1990s. She was a newly minted English major writing brochure copy for $38,000 a year; John was making $80,000. After marrying, John and Rosa's combined income was $118,000, plus bonuses. With one child on the way, that was a pretty good sum.
Even better financial conditions lay ahead for the Smiths. After Sun's stock started on its rocket ride during the late 1990s, John's options were worth $360,000. Wisely, in 1999 he and Rosa decided to exercise and sell half their options, using the aftertax $142,000 of their capital gains proceeds as a down payment on their first home in Redwood City. They purchased it for $420,000, which left a mortgage of $278,000. With John's $80,000 base salary (not counting bonuses that averaged $40,000 a year--an amount equivalent to the salary of Rosa, who had quit her job upon learning she was pregnant again), monthly payments were a snap.
Good times rolled for John and Rosa Smith. A second child arrived, and so did job opportunities for John. He weighed offers from software giant Oracle, as well as from three dot-coms--two of which were backed by brand-name venturecapital firms and looked like sure bets to do an IPO and make their early employees rich. This was a heady experience. John decided to stay put because Sun kicked up his base salary to $95,000. John's boss at Sun also granted John more options, a six-week sabbatical and more flex time. Now that was a package!
John felt like a master of the universe! Every employer inSilicon Valley wanted him. He was calling his own shots. The money was pouring in. The Smiths were almost millionaires--on paper, anyway. It was time to trade up to an executive-style house. Time to apply to a private golf club. Time to think about private schooling for their oldest daughter, Kirstin, now 5.
Slide Down the Matterhorn
Sun's stock peaked at $65 in September 2000--six months after the Nasdaq stock composite index peaked at 5031--and the Smith family's paper worth climbed to more than $1 million. John felt like a million bucks. When Sun's stock sagged to $40 in November, he wasn't too worried. The Smiths were in good shape. John's weighted average option strike price at Sun was, after all, $22. The Smith family's paper net worth might not have been $1 million anymore, but it was easily three-quarters of that, counting their home. Thus buoyed, John flew his family (business class) to Italy, where they enjoyed their six-week sabbatical, and spent $45,000.
But Sun's stock kept falling. And falling. It fell so fast that John and Rosa felt paralyzed and missed the opportunity to exercise their options and sell. When Sun's stock fell below John's weighted average strike price of $22 in early 2001, John realized that his Sun paper wealth had vanished. Another type of compensation also vanished later that year--John's bonus. Sun suspended bonuses in 2001, and again in 2002. By then, the company's stock price was hovering around $3.
The Smiths were lucky in two respects. They had their home. And John still had his job, with its $95,000 income. But now this income had to support the entire Smith family concern. Out of the $95,000 had to come the money for taxes, food, clothing, the monthly mortgage, insurance, preschool payments and vacations. Reluctantly, the Smiths put Kirstin in public school. The closest the Smiths came to Italy in 2002--and again in 2003--was a wet slide down the Matterhorn ride at Disneyland. The Toyota Sienna minivan that propelled the Smiths to Disneyland was paid for, but it had 107,000 miles on it and smelled like sour milk.
At work, John no longer feels like a master of the universe. He feels lucky to have his job. He suddenly feels like a commodity, and he doesn't like that feeling one bit. During the last three years, thousands of software jobs like John's have migrated to Bangalore, India. John is so worried about his job that he doesn't take the flex time promised to him. He doesn't sleep well. After two hours of coding at work, the trapezius muscles connecting his neck to his shoulders feel as hard as cast iron. He would like to go for a sauna and a massage, but the $95 that costs would blow the Smith's weekly budget.
The Smiths have dropped out of the upper middle class. Should we feel sorry for them? To be a middle-middle-class American in the early 21st century is to occupy the 99.99 percentile of human existence, in terms of nutrition, wealth and ease. But the Smiths don't feel that way. For a few years in the late 1990s the Smiths had tasted something better. They were upper middle class, or at least close enough to feel like it. They miss that. They are frustrated. They want back in.
Millions of American families are just like the Smiths. Politicians, take heed. The Smiths will decide the election of 2004.
The point is that perception can play just a big of a role as reality.
I wonder the same also. In my part of CT housing is thru the roof (not quite as bad as in this article, but still ridiculous). I think it has to do with the extremely low interest rates. I don't see how the high prices can be justified forever though, since I've also been seeing many former white-collar professionals taking jobs at temp agencies and WalMart. For the time being I think a lot of what's driving the high prices is that all of those who got out of stocks w/o losing their shirts are putting that money into real estate. Eventually this demand has to decline, and interest rates have to creep up (with deflation fears) so we may see a shakout in real estate. Just one man's opinion.
It is odd... I have had my engineering degree for more than 5 years now, and out of three instances of being on the job market, I have yet to get a single offer for a private-sector engineering job. My last two positions have been state government bureaucrat jobs (environmental engineering from a regulatory standpoint), where I can at least get experience toward a PE, but I would have preferred a private-sector position. But I had no trouble at all getting the state jobs -- in fact they were practically begging for engineers. I have yet to figure out why it was so easy to get a gov't job and so hard to get a private job.
Environmental engineering is probably one of those fields that is more heavily tied to government regulations than others. As a result, you tend to have more positions available in government oversight and/or compliance roles than you might have in other fields.
I wouldn't be so hesitant about taking a government position in a field like yours -- once you get your P.E. (and maybe some work toward a graduate degree as well), you will be a very attractive candidate for a private sector job.
At half the pay. My husband works for a HUGE oil company. At his lease, 6 guys all around 50 years old were laid off. My husband was demoted. My husband has been a super star automation guy since Allen Bradley hit the market. A great guy, best in the business.
But this HUGE oil company discovered they could pay a guy just starting out half of what my husband was paid. The best thing of all for this HUGE oil company is that although my husband was demoted and had his pay cut almost in half, in order to keep his crappy new job must help the new kid do my husband's old job. This is a must because the new kid couldn't complete these difficult tasks without my husband's 30 years of expertise.
The good news is that we still have each other and our children and we will have a great life no matter what this HUGE blood sucking bunch of bastards do. It was very difficult for my husband to see a lifetime of achievement and rewards be unfairly taken away from him, but I just keep telling him, "That is your job. We are your life."
Is there any way your husband could leave his job and start a small consulting business on his own? His first client would be his old employer -- because it sounds like they really do need him!
My old company was bought out by a major engineering firm, and the first thing they did was lay off one of the senior mechanical engineering project managers.
The day after they laid him off, the company received a call from a client of his. The guy was calling to let us know that we had just been awarded a contract for a major design-build project, but when he found out that "[Mr. Smith] is no longer employed here" he asked to speak to the office division manager who was now in charge of all mechanical engineering work in the new company.
"We've got a $40 million design-build project that we'd like to award to your company," he said, "but you aren't going to get it unless you hire [Mr. Smith] on a contract basis to serve as the project manager."
My company ended up hiring Mr. Smith to serve as the project manager on that job, to the tune of $300 per hour. Those stupid bastards had no idea what they were getting into when they bought my old company and started laying people off. Within one year, 90% of the senior people in the most successful division (mine) -- who had no concerns at all about being laid off -- had left the company to work for competitors. My old division is now on its third division manager in two years, and the CEO of the new parent company was just fired for managing the acquisition so badly.
That's understood. The difference, though, is that you can work for a number of different clients. If you are good at what you do, then the one client who treats you like crap is going to end up at a competitive disadvantage to the ones who treat you well.
That's exactly what happened to "Mr. Smith" in the example I cited in #51. After his contract with his old company was completed, he went to work for one of our competitors. And we never won another job with that client again -- because his new company did.
That's what I figger. That, or lawn mowing.
As a new grad, I have got me a good-paying job lined up for the next 2, 3 years. Have no idea what happens after that. I do know that I don't plan to blow my entire salary with the blank assumption that I'll find another job just like it.
I have lived spartan for years and I don't plan to change much. Except for a Harley. Hehe...
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