On Beating the Retirement System: A Case Study
I was in the parking lot at the new Costco yesterday. I have described the event here.
I got to talking with a Costco employee. He was monitoring the lot. He told me a couple of stories that interested me. The main one was this: he had retired five years earlier, but after 30 days, had gone stir crazy. He found a way back into the labor pool.
I drove home. But I decided that I wanted more information. I drove back. By this time, the lot was filled. Costco had to bring in someone from the sheriff's department to help control traffic.
I found him after several drive-throughs. I told him I wanted to interview him. He told me to park outside the main lot on a short street that feeds into the lot. I found a parking space. He walked over to talk with me.
I learned a great deal.
WORK ETHIC
His name is Frank Hargrove. He is 67. He has been in the job market ever since he was 14 years old. That resonated with me. I got my first job at 14.
He grew up in Virginia. In those days, you had to be 16 to get a work permit. But his father had a friend in the construction business. The man hired Frank, but paid him in cash. He was paid $1.80 an hour. In today's money, that was over $12. He helped a mason with brick-laying. It was hard work.
He played sports in high school. After graduation in 1971, he was drafted. He served in the Army for 14 years.
I asked him where he got his work ethic. His father had taught him: "show up on time, work hard, never call in sick . . . even if you're sick." I asked him if his father had been in the military. Yes: Navy. I recognized the mindset. My father had been in the Army: military police. He had the same attitude towards work. He was fanatical about showing up on time. I developed that same outlook. It is called "old school." There is a reason why it is called old school. It has faded away over the last generation.
After he left the Army, he served for years in the Washington D.C. area in programs helping the homeless. Then he moved to Georgia. In the years before he retired, he had been in security management in commercial buildings.
I asked if his children had picked up his work ethic. Yes. They are all professionals. They all are college graduates.
Frank and his wife had sent them through college. Neither of them had attended college.
This is what Harvard Professor Edward Banfield in 1968 called the upper-class mindset: future-oriented. It is this outlook: sacrifice now; benefit later.
I asked him about his church background. He is a Baptist. I asked if his pastor had been supportive of him as a child. He had been. He attended regularly. He still does.
Here we have a case of a man who has known how to work hard all of his life. It had never occurred to him not to work.
Old school.
A WAY OUT OF RETIREMENT
He retired at age 62. He said he enjoyed his retirement for about 30 days. Then he started working on fixer-upper projects at home. Finally, his wife told him to go get some kind of work. Just get out of the house.
He had an idea. He applied to five different temporary employment agencies. He wanted to see if there would be enough work on a regular basis if he signed up with more than one agency. It turned out that there was.
At present, he says three agencies provide his jobs. He had been on the Costco job since July. Yesterday was his last day.
I asked him if the temporary work is steady. It is. How many hours a week? He works between 40 hours and 50 hours a week. That means it's not temporary for him. It's a new career.
He pointed out something else. Companies want to reduce their risk of putting the wrong people on the payroll. So, they watch the performance of the temp. This takes most of the risk out of hiring somebody on a full-time basis. This gives them an opportunity for them to achieve their goals without entering into long-term employment agreements, which can be difficult to escape. Department managers can evaluate how effectively a temporary employee works. Does the employee fit into the company's culture? If so, it offers a full-time job if there is still an opening after 120 days on the job.
He told me that companies are getting rid of their human resources departments. Managers do not have to rely on the minimally informed judgment of a human resource person. This reduces guesswork. The companies do not have to pay Social Security, Medicare, or put workers into a 401(k) retirement program until they are sure the employee will fit in. Meanwhile, they pay the temp agency to do all the paperwork.
I asked him if the temp agencies are aware of this policy. He said they are.
BUSINESS MODEL
To make their business model work well, the temp agencies want to hire people part-time who had the old-school work ethic and who show up on time. We are once again back to the line made famous by Woody Allen: "80% of success is just showing up."
Those of us who grew up in old-school families assume that this outlook is common. It is no longer common. It has not been common for a generation.
That got me thinking. If the temp agencies are losing good people to the companies that hire them, they have to recruit part-time replacements on a continuing basis. But where can they find replacements who are as competent as the people who keep getting hired on a permanent basis by the companies that rent temps?
This means that somebody who grew up under the old school rules and who internalized them early has a competitive advantage in this marketplace. Someone who is looking for supplemental income to Social Security is in a position to stay in the workforce, even if his original skills are getting rusty. He is not going to come back into the market at a pay scale comparable to where he was on the day he retired, but he can get back in.
This is good news for wives who are tired of having their retired husbands cluttering up the house all day long.
These are not high-tech positions. They are not heavy-lifting bricklaying positions. They are somewhere in between. What makes the difference in terms of employability is a combination of an old-school work ethic and the willingness to learn new skills when required.
CONCLUSION
I have long argued that retirement is not going to be a viable option when the unfunded liabilities of Social Security and Medicare force cutbacks in the payments.
I think it is a good idea not to retire if you have a job that you do not hate. I also think that creating a side business that grows into a full-time business is another way of avoiding retirement. You leave your full-time salaried job at some point before retirement age. You build up the business, which builds up a stream of income. That is what I have done. But I did it early. I did it in 1979.
Some retirees need extra money. They did not plan well for retirement. They think about the possibility of getting back into the job market, but not on a temporary basis. They want more income than a temporary job generates. They need the money. So, they look for permanent jobs. But those jobs are mostly closed to them as walk-ins. They give up looking. They do not think about using multiple temp agencies. If a person proves to be a predictably reliable worker, he can use multiple temp agencies to secure steady employment. This is how to convert an old-school work ethic into supplemental income that will keep you from having to deplete your retirement capital.
If he ever wants to cut back, this is easy. He just stops offering services at one of the temp agencies. It is not like quitting a full-time job.
You have to be out of debt to do this. Also, you had better have adopted an old-school attitude toward thrift early in your life. You have to make certain that your expenses do not exceed your income. But once you have gotten that outlook into your system in your planning, your budgeting patterns will become psychologically permanent. That will give you an advantage in old age: a hidden resource.
You do not have to take my word for this. Take Frank Hargrove's word for it. Two words, in fact: old school.