3 unconventional ways to get through the recession
The Governor of the Reserve Bank has made it clear - New Zealand is heading for a recession, or period of negative economic growth. It’s not a rosy time, but there are three unconventional, evidence-based, life-affirming tactics we can use to help us get out of this mess - job redesign, more flex, and reexamining the relationship between love, capitalism and Christmas.
The R word
Yesterday the Governor of the Reserve Bank, Adrian Orr, warned that New Zealand was about to head into a recession – or a period of negative economic growth. Orr admitted that he was ‘engineering’ this recession to try to slow down inflation.
Now I’m not an economist, but I think it’s useful for us to unpack some of the big-ticket reasons about how we got here – because it helps us identify how to productively go forward.
Getting to grips with inflation
Orr is trying to tackle inflation, which can colloquially be understood as ‘too many dollars chasing not enough goods’. Or, a dollar is not worth what it used to be.
From what I understand, inflation has a few macro drivers.
On the supply side, inflation occurs when the cost of production goes up. So that’s raw materials, processing costs, and labour - costs which are then passed on to consumers. Looking at some key input categories, we’ve got:
Oil - which continues to increase in price for a variety of complex reasons, including sanctions from the Russia-Ukraine war which have stemmed the flow of Russian oil into our gas tanks; and OPEC countries and private oil companies shifting some of their focus from oil to renewable sources of energy, thus reducing supply and raising prices. But consumer demand plays a role too, which we’ll get to in a minute.
Microchip production – microchips / semiconductors are a key input in most electronic goods, and producing microchips is water intensive, as this article explains. But microchip-producing countries like Taiwan are experiencing climate-change related drought and water restrictions, which hinders production capacity and again, leads to increased prices.
Shipping costs – these have gone through the roof, driven in part by supply chain dramas during Covid, and by a huge rise in eCommerce as people shifted away from shopping in bricks-and-mortar retailers during lockdown.
Wages - which have increased in response to the Great Resignation and tight labour markets, as employers seek to pay more in order to attract and retain talent.
On the demand side, some key categories of spend include:
Government stimulus spending. We’ve just been through a global pandemic, and to try to keep employment levels high and businesses open, the government helped prop up wages and rolled out stimulus packages, like investing in infrastructure. They probably went too far with this, as Adrian Orr admits, but the spending did help to keep employment pretty low.
Consumer demand. High consumer demand is good for business, but if demand is too high and it outstrips the supply of goods to meet that demand, then prices rise and the risk of inflation increases. In New Zealand, our spending has fluctuated pretty wildly in the last wee while. We couldn’t spend much in the stores during Covid, and our dollars went into groceries, home gyms and eCommerce purchases. In the first quarter of 2022 we could get out and about again, and we spent ‘nearly every dollar of our income’, according to Statistics New Zealand. Some of the big winners were domestic travel, hospo and events. But more recently, we’ve been wary of the increased cost of living and a bit nervous about the economic outlook, so Kiwis have been tightening our belt, according to research by BCG.
It was worth unpacking this - because within the problem lie the seeds of the solution. There are methods that we can use to address inflation and prevent recession in ways that feel positive and productive, rather than dire and depressing.
Outlook - from grey to sunny. (Photo by Drew Beamer from Unsplash)
How to attract talent, without a giant price tag
First off – let’s look at that finding, that wages are increasing as employers fight to attract and retain talent. Salary is one parameter on which employers can compete, and for sure, you need to pay people a decent baseline salary so that they feel valued and so that income is ‘taken off the table’ as an issue. But employers can compete on other fronts, which are arguably more effective in the long run. A huge body of research, from people like world-leading organisational psychologist Adam Grant, and Dr Vivek Murthy, the US Surgeon General, articulate what people really want from their work. They want meaning, or a sense that their work is purposeful rather than futile. They want to belong to a group, and feel a sense of psychological safety with the people around them. They want to work in a flexible manner, with enough downtime to recover from work and to pursue other interests. They want to learn and grow, rather than stagnating. And they want feedback about how they’re doing.
The good thing about these parameters is that enhancing them doesn’t need to cost the earth. For instance, if you want to build a greater sense of purpose in your team or organisation, you can find ways to ‘zoom out’ and tell the bigger story about how each task matters. You’re not a zoo employee that is shovelling animal dung, you’re helping to protect endangered species. You’re not building a housing development with some parks. You’re creating a space for community. Purpose is also built by helping workers to connect with the ultimate beneficiaries of their work. In his research, Adam Grant found that chefs are far more satisfied in their roles when they work in kitchens with a view of the restaurant, rather than ‘behind the scenes’, because they can see people enjoying the meal they’ve made.
You can help people learn and grow, and feel a sense of belonging, by establishing regular coaching chats with employees. How are they actually going? What’s working for them, what’s not, and how would they like to shape their role?
These are just a few examples of low-cost, high-impact job design. The recession is challenging but it also presents an opportunity to attract talent by making jobs less shit – rather than paying people the big bucks to do work that feels futile, every hour of the day, with people they don’t like, in a role where they receive no positive feedback or training, and they see no progression pathway.
How flexing can help us from recessing
Another unique opportunity comes from the world of flexible work. You’ve probably heard that the 4-day working week (for full-time pay) has been trialled in a range of organisations around the world, and for the most part, companies are finding that their people are just as productive in 4 days as they can be in 5. Employees are also happier, as they have more time for their ‘life admin’ and for, you know, leisure and hobbies and family and exercise and all other parts of life that make us whole, happy humans.
The World Economic Forum recently released a panel discussion on whether the 4-day week is a necessity or a luxury, hosted by our good friend Adam Grant. One of the fascinating discussion points was how a truncated working week could generate sustainability benefits – by reducing demand in a way that’s also helpful for fighting inflation. First off, people would commute less often, which reduces demand for oil and associated emissions. Second, people would (most likely) lead less consumption-intensive lifestyles, because they would have more time, and time is the secret-sauce ingredient that helps us to make more sustainable choices. As Juliet Schor, a researcher looking into the links between work, consumption and climate change explained to the Washington Post,
people who work more and have less free time tend to do things in more carbon-intensive ways, such as choosing faster modes of transportation or buying prepared foods. “Convenience is often carbon-intensive and people opt for convenience when they’re time-stressed.”
So in New Zealand, the recession offers us yet another opportunity to examine how we work, and whether we need to work so much. Given that a huge proportion of our workforce are burnt out or approaching burnout, we have an opportunity for a multi-win solution, with a truncated work week in which people are just as productive, able to rest and be well-rounded humans, and less likely to demand and consume so many resources, thus preventing inflation and, much more importantly, climate change.
How to do Christmas, with less
Which brings us nicely to demand, and that massive stimulator of demand that is on the horizon – Christmas. I know that retailers are keen for people to spend because it helps them to stay afloat, and I acknowledge that the last few years have been particularly hard for small business owners and brick-and-mortar stores.
But if we zoom out and look at Christmas, the way we do this is pretty bizarre. We all go out and buy things for people that we love (or people in our family, as those categories can be mutually exclusive). We wrap things in paper that gets thrown out instantly. We receive a lot of gifts that we probably don’t need, given that we’ve never chosen to go out and buy that thing, to date. And then we go home with our loot, and get stressed because our house is already overflowing with stuff, and come February, we engage in a Marie Kondo blitz and end up taking a huge chunk of our stuff down to the local op shop.
It’s a binge-purge cycle, and, it’s madness. It probably stems from a very lovely human instinct – to try to show our loved ones that we love them. But that instinct has been co-opted by late-stage capitalism, as this quote powerfully shows:
“Most of us confuse capitalism with love. We buy too much equipment for our small babies; we buy the expensive coffin for a parent; we set the table lavishly to show our friends we care. . . We want to care – and connect – and it’s totally understandable that we buy our way to love-giving. That’s the dominant language” (p217 – 218, from This one wild and precious life, by Sarah Wilson).
But there are other ways for us to show love. Approaches that don’t require us to buy so much stuff, at the expense of our wallets, inflation, and the planet. It’s a bit cheesy but there are five ‘love languages’ and gift giving is just one of them. The others are quality time, acts of service, words of affirmation and touch. This Christmas, it could be worth exploring how to show love in non-commercial ways – whether it’s offering to take care of a friend’s child so they can go on a date with their partner, or gathering kind words from your whole family and writing a truly heartfelt Christmas card that will light up the recipient. When discussing this idea with my 5 year-old daughter, she was excited about the idea of focused attention – in which we all watch her do tricks on her trapeze.
Priya Parker, author of ‘The Art of Gathering: How We Meet and Why It Matters’, encourages us to re-examine the core purpose of our social events, and to creatively design them so that they are life-giving rather than dull, predictable and, in the case of Christmas, really unsustainable. I think it’s a good challenge to take on. And it means you won’t be drowning in stuff, come January.
So there you have it. Three innovative strategies to get through the recession. I’m not saying that recession is good, and I acknowledge that recession impacts most heavily on those who can least afford it. But recession also presents us with an opportunity to do things differently. An opportunity for better jobs, more flexibility and downtime, less unnecessary crap filling up our homes, and more life-giving family events in which we actually connect in ways that make us feel loved. At the very least, these ideas are worth considering.
Because as one of the fathers of modern capitalism, Milton Friedman put it,
“Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”
Good luck out there friends.
x Renee from Thrive Lab