(Please see correction in fourth paragraph.)
Rice pudding. A new Rorschach test: some see a nostalgic dessert; I see a recession indicator.
The stock market might be doing better; but the real economy is a swamp; unemployment is scarily stuck; The New York Times reports the gap between job openings and job seekers is at record highs. Unemployment is mostly permanent loss: income never to be recovered; detachment from work habits and skills; and much higher rates of mortgage and credit-card defaults. These are losses that devastate families long after an official recovery starts. And, more people are taking early Social Security benefits — and a permanent 28 percent cut in benefits — because they can’t find work now. (Warning! Higher elderly poverty rates in 10 years.)
I watch traditional recession indicators; but, there are other, more subtle signs of desperation. Sunday, on a sweet street in Hoboken, two women gave us free samples of rice pudding (three flavors, cannoli, traditional, and something cute like cinnawowwow). Miami Rice Pudding is opening right next to a weight loss gym, Curves. (I noted the irony to the eager solicitor and she shot back a favorable caloric comparison of rice pudding and ice cream. So there.)
Investing in a rice pudding franchise? Sadly, what you learn in the popular culture and in entrepreneur classes is that if you can’t get a job, buy one. A Rand study found over two-thirds of young black men want to start their own businesses compared to 43 percent of young white men. [When first posted, that number was wrongly put at 63 percent.]
Self-employment is a stopgap alternative to a job, especially in recessions, but it is lower paid and less secure. The average self proprietor earns less than an employee with the same education and about half of small businesses fail (the measurement is tricky). Franchises are well-known sucker-bait where, often, inexperienced people invest their savings into stores that are not in the right location and have too much surrounding competition. (The four gas stations, or Starbucks, at a crossroads is a standard textbook example of market instability. One gas station located in a good spot makes huge profits; the second, third, and fourth make the franchisee work more hours as profits plumment.
I’ll let you know how the rice pudding shop does. They’ll need a second round of stimulus and keen focus on the part of the president and Congress on the economy. The bad stuff isn’t over yet.
12 Responses to A Rice-Pudding Recession
kccole01 - September 28, 2009 at 6:03 pm
The article compares white and black men like this:A Rand study found over two-thirds of young black men want to start their own businesses compared to 63 percent of young white men.Seems as though the better way to phrase this would be to say that about 2/3rds of men regardless of race want to start their own businesses. Right?
ksledge - September 29, 2009 at 7:27 am
I was about to say the same thing as kccole01. 66.7% is two thirds. Not really an impressively larger number than 63% (though I won’t deny statistical significance, if it is there.)
tribblek - September 29, 2009 at 8:28 am
I agree with kccole01 and ksledge: I don’t believe Ms. Ghilarducci meant to point to any significant differences. However, we’re used to FINDING significant differences when sentences are worded that way. That sentence stopped me for a full minute while my art brain converted the fraction into a percentage.That being said, I agree with everything the author says. The scariest part of the article for me (a 41 year old who is 20 years away from retirement) was the second paragraph detailing the trend toward taking early retirement to make ends meet. I see the same writing on the wall (as she) about senior citizens in poverty. Tough times ahead.
liebrenz - September 29, 2009 at 9:05 am
The franchise comment is possibly accurate but seems far too simplistic. Plus, the Starbucks example is totally wrong, since all Starbucks shops are corporate entities (no franchises here) and if having a Starbucks on each corner keeps out the competition, well, so much the better when all the pennies go into one corporae coffer.
liebrenz - September 29, 2009 at 9:05 am
The franchise comment is possibly accurate but seems far too simplistic. Plus, the Starbucks example is totally wrong, since all Starbucks shops are corporate entities (no franchises here) and if having a Starbucks on each corner keeps out the competition, well, so much the better when all the pennies go into one corporae coffer.
liebrenz - September 29, 2009 at 9:05 am
The franchise comment is possibly accurate but seems far too simplistic. Plus, the Starbucks example is totally wrong, since all Starbucks shops are corporate entities (no franchises here) and if having a Starbucks on each corner keeps out the competition, well, so much the better when all the pennies go into one corporae coffer.
11172680 - September 29, 2009 at 9:15 am
From an older eat-at-home generatoin, I thought you were going to point to serving rice pudding at home as a cheap, palatable, nutritious way to fill up the kids’ tummies during a recession. That computes for me.
11172680 - September 29, 2009 at 4:00 pm
Put another way, rice pudding at home is my Depression generation; rice pudding franchise is your Recession generation.
ustabe - September 29, 2009 at 10:26 pm
More research should have been done on this article. Miami Rice Pudding was created long before the “recession” additionally, calling franchises sucker-bait is far from true…many of the so called suckers own Subways, Dunkin Donuts, Hess Stations, 7-eleven, Burger King, McDonalds, Blimpies, Sonics, UPS Stores, Circle K, Auntie Annies Pretzles and so on. Starbucks is not a franchise.
lartnec - October 1, 2009 at 12:19 pm
The article does not require “Starbucks” to be a franchise. In fact the simplest way to read meaning from that sentence is to simply use “Starbucks” as a brand-name popularized as a common term to describe the generic product — “four gas stations, or coffee shops selling the same coffee.” a simple and classic example of competitive market forces that a naive franchisee would unknowingly put themselves into and we have so much hostility on this board
akafka - October 1, 2009 at 2:36 pm
Please see a correction in the fourth paragraph. Thanks.-Alex Kafka, an editor at Brainstorm
ustabe - October 1, 2009 at 10:44 pm
“The four gas stations, or Starbucks, at a crossroads is a standard textbook example of market instability. One gas station located in a good spot makes huge profits; the second, third, and fourth make the franchisee work more hours as profits plumment.” …the author made inference to Starbucks relative to the four gas stations being related to the 2nd 3rd and 4th franchisees working more hours….Many read it this way. Starbucks was a poor example to include with gas stations owned by franchisees. I do not see hostility related to the comments just a strong desire for factual reporting and a fair representation to the proof of higher education.