My father came to America from Greece in 1974. He had a 2nd grade education, $500 in his pocket, spoke no english and only had his brother to help him who came in 1968. My father started working as a dishwasher at a burger joint. He worked his way up the restaurant ladder, from dishwasher to prep guy, to cook, and eventually to manager within 3 years. By 1979 he had saved up enough money to open his own place with his brother. The first location failed miserably as he made no money at all. These were the worst years for him he says. He was putting in 100 hour weeks and was so exhausted and overworked that he fainted and had to be taken to the hospital. After 3 years of toiling at this location, he got out and went back to work for his old boss, saved up some money and then bought his second place. The second restautant struggled its first year, did better the 2nd year, and by the third year, business took off. My father got his piece of the American dream! There is an old photo of him checking out the cash register with a huge smile on his face. He is in his late 20's with this massive grin, almost a look of disbelief. From there he bought more property and added more locations. Today he owns a chain of 5 restautants, all of them being owned free and clear. Some mistakes were made during the bubble years as he dabbled in some real estate speculation, but nothing too crazy. All in all he did very well for himself despite having a 2nd grade education and to this day, can barely speak english. Writing for him is impossible.
Lets fast forward to 2010. A Chinese immigrant comes to America and works at a fast food joint making $8 per hour. Even at 80 hours per week at 2 jobs he is making $640 per week and thats before taxes. Say he works every week these 2 jobs (assuming one can even get the hours) he will make roughly $33,000 per year. After taxes the Chinese immigrant is bringing home at most $25,000 per year. Take out $400 per month on a low ball rent by renting a room out of a house. $5,000 per year for rent leaves him $20,000 remaining, assuming no car, no cell phone. He eats for free at work so that saves him quite a bit. After all is said and done the Chinese immigrant manages to save $12,500 per year. After ten years he manages to save $125,000. By way of example my dads first successful location today goes for a good $3 million. Even a piece of shit building goes for at least $1 million. A 20 year lease plus business license costs a good $450,000 up front and that does not include your monthly rent, insurance and bi-annual property taxes. A rent with cam charges can easily put you in the hole $10,000 a month. The game has changed for good. Were my dad to come here today he would not have the opportunity or success he had. As a matter of fact 5100 restaurants shut down in the last 12 months nationwide. This number is expected to increase.
Now lets compare my dads story with many of us from the subprime generation. Many of us have worthless BA's and equally worthless JD's. In addition to worthless degrees we also carry a heavy burden of nondischargeable debt. I know many people that simply cannot get a job in their fields. 2 of my friends that have BA's in marketing have left the states and moved to Germany and Dubai where they are making good coin. But for the family business I would have gone down to Western Australia where my wife is from. There they have a 3% unemployment rate with miners (read: people who drive trucks around) making $100k per year. America is no longer the place of dreams as our true unemployment rate hovers around 17% with some private estimates running as high as 22%.
By 2015 I expect student loan debt to number $1.5 trillion. Student loans will be 15% of mortgage debt, an unfathomable number just a decade ago. With so many young workers sending so much of their earnings to this debt service, many will be unable to qualify for loans. Back in 1986, my dad bought his first home in Buena Park, OC, for $145,000. It was a beautiful 3 bedroom, 3 bath home with a big backyard. Of course, the bubble began brewing back then as he sold it for DOUBLE what he got it for just 5 years later and moved on up to the home we still have today. The same Buena Park house today despite the price declines will still cost you a good $550,000. My brother is a real estate broker and we have done the MLS research in the area. Perhaps that home will have to go back to $145k in real terms in order to get this economy moving again.
Also by 2015 the federal debt will probably have ballooned to 19-20 trillion, well over 120% of gdp. The global wage war will continue as more emerging markets get on the manufacturing bandwagon. Crude oil will easily be in the plus $100 range, costing us all at least 4-5 dollars per gallon. God only knows where health care costs will go. God forbid you get sick or break a bone because then you are fucked.
And then I keep hearing about all these tax cuts coming in the future. Ha ha ha. Good luck with that. With so many boomers heading into retirement and with nations debt levels exploding higher the money is going to have to come from somewhere. Taxes will be a major source of this funding requirement alongside with monetization.
So in conclusion, when looking back at the days when my dad first came I feel nostalgia and a bit of envy. While he came here uneducated and barely able to speak the language, he made big money, bought himself homes, cars, and trips to Greece. And me, now at the age of 28, I have $6,800 in my bank account, $80,000 in student loans, and a JD. At least im learning more and more how to cook in the last 4 months, just like he did 30 years ago.